Spanish+new+low-cost+airline+Iberia+Express+launched+by+Veronica+Chung

//**REMEMBER: DO NOT SUMMARIZE THE ARTICLE!!!**//

=TITLE OF EXTRACT:= Spanish new low-cost airline Iberia Express launched

=SOURCE:= http://www.bbc.co.uk/news/business-17496003

=DATE EXTRACT WAS WRITTEN:= March 25, 2012

=DATE CURRENT EVENT WAS WRITTEN:= March 25th, 2012

=EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:= The Spanish launched a new low-cost airline called Iberia as a response to the collapse of Spain's forth-largest airline, Spanair. The reason they launched a low-cost airline was because a major competitor in the country has left the industry, which relates to the Theory of Firm of Oligopoly, where there are a few major firms and many smaller firms. In this case, with a large firm out of the industry, it makes small firms such as Iberia easier to enter the industry. Because if the large firm was still in the industry, they would acquire most of the clients in the industry and make it even harder for small firms to enter because there's a small number of clients left against a large number of small firms. One advantage for Iberia to enter right now is because Spanair closed down really suddenly and left 20,000 passengers out without flights. Iberia entered right when supply suddenly dropped drastically, which would most likely provide them with many opportunities to get customers. Moreover, they're entering with a low-cost, which means it'll attract even more customers to take their company's flghts. Other than Oligopoly in play here, Supply and Demand is also involved in this. There are two changes in supply and demand in this article. First is the decrease in supply, which means prices will increase and demand will decrease. Though plane tickets can be quite inelastic because some people must be travelling such as businesses. With Spanair leaving, it took away a lot of supply of planes to fly customers, therefore with less supply and similar amount of demand, it'll drive the price up. Second is the increase in supply, due to the enter of Iberia into the industry. With a sudden drop in supply, leaving a hand full of passengers without flights, the enter of Iberia creates an increase in supply that will once again find an equilibrium. =VOCABULARY TERMS AND DEFINITIONS:= =DIAGRAMS:= **EVALUATION:** Iberia is currently only operating within Vigo, Santiago, Menorca, Ibiza, Fuerteventura, Lanzarote and La Palma. Although this is not nearly as close as the number of destiantions Spanair had before they collapsed, it can eventually match up to Spanair's size after they expand successfully. Iberia is currently planning to expand to other places like Ireland, Greece, latvia and Netherlands. This will not only increase the demand for Iberia because people going to those newly added countries now have the option to travel with Iberia instead of other airlines. The problem with Iberia is that they aren't a huge firm to begin with, therefore it'll take a lot of time to be able to compare with Spanair. It will take them years and years of business to expand the size of their firm from a small low-cost airline to a large and developed company. A negative side is that because Iberia isn't very appealing as a new option for many customers due to it's lack of destinations to travel, the stranded 20,000 passengers could easily move to other large or small firms thay they've known for longer and trusted more. There isnt an immediate way to change this situation because there's no immediate way to build up a very fancy and trustworthy reputation in just a couple weeks. A way to accelerate the process may be government subsidies to help firms grow and develop in order to become larger firms. This way it'll take a much shorter time to build up.
 * supply - a source of something, make something available
 * demand - the desire of purchasers, consumers, clients, employers, etc for a particular commodity, service or other item.
 * expand - become larger
 * firms - companies
 * oligopoly - a few firms dominate the industry along with many small firms on the side
 * industry - economic activity in a society concerned with processing of raw materials and manufacture of goods in factories
 * competitor - an organisation or a country that is engages in commercial or economical competition with others
 * inelastic - a change in price of the product leads to a proportionally smaller change in the quantity
 * equilibrium - a state in which opposing forces or influences are balanced.