Monopoly Market and Egypt Air Analysis

Abstract:

This paper crucially illustrates the main characteristics and definition of the monopoly market including the main advantages and disadvantages. In addition to the X-efficiency and how the monopoly system works. On the other hand, this paper included an example that considered from monopoly market in Egypt, which is Egyptair. Nevertheless, included the history of Egyptair, the financial information, the market share and why Egypt air considered from the monopoly market. Finally, this paper crucially illustrated the profits and losses with evidence to determine whether this company makes profits or losses while playing monopoly to maximize their profits.

I. Introduction:

Monopoly markets are well known to be the organizations that have a whole market control in a specific industry. At the point when discussing monopolistic organizations, we generally reference to a solitary vender of goods and services in the market. (Manni, 2009) Monopoly markets can control costs on their creation; this compelling type of the imperfect competition that has a negative impact on shopper’s decision. (Jack, 2008).On the other hand, the monopoly market has many advantages and disadvantages that will be crucially discussed. For instance, Egypt Air is Egypt’s national airline that was established as a privately owned business in May 1932, turning into the seventh air transport on the planet. In 1933, Egypt air’s first flight left from Cairo’s Almaza Airport to Alexandria. The Egyptian Government assumed control over the organization amid the Second World War and transformed its name to Misrairlines, on the other hand, it was soon come back to its status as an independent organization. (Hanna, 2011) In addition, Egypt air is Africa’s biggest air transport that joined the Star Alliance on 13th of June 2008. In 2005, Egypt air turned into the first IOSA affirmed aerial shuttle in Africa. Therefore, Egypt air is considered a monopoly market as it is the national airline in Egypt that has the full power in controlling the prices without any interference or competition from other companies. (CAPA, 2012)

II. What is the Monopoly market?

Markets are the complete self of an industrialist or free market economy which is focused around the idea of competition. Shifting degrees of rivalry at last prompt distinctive market structures with diverse conclusions to the business. (Jack, 2008) The fundamental market structures are monopolistic competition, monopoly, oligopoly and perfect competition, each with an alternate conclusion to the markets which heads economists to think of some as market structures for the general public that more desirable for the society such as the perfect competition. (Rilley, 2012) On the other hand, the others are less desirable such as Monopoly. It is frequently contended that imposing the Monopoly model limits restricts competition through entry barriers and consequently ought not to be permitted. This is regularly upheld by a solid argument against imposing market model as it limits shopper decision and keeps little creative organizations from being created. Also, a restraining infrastructure will deliver at a lower yield and charge higher costs than a focused business, with the same expense structure. This will prompt a loss of financial welfare and productivity. (Rilley, 2012) Then again, on the off chance that we accept that restraining infrastructures are constantly terrible then it will bring up issues of why firms try to be a monopoly and why do governments acknowledge or endure monopolistic firms. In theory imposing Monopoly model is a market sector structure with one firm the industry demand curve is the firm’s demand curve is the company’s interest bend that commands and sets cost and amount of the great. It is accepted in imposing business model that there are no substitutes and consequently a firm is a value producer who is inspired by benefit expansion and is underpinned by prohibitive obstructions to entrance of the market that along these lines counteracts rivalry. (Rilley, 2012)

• The advantages and disadvantages.

• Advantages

Concerning the advantages and disadvantages of the monopoly market; the advantages on economic views and terms, the perfect competition is for the most part viewed as more alluring than the monopoly market. In any case, the monopoly market is not so much a terrible thing, considering they are as profoundly energetic and open vivacious as much as aggressive competitive markets. (Capozzi, May) The firms in competitive markets might truly want to be a restraining infrastructure by killing the monopoly market yet this is unrealistic to be attained because of business sector strengths and the nonappearance of obstructions to passage and passageway which encourage the absence of barriers to entry and exit. The way that restraining infrastructures make supernormal benefits permits them to put resources into innovative work. (Capozzi, May) It likewise permits them to store high cost venture using into new innovation. This is liable to come about, if fruitful, in enhanced items and lower costs on the long run.

• Disadvantages.

the disadvantages is that the monopoly market structure would deliver less yield and charge higher costs which prompts a decrease in shopper surplus and a dead weight welfare misfortune. The high costs would prompt allocative supernormal benefits and wastefulness, prompting decreased profits to shoppers and unequal dissemination of pay. (Jack R. , 2011) This additionally brings up an issue about value. The high costs would endeavor low salary purchasers and their buying force may be moved to shareholders as profits. (Jack R. , 2011) This will again prompt unequal dispersion of salary. The monopoly market is likely to be less inspired towards economic effectiveness, for example, cutting expenses or expanding profit. There is additionally a probability that an imposing business model would encounter dis-economies of scale as the higher it gets greater, their normal expenses increment. (Jack R. , 2011)

• X-efficiency

The idea of x-efficiency that the most minimal conceivable costs are paid for inputs or elements of generation; On the other hand, there is less motivator for an imposing business model to make full utilization of the accessible innovation and administration strategies, predominantly because of absence of rivalry. (Steven, 2012) Monopolies are more inclined to be in fact and beneficially wasteful, bringing about unnecessary creation costs and squandered assets. (Steven, 2012) A firm utilizes an excess of laborers or putting resources into machines that are never utilized, esteeming it in fact wasteful. It could be paying its specialists unnecessary high wages or purchasing capital or crude material at unnecessary high costs. (Steven, 2012)

Figure 1: comparison between the competitive market and the pure monopoly about how X- efficiency works.

