AJC_H2 Econ_Case Study

ANDERSON JUNIOR COLLEGE JC2 Preliminary Examination Hi gher 2 READ THESE INSTRUCTIONS FIRST Write your name, PDG and index number in the spaces provided on all the work you hand in. Write in dark blue or black ink. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer all questions. Begin your answer to each question on a fresh sheet of writing paper. At the end of the examination, fasten your answers to each question separately. Fasten this cover page in front of your answers to Question 1. The number of marks is given in brackets [ ] at the end of each question or part question. Name: ________________________________ ( ) Question Number Marks Awarded 1 PDG: _________________________________ 2 Total Marks /60 ECONOMICS 9732/01 Paper 1 10 September 2008 2 hours 15 minutes Additional Materials : Answer Paper This document consists of 7 printed pages, including this cover page. [Turn over

2 Answer all questions Question 1 Deregulation of Airline Industry Extract 1: Freedom in the air Europe deregulated air travel in 1997 almost twenty years after America in 1978. In the past, the industry was dominated by national ‘flag’ carriers or ‘network carriers’, such as British Airways, Air France and KLM (Netherlands). Flag carriers have often been regarded by their home government as being an important and highly visible symbol or totem of the country itself. As such, many governments have protected their national flag carri er from competition. Such measures might include direct government subsidy, government-dicta ted airfares and route networks, prevention of buying take-off and landing slots at major airports or simple price fixing. Since deregulation, airlines have been largely free to negotiate their own operating arrangements with different airports, enter and exit routes easily, and to levy airfares and supply flights according to market demand. Any technically qualified airline in the European Union (plus Norway and Iceland) will be able to run services inside any other country without any need for government approval. Competition between European airlines has increased. At present an all-out war rages not just between low-cost carriers but with network carriers as well. Network carriers such as British Airways have successfully adopted the internet-selling and yield-management techniques of low-cost rivals. They are not always as cheap as the likes of low cost carriers such as EasyJet and Ryanair, but often at busy periods, their fares to holiday resorts compare well. The traditional airlines also offer business travelers a wider range of flights to helpful destinations at prices from London Heathrow air