The Module 6 discussion question is

Briefly identify a situation in which a business or organisation has either internalised, or failed to internalise, externalities. Comment on the consequences of their actions and whether you think they demonstrated good leadership, or how they might demonstrate good leadership (in relation to the issue you identify) in the future.

In this topic I will be talking about the aviation industry. Rather than talking about a specific airline company like Cathay Pacific, Virgin Atlantic or even organizations such as The International Civil Aviation Organization (ICAO), I will talk about the failure of internalizing externalities caused by airplanes in general. In this case some examples of negative externalities caused by airplanes include aviation pollution such as aviation noise and air pollution. Aviation noise is problematic for local communities that are nearby as residential areas can be affected by loud engine noises at night when residents are at rest; this has caused many complaints made towards airports. As for air pollution the huge amounts of fuels being consumed by airplane engines produce large quantities of greenhouse gases leading to global warming/climate change e.g. carbon monoxide, carbon dioxide and nitrogen oxides etc. It is fact that there are many externalities in the aviation industry but even though we may not realize that developments and changes are being made there are leaders trying to internalize these externalities. So in my opinion this still shows poor leadership in my eyes as no huge advancements (e.g. in aviation technologies) have been made to resolve these problems. However even though there isn’t much advancement there are developments taking place for example: progressive introduction of improved technology, alternative fuels (e.g. biofuels), better operational practice, demand management, introducing Noise Preferential Routes and restrictions on night flying. Some of the leaders include The International Civil Aviation Organization (ICAO), governments and some airline companies (e.g. Virgin). Overall in order to make improvements it is important that governments take a leading and active role and should encourage and fund the development of radical and innovative solutions in the future. Can anyone else think of any other alternatives that could be taken to internalize the externalities? Also are there any other major externalities? CBC NEWS ‘Airplane flies jumbo jet powered by biofuel’ Available at: [Accessed 24/04/12] Environmental protection UK Available at: [Accessed 24/04/12]

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