Essay on Navigating Turbulence: Analyzing the Macroeconomic Impact on Delta Air Lines

Introduction

Indeed, business performance is inseparable from the influence of macroeconomic factors (Dewi, Tan & Surjoko, 2019). As such, the global economic crisis recorded in 2015 led to significant impacts on business performance worldwide. Even before recovery, the 2020 coronavirus pandemic sets in, dismantling the already formulated 2015 recovery strategies (Marc & David, 2020). Thus, the World Economic Outlook forecasts that the recovery will be more gradual than anticipated at the epidemic's initial stages (Gopinath, 2020). Financial crisis triggers macroeconomic factors, affecting business operations, and among the most affected businesses are the airline industries. Following the crisis, Delta Airlines reported a 5.7 billion net loss within three months. Therefore, the paper intends to discuss how certain macroeconomic factors like gross domestic product, inflation rate, firms’ profitability exchange rate, and unemployment level may have affected Delta Air Line's progress.

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Ways in Which The Macro-Economy Has Impacted the Firm

The Delta Air Lines industry is a U.S.-based oligopoly that lies in most affected companies by changes in macroeconomic factors. Currently, unemployment and low profitability exchange rates among firms have been the main macroeconomic concerns tiring firms apart to the extent of requesting government bailouts (Marc & David, 2020). Just like other travel and leisure industries, Delta Air Lines has had a decline in profitability due to slow economic growth instigated by coronaviruses (Gopinath, 2020). Studies reveal that economic growth, equity, and assets have a strong influence on profitability.

Following massive unemployment in the country, a high cost is imposed on individuals and society as the federal government no longer collects the same income taxes. With a decrease in production, the GDP reduces; hence unemployment benefits necessitate financing from taxes assessed on businesses, which counter-intuitively discourages companies from hiring (Dewi, Tan & Surjoko, 2019). As a result, companies continue to face less demand and difficulty in retaining workers.

Dependent on The Federal Government for A Bailout and Restructuring

The crisis shows that sustained growth rates depend on specific structural measures like privatization, regulatory reforms, improved governance, civil service reforms, banking sector reforms, and trade liberalization (Gopinath, 2020). The Delta Air Line and its employees have been forced to adapt to falling revenues as the firm at the edge of bankruptcy (VOA News, 2020). However, since the industry is viable in the long run, it has opted for bankruptcy protection to allow re-organization time.

Factors Undertaken to Avoid Market Failure at A Macro-Level

Through the federal CARES Act's payroll support program, the Delta company acquired a 5.4-billion-dollars in loans and grants (VOA News, 2020). By the end of September this year, the company is expected to decide whether to take another 4.7-billion-dollar federal loan (VOA News, 2020). Companies are also urging the government to safeguard macroeconomic stability through poverty reduction strategies. Additionally, the government budget must be financed in a sustainable, noninflationary way to sustain the industry.

Effects of the firm on the macroeconomy concerning economic output.

Airline transport plays a vital role in the macro-economy due to its effect on its GDP, profitability, and employment. For instance, the Delta Air Line has over 15,000 employees; therefore, the number of people whose living standards are improved is very significant (VOA News, 2020). Additionally, the revenue generated through taxes also contributes to sustainable development and economic growth; hence the GDP.

Conclusion

It is worth noting that not all oligopolies have been affected by the macroeconomic factors discussed. E-commerce companies like Google and Microsoft have remained stable despite the crisis. Yet, the government has intervened to decrease poverty levels and create distributional changes by enacting policies that improve the distribution of assets and income within the community to save firms under pressure. These policies include pro-poor public expenditure, an increase in financial market access, and land tenure reforms.

References

Dewi, V. I., Tan Lian Soei, C., & Surjoko, F. O. (2019). The Impact of Macroeconomic Factors on Firms Profitability (Evidence from Fast Moving Consumer Good Firms Listed on the Indonesian Stock Exchange). https://www.abacademies.org/articles/The-Impact-of-Macroeconomic-Factors-on-Firms-Profitability-1528-2635-23-1-327.pdf

Gopinath, G. (2020, April 14). The Great Lockdown: Worst Economic Downturn Since the Great Depression. IMFBlog: https://blogs.imf.org/2020/04/14/the-great-lockdown-worst-economic-downturn-since-the-great-depression/

Marc Jarsulic and David Madland. (2020, March 18). Are They Needed, Who Should Get Them, and What Conditions Ought To Be Attached? Center For American Progress: https://www.americanprogress.org/issues/economy/news/2020/03/18/481945/industry-firm-bailouts-amid-coronavirus-pandemic/

VOA News. (2020, July 14). Delta Lost $5.7 Billion in Three Months After COVID-19 Shut Down Air Travel. VOA: https://www.voanews.com/economy-business/delta-lost-57-billion-three-months-after-covid-19-shut-down-air-travel#:~:text=Delta%20Air%20Lines%20reported%20a,reported%20revenue%20of%20%2412.54%20billion.