Influences of Macroeconomic Activity on Virgin Atlantic

This report analyzes the impact of macroeconomic factors on Virgin Atlantic's business operations, including unemployment rates and inflation. It also evaluates the current growth rate of the UK and how government intervention methods, such as fiscal and monetary policies, affect the airline industry. Additionally, the report discusses global challenges faced by Virgin Atlantic, such as the COVID-19 pandemic, and provides recommendations on how to overcome them.

Influences of Macro-
economic Activity

Contents
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
Macro-economic factor that should be consider by Virgin Atlantic and its influence on
business activities.........................................................................................................................1
Evaluation of how current growth rate of UK impact business operations.................................2
Assessment on how government current intervention methods affect Virgin Atlantic...............3
Analysis of current global challenges that are to be faced by Virgin Atlantic and
recommendations on how to overcome those..............................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Macroeconomics can be explained as the branch of economics that essentially involves
structure, performance and behaviour of aggregated economy (Bouis, Duval and Eugster,
2021). Macro-economic factors can be described as geopolitical events that greatly affects a
national or regional economical aspects. These factors persuades economic growth as well as
help to create financial stability for organisations. These forces in positive aspect inject more
cash in market and inspires industries to grow as well as earn profit margins. For better
understanding of impact of macro economic factors on business operation, expansion and
growth, Virgin Atlantic is taken into consideration. Virgin Atlantic is a British Airline company
which is established in 1984 owned by Virgin Group. Company has its head office at Crawley,
England.
This project demonstrate an investigation on how economic factors affect business
operations of chosen organisation. This project also depicts the explanation of challenges that are
faced by organisations in a global economy. This project also depicts varied challenges and
issues faced by aviation industry as well as recommendations on how to overcome those. It also
comprise of policies and schemes framed by government as well as how they influence on
business operations.
MAIN BODY
Macro-economic factor that should be consider by Virgin Atlantic and its influence on business
activities
Macro-economic factors can be explained as pattern, feature or condition that is
essentially related with massive aspects of economy instead of specified population (Bourjade,
Huc and Muller-Vibes, 2017). It majorly affects national and state economies through varied
policies and regulations. These economic factors are tracked closely by business houses, states
and consumers alike. These are significant for Virgin Atlantic for attaining economic prosperity
and gain more liquidity in market. Macro economic factors that needs to be consider by
managers of Virgin Atlantic in order to assess their influence on business outputs are discussed
below:
Unemployment rates- It is considered as an useful measure which studies about
underutilization of labours. It reflects that aspect of economy where individuals are willing to
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work and seeking job but are unable to find one. Due to global pandemic, unemployment rates
are rise significantly as organisations are closed down and they are unable to pay salaries to their
employees. Studies revealed that varied companies are closed down or paused their trading
activities which lowers their revenue as well as generate a feeling of uncertainty. This has also
impacts the business operations of Virgin Atlantic where they have to terminate their employees
because of inability to pay even basic salary doe to global lockdown. Managers of Virgin
Atlantic have terminated 3500 employees in order to cut their operating costs and survive in
market (Coronavirus: Virgin Atlantic to cut more jobs. 2020). This factor is need to be consider
by managers of Virgin Atlantic as it is described as a lagging indicator which measures
economic events like recession. High employment rate impact the business operations of Virgin
Atlantic as it lowers the spending ability of people and ultimately decreases revenue of
organisation. It is desirable for managers of Virgin Atlantic to retain their skilled and
experienced workforce which helps them to operate their activities in an effective manner.
Inflation- It can be described as decline in in purchasing power of a specified currency
over a given period of time (Han, Yu, Kim, 2019). Rise in level of prices means that a unit of
currency can purchase less products or services from prior period. These factor needs to be
considered by managers of Virgin Atlantic as it heavily impacts on their operational cost and
pricing methods. Rise in inflation can increase their fuel prices which compels them to escalate
prices of tickets. This practice lowers consumer demands to use air routes specifically. Due to
global pandemic, purchasing power of people declines which compels them to avoid air routes. It
is also due to safety purposes as covid-19 has created global crisis all over the world.
Evaluation of how current growth rate of UK impact business operations
Economic growth rate can be explained as a change in percentage of the value of
products or services that are manufactured in a country over a specified time period in
comparison to earlier period (Jang, Jeong and Cho, 2020). It is used for evaluating comparative
health of a nation's economy during a specified time limit. Economic growth rate has gradually
declines in United Kingdom due to global pandemic which affects many businesses. Due to low
growth rates of UK economy, managers of Virgin Atlantic are planning to make it a public
limited company by launching its initial public offer and list it on London Stock Exchange.
In reference to rising inflation rates in UK, top management of Virgin Group has
estimated that operational cost are much higher than generated revenues of organisation. In order
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to cut down their costs, managers of Virgin Atlantic have fired many of its employees that
ultimately hampers their position and put them in problem of lack of skilled workforce. Aviation
industry is concerned with creating transportation network and generates economic growth. Rise
in inflation rates have compelled owners of Virgin Atlantic to increase the prices of flight
routes. As after global pandemic, it becomes hard for them to survive and grow their business.
