Five Forces Analysis Of The Airline Industry In Europe

The Airline industry is a large and constantly growing industry. It facilitates economic growth, international investment and world trade and is therefore central to other industries as well for globalisation. There are various forces which lead to globalisation in airline industry. Key drivers of change are forces likely to affect the structure of an industry; sector or market. (1).

Overall, the five forces model suggests that the overall intensity of competition in the airline industry is likely to be severe. Back in the early 1980 's competition was very intense. During the late 1980 's the monopolization of major routes by a few major carriers, the limited availability of free landing spots at major hubs and the emergence of limited brand loyalty and tacit price agreements have all helped reduce the intensity of competition. However, as already mentioned, slumping demand in the early 1990 's plunged the industry once more into a severe price war. Airline travel is a commodity-type product, with limited potential for differentiation.

The risk of entry into the airline industry by potential competitors is low due to the “liberalization of market access, a result of globalization. According to the IATA (International Air Transport Association), about 1,300 new airlines were established in the last 40 years,” (Cederholm, 2016). The cost structure of businesses in an industry is a determinant of rivalry. In the Airlines Industry, fixed costs are high, because before the organization can make any sales, they must invest in air crafts, fuel and service employees. These items come attached with hefty price tags. Industries that require such enormous amounts of start-up capital as predicted by many analysts

American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.

Airlines Industry is large and growing, it is also the most fiercely competitive sector. It facilitates international trade, world economy growth, tourism and international investment. The airline industry has over time with the use of modern technology been able to take advantage of the short haul, high frequency and gained a competitive advantage over other forms of travel, such as buses and railroad travel. Additionally, the airline industry still holds the market for global travel at a low cost and convenient way to travel. The aviation industry gives a good contribution to the GDP which includes the following: airline services, general aviation, civil airport operations, aircraft manufacturing, and

Doganis, R. (2010). Flying Off Course - Airline Economics and Marketing. London and New York: Routledge.

Porter’s Five Forces analysis is a tool to analyze the external environment in which an industry operates. In the European airline industry, the threat of new entrants is low. Entrants will need high capital investments to compete with existing firms. The substitutes in the airline industry are the railway networks, rental cars and sea transports. Rental cars and sea transports are more expensive than the airlines therefore they don’t pose a threat to the industry. It takes longer to reach a destination by train than a plane, which causes the threat of railways be low. Existing firms pose a threat to the industry because there are 35 firms operating in the European airline industry, which creates intense price rivalry among firms. Customers are price sensitive and customer can easily switch to another airline causing the threat of buyers to be high. Suppliers can charge a high price for their

Porter’s Five Forces analysis is a tool to analyze the external environment in which an industry operates. In the European airline industry, the threat of new entrants is low. Entrants will need high capital investments to compete with existing firms. The substitutes in the airline industry are the railway networks, rental cars and sea transports. Rental cars and sea transports are more expensive than the airlines therefore they don’t pose a threat to the industry. It takes longer to reach a destination by train than plane, which causes the threat of railways be low. Existing firms pose a threat to the industry because there are 35 firms operating in the European airline industry, which creates intense price rivalry among firms. Customers are price sensitive and

industry and in turn this fostered entrepreneurship and innovation, as a reaction of firms to adapt to

Airline industry has been faced with stiff competition due to the increased number of airline companies in the sector. The study will focus on the strategies that are deployed by Ryanair Airline Company, Air Berlin Company and Easy jet plc in ensuring that it meets with the competitiveness in the economy. The strategies for Ryanair Airline include; Low fare, Best Customer service, Short-haul route and destination, Reduction of operating costs, Internet services in its reservation system and Quality management. In the case of Air Berlin airline its strategies comprises of high service standards, blanket coverage, market positioning

Economical can be another major factor for the airline industry. Airlines ' profitability is closely tied to world economic growth and international trade. Due to the rate of war and terrorist event, the growth rate of economy dramatic slowdown, capacity in Europe outstrips demand, which gains the low yield to the airline industry. The airline industry is now faced with significant capacity overhang and high cost platform, especially in the US. The report shows that, two major airlines American Airline and United airline losses of more than US$ 3billion for 2002, which makes world airlines get struggle.

Through a century of perpetual development [1], the commercial airline industry has witnessed a steady increase in airplane passenger capacity [2]. The industry itself is a notable economic force, from the perspectives of both operations and its impacts on relevant industries such as aircraft construction and tourism [3]. Different scales of wealth has led to market segmentations between airline companies with dissimilar objectives and consumer focus: premium airlines such as Singapore Airlines offering top-notch service, comfort, and quality at a higher price whilst low-cost airlines such as easyJet are catering to consumers that prefer economical flights.

The airline industry is facing one of its most challenging environments in history. A global economic recession coupled with the terrorist attacks of September 11, 2001 have led to a decrease in passenger traffic, reduction in revenue

In this essay, we will first describe the features of the market which determine its market structure and consider what the best market structure for the International Airline industry is. Then we will move on to the term of non-price competition and the three different ways in which airlines compete for a share of the market. Lastly, we will explain why a perfect competitive firm is unlikely to make supernormal profit in the long-run by using the graph and also discuss why the

When people think about airlines, they think of luxury as well as comfort. Though, under the surface, the airlines worldwide, is caught in a higher operating costs, low profit, and decreasing margins due to the few features that will be mentioned in this report. The PESTLE analysis is used to analyze the current state of this industry.