Influences of Macroeconomic Activity on Virgin Atlantic (BMP4003)

This report analyzes the impact of macroeconomic activity on Virgin Atlantic Airlines, examining key factors such as inflation, unemployment, and economic growth. It explores the effects of the UK's economic growth rate, considering the economic life cycle and related metrics. The report also investigates how government intervention methods, including fiscal and monetary policies and the furlough scheme, influence the airline. Furthermore, it addresses current global challenges faced by Virgin Atlantic, such as customer experience, fuel efficiency, and unemployment, offering recommendations for overcoming these issues. The analysis provides a comprehensive overview of the business environment and offers strategic insights for the airline's operations and future planning.

4003 Project 2
Influences of
Macroeconomic
Activity

Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
1. Analyse macroeconomic conditions and their impact on business outputs.............................3
2. How does the UK economic growth rate affect the chosen firm in terms of the economic life
cycle.............................................................................................................................................4
3.The effects of present government involvement techniques on the business organisation......5
4.The present worldwide issues confronting the business, as well as ideas on how to solve
them at this moment are as follows:............................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Macroeconomics is the discipline of economics that investigates how an economy as a
whole behaves and performs. It concentrates on the economy's aggregate changes, such as
unemployment, growth rate, GDP, and inflation. Virgin Atlantic Airlines was founded in 1984 in
Crawlwy, England, as a British airline. It has 32 destinations throughout the world where it
operates flights (Alexander and Eberly, 2018). COVID-19 has a significant influence on how the
firm operates as a whole. This study will examine macroeconomic issues and their impact on the
overall performance of the company, as well as the pace of economic growth in the United
Kingdom. The report examines the initiatives of current government that have an impact on the
company' overall operation. Finally, it addresses some of the company's issues and offers sound
advice on how to solve them in the short term.
TASK
1. Analyse macroeconomic conditions and their impact on business outputs.
Macroeconomic factors are described as important fiscal and geopolitical events that
have a significant impact on the regional and national economies of the United Kingdom. These
issues tend to affect the economy as a whole, rather than simply a few individuals. The two
macroeconomic elements that are most commonly discussed are unemployment and inflation,
which are described as follows:
Inflation:
Inflation occurs when the value of a currency falls and, as a result, the overall level of prices for
goods and services rises. Inflation is a term used to describe the overall impact of price changes
across a wide range of goods and services, and it provides for a single value description of the
rise in the price level of goods and services in an economy over time. Inflation, according to
Virgin Atlantic's CEO, will drive up expenses significantly (Cantele and Zardini, 2018). Due to
supply constraints and rising labour costs, the airline will bear the brunt of the costs of flying
more sustainably this year, with passengers footing the charge. However, the CEO warned that
increasing the total quantity of sustainable aviation fuel, which is now 3 to 5 times more
expensive than conventional gasoline, would directly hurt the CEO's (Virgin Atlantic CEO

Warns Inflation Will Drive Higher Costs, Fares in 2022) earnings. They also mentioned that the
cost of flying on more sustainable fuel will be borne equally by all parties.
Unemployment:
Unemployment is defined as a state in which a person actively seeks work but is unable to obtain
job. The unemployment rate, which is the number of jobless persons divided by the number of
people in the labour force, is the most often used measure of unemployment. Unemployment is
seen as an important indicator of economic health. It covers a group of persons who are unable to
work owing to the effects of numerous conditions. However, at the moment, there is a significant
impact of COVID-19 on employment in the UK. People have been laid off as a result of the
economic crisis. In the case of Virgin Atlantic, it is the carrier that became as far ahead as
possible during its early flights in order to survive. It lay off 45 percent of its workforce, saving
more than $530 million in costs (Ekici, Kabak and Ülengin, 2019). For this reason, adaptability
will be crucial in the future year so that businesses can comply with shifting market strategies
and readily meet economic changes.
They went on to say that 4,5 million individuals departed their jobs in December,
illustrating the magnitude of the problem. Because of the tight labor market, pay for new and
skilled employees will climb. These macroeconomic issues have impacted the overall operation
of Virgin Atlantic Airlines and the economy. Price increases as a result of rising manufacturing
costs and a scarcity of skilled workers.
2. How does the UK economic growth rate affect the chosen firm in terms of the economic life
cycle
The United Kingdom has the fastest expanding economy, since individuals have higher
living standards and earn more money to ensure their existence. The UK GDP increased by 7.5
percent year on year in 2021. (GDP first quarterly estimate, UK: October to December 2021).
The impact of COVID-19 on the business has been significant, with a 9.4 percent drop in 2020
owing to public health regulations and the pandemic (Mariyono, 2018). There are several
techniques of observing the influence of the UK economic growth rate in the Virgin Atlantic
Airlines, as indicated below:
Economic life Cycle: The economic cycle is the shifting status of an economy between periods
of economic boom and recession. It is often quantified in terms of a country's or region's Gross
Domestic Product (GDP). Other economic metrics, such as employment rates, consumer