Economic cycle can be described as an overall state which essentially illustrates four
phases through a cyclic pattern (Jin and Kim, 2019). These four phases helps to evaluate
consumer spending, gross domestic product rates and unemployment factors. Aviation industry
is considered as a cyclic one as it goes through peak in vacation period. It is caused by economic
downturns and hampers prosperity. This economic cycle helps in influencing other factors of
economy and assists in stabilizing them through GDP and inflation rates. Economic growth can
be affected by seasonal fluctuations, structural causes and unpredictable global crisis. As in
seasonal fluctuations, people are tend to travel for enjoying their vacations. This vacation period
is considered as peak time for airlines where they generate high revenue.
However, uncertain global pandemic has compelled managers of Virgin Atlantic to close
down their operations on a sudden basis which lowers their revenues. This situation has
hampered business operations adversely and put them in phase of trough slowly (Nizam and Et.
AL., 2019). Economic progress of Virgin Atlantic is majorly depends upon its employee and
capital. Managers of Virgin Atlantic are trying to uplift their operations as UK current growth
rate in relation to GDP is increasing gradually. After global lockdown, managers of Virgin
Atlantic are trying to meet their organisational objective of adopting sustainable practices and
become the leader in UK aviation industry.
Assessment on how government current intervention methods affect Virgin Atlantic
Government intervention methods can be described as specific regulation or policy which
is framed by high officials in order to support business operations and mobilizing public
resources effectively (Plakandaras, Papadimitriou, and Gogas, 2019). Government
interventions is beneficial for Virgin Atlantic as it provides them a specified fund through which
they can pay to their customers for a certain period. Government can intervene into business
operations through taxes, subsidies, security schemes etc. UK government interventions in
business operations in context to Virgin Atlantic are mentioned below:
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Fiscal and monetary policy- Through this, government of specific country adjusts their
spending level as well as tax rates in order to monitor and influence economical conditions of a
nation (Shen, 2018). Monetary policy is regarded with available quantity of money as well as the
medium by which new currency is supplied in economy. It is performed by Bank of England in
United Kingdom in order to stabilize economic supply of money. For instance, policymakers can
manipulate circulation of money in order to stabilize inflation, employment practices and interest
rates. Aviation industry is highly impacted by government rules and regulations through dynamic
tax rates. During global pandemic, Virgin Atlantic have face significant decrease in their
revenue. This situation put them in drastic situation of not capable for paying taxes timely.
Government consider aviation industry as competitive industry which helps them to gain more
taxes and escalate economic growth in an effective manner.
At the time of pandemic, UK government has lowered their taxes and supports aviation
industry by lowering their protocols.Monetary policy framed by policy makers of United
Kingdom has targeted to meet 2% inflation rate (Monetary Policy Summary, December 2021). It
impacts Virgin Atlantic as it is helpful in stabilising inflation rates. If inflation rate become
stable, managers of Virgin Atlantic can gain more revenues. This practice help them in
developing their business operations after global pandemic.
Furlough scheme- It is a practice which is started by government of UK under which
employees are allowed to unpaid leave (Skare and Soriano, 2021). This exercise allows them to
remain in employer's pay roll so that they can start their work after pandemic ends and situation
gets normal. This helps them to have a job in their hands which they can perform. In UK,
government has announced to pay 80% or full 100% salaried to these furloughed employees for
a specific time period (Coronavirus: What does 'furlough' mean and how will it affect workers
worldwide. 2020). This has lower down the burden of organisation to pay their employees at the
time of global pandemic. It is essential for organisation to understand the procedures of applying
through this scheme. Virgin Atlantic have also received benefits from this scheme of furlough.
Although, when UK government has ended this, managers of Virgin Atlantic have used their
reserves to pay their employees. But they are also unable to cope up with this situation for a long
time, this compelled to them fire large number of employees. This type of government
intervention is helpful in performing business operation in an effective manner. As from these
funds, managers of Virgin Atlantic to pay their employees and lessen their burden.
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Analysis of current global challenges that are to be faced by Virgin Atlantic and
recommendations on how to overcome those
Global challenges can be explained as issues which are to be faced by organisations while
performing business activities on world wide basis (Stojanović, and Ivetić, 2020). These type of
challenges are faced by almost every organisation which are operating on a global level. During
global pandemic, businesses operate in every field face challenges of lowering revenues, lack of
skilled workforce and decline in existing customer base. Aviation industry of UK has also faced
many issues. Citizens of UK and all over country are afraid of taking air routes due to strict
covid protocols and transmission of virus. Aviation industry is considered as an key input for
various sectors as international trade is only possible through air routes in an easy manner.