III. Egypt air and the Monopoly on board.

Egypt Air is Egypt’s national airline that was established as a privately owned business in May 1932, turning into the seventh air transport on the planet. (Galal, 2011)The carrier is based at Cairo International Airport, its primary center point, working planned traveler and cargo administrations to more than 70 ends in the Middle East, Europe, Asia, Africa and the Americas. (Galal, 2011) A far reaching system of residential administrations is additionally centered on Cairo, Egypt’s capital. Egypt air Holding Company had 20,745 representatives of which 7,620 work in Egypt air Airlines. (Galal, 2011)

• Financial information.

The Egyptair Holding Company has achieved substantial benefits in the previous years, arriving at us$176 million amid the 2008/2009 monetary year. It has resources of more than us$3.9 billion. (Galal, 2011) For the financial year finishing 29 July 2007, Egyptair accomplished a record all out income of us$1,350 billion. Aggregate gathering income developed by 16 percent, as contrasted and the earlier year. (Galal, 2011)

• The Market Share.

Concerning Egyptair, it has a piece of the pie of more than 95 percent in 2009. In spite of the fact that it is a 100 percent government claimed holding, it didn’t take any state help however not prohibited by law; it profiles itself as “self account status without any administration subsidy” and state help is “not under dialog”. (Omar, 2012) At normal Egypt air has nearly 72 percent of market shares while the competitors only achieve a maximum of 28 percent of market shares comparing to Egypt air. Egypt air, despite an intense environment with declining benefits, is pressing ahead with the development of its aircrafts and is adding additional destinations of the line in an offer to lift piece of the overall airline industry and gateway in Cairo as a passage to Africa. Egyptair considered one of the world’s fastest growing markets. (Omar, 2012)

Figure 2: Market Share, Egyptair controls 72 percent of market shares comparing to competitors. (Omar, 2012)

• Egypt air’s Monopoly on board.

Currently, the national airline company got continually increased rates simply by practically 60 percent during the last three years, citing the inflation of gas rates and also growth programs while causes. The increase applied on the grouped thirteen value slots for economy class and also two for small business class. (Omar, 2012) Nevertheless soon after crunching the amounts, it shows that the portion improve is significantly above public states. (Galal, 2011) The ticket prices in economy class jumped in between 30% to 55 %, while in small business type reach up to seventy-five percent. Nevertheless Abdel-Hamid had been nonchalant concerning the increase in prices even though conversing with reporters with a news discussion to go into detail your choice on 25th February. (Omar, 2012)”It won’t definitely make any difference for marketers and also rich persons; they’re not going to grumble, “. Instances of the cost modifications include the Cairo to Luxor inside the economy type rose through LE685 to LE1,035; Cairo to Abo Simbel ticket in economy type which increased through LE885 to help LE1685 and also from Cairo to Aswan inside the similar category class jumped from LE770 to LE1, 330. (Omar, 2012) The increase in prices was lower on Cairo to hurghada and Cairo to Sharm El Sheikh routes, the increase in both routes from LE680 to LE850. Many tourism companies and agencies whined that high domestic routes rates have influenced their business, In addition, Egyptair is restraining infrastructure of residential courses. (Galal, 2011) Shockingly, Abdel-Hamid refused an Egyptair imposing a monopoly on the local business sector regardless of the way that generally it is the main administrator and operator of domestic routes. (Galal, 2011)

• Egypt air’s Profits and Losses.

• Profits.

The national company Egyptair has recorded significant benefits in the previous years, arriving at Us$180 million amid the 2007 and 2008 budgetary year. (Haggag, 2013)this is strengthened by enormous resources of more than 4.2 billion dollars. The aerial shuttle’s money related year is from May to June. For the financial year finishing on the 31th of July 2007, Egyptair accomplished an achievement downright income of $1.150 billion dollar. (Haggag, 2013) Aggregate gathering income developed by 16%, as contrasted in the earlier year. (Haggag, 2013)

Figure 3: The revenues have increased significantly by 274 percent over this period from 2002 to 2008. (Assy, 2011)

• Losses.

Taking after the upset of 2011, Egyptair is accounted for to have endured extensive losses. Egypt’s aviation Minister Wael El Madaawi said the carrier lost an expected 1.5 billion Egyptian pounds, or nearly $192 million, between the 2012 and 2013 financial year, fundamentally because of an increment in fuel costs, the depreciation of the Egyptian money and nonstop strikes inside the organization. (Assy, 2011)Misfortunes for 2011 and 2012 were clearly nearly triple the 2012 and 2013 figures. The bearer has apparently endured aggregate misfortunes of more than 8 billion pounds, or almost 1.5 billion since 2011 started. (Galal, 2011)

Conclusion:

In the end, notwithstanding the way that the monopoly market creates less yield at higher costs and the negative ramifications on social welfare and consumer surplus; in addition, the presence of imposing the monopoly market are certain the length of firms look for only profit maximization and additionally expanded piece of the pie and at last a control on market dominance. Concerning the free market economy, the possibilities of supernormal benefits will inevitably sway different firms to endeavor to break into a monopolistic business. The danger of rivalry or even a monetary risk of a competition will drive a monopoly to wind up exceedingly financial productive. For instance, Egypt air that considered Egypt’s national airline that was established as a privately owned business in May 1932, turning into the seventh air transport on the planet. In addition, this paper includes Egypt air’s financial information that accomplished a record all out income of us$1,350 billion and its market share that has a piece of the pie of more than 95 percent in 2009. In spite of the fact that it is a 100 percent government claimed holding and normally have significantly higher percentage of market shares than the competitors. Nevertheless, Egypt air’s monopoly on board and the continually increases in prices to maximize profit. Finally, the estimation and evidence of profits and losses to show whether Egypt air maximize profits or lose which is the total revenue > total cost.