1. Cyclical Nature of the Transportation Industry
An industry is said to be cyclical in nature because that particular industry's operational activity, revenue, and profit margins are highly dependent on the phase of the business or the overall economy. Same is the case of the transportation industry. This industry tends to experience regular changes in profitability, pricing, and revenue due to changes in the economic conditions and other sectors of the economy. Wensveen states that the business of airline industry which is a part of the transportation industry is income elastic (Wensveen, 2007). This means that air travel increases when the income of the travelers such as business and leisure travelers increases and the decrease in air travel is caused due to a decrease in income. If the economy is experiencing a downturn and there is lack of business and at the same time there is an increase in unemployment, air travelling will be low during these periods. This is because leisure travelers will try to save money instead of spending money on leisure activities due to the fear of losing jobs. Furthermore, business travel also decline during recessionary periods as the products and services being produced in a particular economy are less in demand. Wensveen also suggests that air travel is impacted by the seasonal factors (Wensveen, 2007). This means that during certain periods of the year traveling may increase as a result of the customary associations with that particular year. For example people working as expats may travel to their homeland to become part of certain customary activities. For example people from Pakistan may visit their homeland during Eid Holidays while Eid (a religious custom) may be observed in their homeland.
2. Economic Crisis and Lessons Learned in the Transportation Industry
The economic crisis that started occurring during the period of 2008 caused immense economic troubles for the transportation industry. The industry operators were experiencing excess capacity due to a decline in sales. Declining sales resulted in increased cost and unused capacity, and this motivated a huge number of firms to close business (Compeau, 2010). Some of the firms that made out of the recession taught the industry several lessons. One of the lessons was that firms should not try to become a single most large transportation organization. It means that firms should not try to cover all areas of transportation including air, sea, and road. Doing this will increase their capacity, and they may experience trouble during recessionary phases. Instead, they can use the services of brokers who can manage the transportation of goods and services between different modes of transportation required. For example, during the recession, Dan Meldrim came in handy to the transport industry as the business person helped transporters move from one end to another end while dealing with different transporters who provided different services such as land and sea (Compeau, 2010). Meldrim managed to help transporting organizations stay in business by using the capacity of a transport provider to transport different goods and services in a mix (Compeau, 2010). For example, a truck was not simply used to transport the raw material for food manufacturers as the amount of product being supplied was low. The same vehicle was filled with other products from other companies to completely load the truck and use the full capacity. This allowed the middle organization (Meldrim's organization) as well as transportation organizations to maintain some level of profitability.
References
Compeau, M. (2010). How An Industry Survived The Recession. Retrieved from https://www.forbes.com/sites/marccompeau/2012/02/10/how-an-industry-survived-the-recession/#13b7a8853c3d
Wensveen, J. G. (2007). Air Transportation: A Management Perspective. Hampshire: Ashgate Publishing Limited.