Managers of Virgin Atlantic are facing challenge of loosing their reserves as they have low fund
for managing their business activities. Even UK government has refused to pay them subsidies or
loan in pandemic situation. This compels them to arrange funds on their own by listing their
shares at London Stock Exchange. Top management of Virgin Atlantic are facing issues in
managing oil price volatility which ultimately increases their operational costs and compelling
them to raise their ticket prices. At a time, where organisations are providing discounts to their
existing customers in order to engage them and generate more revenues. Managers of Virgin
Atlantic have increases prices of their products in order to survive. This practice can decline the
ability of engaging their customers and compel them to move towards another brand. Change in
passenger's perceptions and demands is also considered as a global challenge for Virgin Atlantic.
As it is hectic job of going through several protocols while boarding a flight after global
pandemic. International travel restrictions cause problems for Virgin Atlantic following of varied
Covid protocols has increase their operational costs.
It is recommend to managers of Virgin Atlantic that terminating employees can definitely
helps in saving their operational costs but is also important to have a positive image in market
which allows to engage more customers towards the brand. It also lack in loosing skilled
workforce which can b be a competitive advantage for competitors. It is advised to managers of
Virgin Atlantic to perform as per their stated vision which necessarily talks about maintaining
sustainability in business operations. Managers should opt for any other alternative in order to
curb their operational cost and to meet the challenge of oil price volatility. It is advisable for
managers of Virgin Atlantic to avail for those alternative options which helps them to grow and
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expand their business in an effective manner. There should be awareness in people to fulfil all
the covid protocols as it is needful for their safety measures.
CONCLUSION
From the above presented report, it has been concluded that macro-economic factors
impact business operations in a significant manner. These majorly addresses the factors like
inflation, interest rates, GDP, unemployment rate, national income and many more. Fiscal policy
is related with adjusting tax rates and government regulations while maintaining varied forces in
economy. Monetary policy is considered with managing money supply in economy that helps to
stabilize economic growth of a nation. Furlough scheme is an exercise where government helps
organisations in paying salaries to their employees in order to lower down their burden and
helping the in cutting their operational costs. Organisations should deal with extensive care while
managing influence of macro-economic factors on their business operations. Global challenges
should be faced by managers of organisations in order to generate more revenues. Aviation
industry has faced many challenges during period of global pandemic. They have faced
challenges such as rise in inflation rates, lowering purchasing power of consumers, lack of
skilled workforce, huge procedures to follow protocols. Because of covid pandemic, many
people lose their jobs which has lower down their purchasing power. This practice hampers their
willingness of taking air routes for travelling.
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REFERENCES
Books and Journals:
Bouis, R., Duval, R. and Eugster, J., 2020. How fast does product market reform pay off? New
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from the airline industry. Transportation Research Part A: Policy and Practice. 97,
pp.30-46.
Han, H., Yu, J. and Kim, W., 2019. Investigating airline customers' decision-making process for
emerging environmentally-responsible electric airplanes: Influence of gender and
age. Tourism management perspectives. 31. pp.85-94.
Jang, Y., Jeong, I. and Cho, Y. K., 2020. Business failure prediction of construction contractors
using a LSTM RNN with accounting, construction market, and macroeconomic
variables. Journal of management in engineering. 36(2). p.04019039.
Jin, T. and Kim, J., 2019. A new approach for assessing the macroeconomic growth energy
rebound effect. Applied Energy, 239, pp.192-200.Uddin, M., Chowdhury, A., Anderson,
K. and Chaudhuri, K., 2021. The effect of COVID–19 pandemic on global stock market
volatility: Can economic strength help to manage the uncertainty?. Journal of Business
Research. 128. pp.31-44.
Nizam, E. and Et. AL., 2019. The impact of social and environmental sustainability on financial
performance: A global analysis of the banking sector. Journal of Multinational Financial
Management. 49. pp.35-53.
Plakandaras, V., Papadimitriou, T. and Gogas, P., 2019. Forecasting transportation demand for
the US market. Transportation Research Part A: Policy and Practice. 126. pp.195-214.
Shen, C. S., 2018. Forecasting Emerging Markets Index with Macroeconomic Factors.
Skare, M. and Soriano, D. R., 2021. Technological and knowledge diffusion link: An
international perspective 1870–2019. Technology in Society. 66. p.101652.
Stojanović, Đ. and Ivetić, J., 2020. Possibilities of using Incoterms clauses in a country logistics
performance assessment and benchmarking. Transport Policy. 98. pp.217-228.
Online:
Coronavirus: Virgin Atlantic to cut 1,150 more jobs. 2020 [Online] Available through
<https://www.bbc.com/news/business-54027229>
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Monetary Policy Summary, December 2021 [Online] Available through
<https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2021/december-
2021>
Coronavirus: What does 'furlough' mean and how will it affect workers worldwide? 2020
[Online] Available through <https://www.weforum.org/agenda/2020/04/covid19-furlough-
employers-workers-support-global/>
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