spending, and interest rates, can also be used to define the economic cycle's stage. Better
knowledge and ideas are extremely beneficial to both company and investors. In the perspective
of Virgin Atlantic Airlines, the four stages of the growth cycle are as follows:
Expansion: In the case of Virgin Atlantic Airlines, inflation is a result of increased market
demand as well as rising fuel costs. At this point, the industry is highly rousting growth and
interest rates are low, output rises, and inflationary pressures rise.
Peak: When growth rates reach their zenith, the economy enters a peak cycle, which causes
various imbalances that must be corrected (Finsterwalder and Kuppelwieser, 2020). It is the time
at which an organization reaches its pinnacle in profitability, but it also causes an asymmetry in
the functioning of Virgin Atlantic Airlines.
Contraction: Following the Peak, there is a phase of contraction in which growth slows,
employment declines, and prices remain stable. It is the point at which Virgin Atlantic Airlines
has performed a fix in order to erase the faults.
Trough: The moment at which the economy reaches a low point and begins to recover. It is the
stage at which Virgin Atlantic Airlines begins its recovery from the business by comprehending
the corporate culture.
Inflation: In the United Kingdom, rising inflation occurs as a result of a rise in the cost of
production for businesses, which raises the costs of airline tickets, resulting in inflation within
the economy as consumers face a significant shift in the market. Fuel price increases tend to raise
ticket costs, causing inflation in the UK economy.
Unemployment rate: There are elements influencing business and the economy in the present
market condition. In the United Kingdom, unemployment has reached an all-time high due to the
massive impact of COVID-19, so that they can rightfully assure higher market consideration.
3.The effects of present government involvement techniques on the business organisation
Some individuals believe that the government is the dominant actor in the market. Because
the government has the ability to make significant changes to monetary and fiscal policy, they
have an influence on the general operation of the firm (Manavalan and Jayakrishna, 2019). They
can legitimately strengthen the currency since it momentarily increases business earnings and
share prices, but it eventually depreciates, causing interest rates to rise. In the case of Virgin
Atlantic Airlines, the following are examples of government initiatives that have an impact on
the company:

Fiscal policy: Interest rates are another tool used to control inflation. This is because they can
help the economy by reducing inflation. It simply leads to a greater loss in the market, which
leads to a better consideration in the market, causing corporations and individuals to borrow
more and purchase more. This also leads to improved customer service since the Central Bank
can lower interest rates instead of raising them (Hannibal and Knight, 2018). However, this
results in asset bubbles, as opposed to the progressive erosion of inflation in the market, and a
large quantity of capital is lost, bringing us neatly to another level the government may affect the
market.
Monetary Policy: Monetary policy is the most effective instrument, but it is also the most
ambiguous. The government can exercise some fine control over tax policy in order to drive
money into projects by giving effective tax status. It is the primary element that assures big, far-
reaching changes by altering the monetary environment. In the case of Virgin Atlantic Airlines,
they are compelled to work better by reinforcing the relevant interest rate to the people so that
the supply of funds can be float in the correct direction, as well as ensuring a better flow of
money to the stock holders so that they can initiate their venture or enhance the airlines activities
by offering adequate resources to them.
Furlough scheme: As the country slips under coronavirus lockdown, whole industries have come
to a standstill. In the case of Virgin Atlantic Airlines, they are focused on the business so that
they may properly assure improved working conditions and avoid superfluous expenditures to
the firm, especially during the difficult period of covid-19 (Kolk, Rivera-Santos and Rufín,
2018). The aviation sector provides this plan to its employees in which they provide temporary
leave to employees due to a unique requirement of the firm, allowing the entire organization to
be more competitive in the industry.
4.The present worldwide issues confronting the business, as well as ideas on how to solve them
at this moment are as follows:
It is the key aspect that assures the better working of the firm, but there are certain issues
that the Virgin Atlantic Airlines is facing that need to be addressed by the company so that they
can fulfil them in an acceptable manner, and they are as follows:
Customer comfort and experience: The aviation sector is service-oriented, and its profitability
is predicated on passenger happiness. The issue that Virgin Atlantic Airlines has is that no

traveler, regardless of class, will be unsatisfied at some time. This is what led the firm to assure
seamlessness, outstanding security, no difficulties in airport lineups, and simple customer care,
among other things.
Foreign Policy, Policy Nuances, and Relations: It is usually impacted by politics, regulations,
legislation, and connections, and the leader makes decisions that effect labor, raw materials,
transportation infrastructure, and the educational system. In the case of Virgin Atlantic Airlines,
they have faced enormous losses in order to appropriately provide better working conditions, but
they also prefer to minimize the overall running of the organization and ensure better working
conditions.
Fuel efficiency: prices have remained a key economic element impacting the aviation sector. It
mostly affects the financial portfolios of airlines. Fuel prices are rising due to the increase in the
number of aircraft, creating a vicious spiral (Kusumasondjaja and Tjiptono, 2019). In the case of
Virgin Atlantic Airlines, these are the challenges that are reducing the organization's total
profitability and revenue.
Unemployment: If the corporation concentrates on simple operations, they will be able to lower
total working hours and eliminate unemployment inside the organization. This also aids in better
working conditions, resulting in increased productivity within the organization. Since a result of
the massive impact of COVID-19, Virgin Atlantic Airlines is suffering unemployment, as the
firm originally reduced job prospects owing to their massive loss and drop in general aviation
sector profitability. However, after a long period, those who worked in this area were remained
jobless, and they gradually changed their occupation so that they could earn and live a better life.
Recommendation: It is suggested that Virgin Atlantic Airlines restore its flights while taking all
necessary safety precautions to prevent negatively influencing aviation safety within the
organization. Other companies also help the company by supporting it so that it may restart its
services and provide numerous job chances in the market. In this approach, they benefit both the
corporation and society, as an abundance of work possibilities helps to improve people's living
standards, and they can legitimately ensure better services to passengers, resulting in more
profits for them.
CONCLUSION
From the mentioned report, it is concluded that Macroeconomics is the discipline of
economics that investigates how an economy as a whole behaves and performs. The economic

life cycle is useful in analysing spending power, consumption, and other market dynamics.
Monetary and fiscal policies assess the flow of money and guarantee the stipulated interest rate
to individuals in order to ensure the smooth operation and circulation of money within the
market. Unemployment, inflation, and economic outflow are all elements that affect the general
functionality of the firm and the economy. Aviation industry face the huge impact as they are
facing the rising prices of fuel due to the large number of firms which are operating in the same
industry. Further, it is recommended to the company to use the better services by which they can
maintain the flow of goods and services in the market also ensures the higher success in the
upcoming year.

REFERENCES
Books and Journals
Alexander, L. and Eberly, J., 2018. Investment hollowing out. IMF Economic Review. 66(1).
pp.5-30.
Cantele, S. and Zardini, A., 2018. Is sustainability a competitive advantage for small businesses?
An empirical analysis of possible mediators in the sustainability–financial performance
relationship. Journal of cleaner production. 182. pp.166-176.
Ekici, Ş.Ö., Kabak, Ö. and Ülengin, F., 2019. Improving logistics performance by reforming the
pillars of Global Competitiveness Index. Transport Policy. 81. pp.197-207.
Finsterwalder, J. and Kuppelwieser, V.G., 2020. Equilibrating resources and challenges during
crises: a framework for service ecosystem well-being. Journal of Service Management.
Hannibal, M. and Knight, G., 2018. Additive manufacturing and the global factory: Disruptive
technologies and the location of international business. International Business
Review. 27(6). pp.1116-1127.
Kolk, A., Rivera-Santos, M. and Rufín, C., 2018. Multinationals, international business, and
poverty: A cross-disciplinary research overview and conceptual framework. Journal of
International Business Policy. 1(1). pp.92-115.
Kusumasondjaja, S. and Tjiptono, F., 2019. Endorsement and visual complexity in food
advertising on Instagram. Internet Research.
Manavalan, E. and Jayakrishna, K., 2019. A review of Internet of Things (IoT) embedded
sustainable supply chain for industry 4.0 requirements. Computers & Industrial
Engineering. 127. pp.925-953.
Mariyono, J., 2018. Micro-credit as catalyst for improving rural livelihoods through agribusiness
sector in Indonesia. Journal of Entrepreneurship in Emerging Economies.
Parent, J.D. and Lovelace, K.J., 2018. Employee engagement, positive organizational culture and
individual adaptability. On the Horizon.