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    Porter'S Five Forces Analysis of The Airline Industry

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    DENISE MARQUEZ
    The document analyzes Porter's Five Forces for the airline industry. It finds that the threat of new entrants is low due to high capital requirements to start an airline. The bargaining power of buyers is high since customers can easily compare prices online and face low switching costs. The bargaining power of suppliers like fuel companies and aircraft manufacturers is also high since airlines depend on these inputs over which they have little control. The threat of substitutes is medium as other transportation methods exist but planes are often the fastest. Finally, competitive rivalry in the mature airline industry is intense due to stagnant growth, high fixed costs, and commoditized planes. One complementor is the tourism industry which benefits from airline passengers.

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    Porter'S Five Forces Analysis of The Airline Industry

    Uploaded by

    DENISE MARQUEZ
    41 views2 pages
    The document analyzes Porter's Five Forces for the airline industry. It finds that the threat of new entrants is low due to high capital requirements to start an airline. The bargaining power of buyers is high since customers can easily compare prices online and face low switching costs. The bargaining power of suppliers like fuel companies and aircraft manufacturers is also high since airlines depend on these inputs over which they have little control. The threat of substitutes is medium as other transportation methods exist but planes are often the fastest. Finally, competitive rivalry in the mature airline industry is intense due to stagnant growth, high fixed costs, and commoditized planes. One complementor is the tourism industry which benefits from airline passengers.

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    The document analyzes Porter's Five Forces for the airline industry. It finds that the threat of new entrants is low due to high capital requirements to start an airline. The bargaining power of buyers is high since customers can easily compare prices online and face low switching costs. The bargaining power of suppliers like fuel companies and aircraft manufacturers is also high since airlines depend on these inputs over which they have little control. The threat of substitutes is medium as other transportation methods exist but planes are often the fastest. Finally, competitive rivalry in the mature airline industry is intense due to stagnant growth, high fixed costs, and commoditized planes. One complementor is the tourism industry which benefits from airline passengers.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    41 views2 pages

    Porter'S Five Forces Analysis of The Airline Industry

    Uploaded by

    DENISE MARQUEZ
    The document analyzes Porter's Five Forces for the airline industry. It finds that the threat of new entrants is low due to high capital requirements to start an airline. The bargaining power of buyers is high since customers can easily compare prices online and face low switching costs. The bargaining power of suppliers like fuel companies and aircraft manufacturers is also high since airlines depend on these inputs over which they have little control. The threat of substitutes is medium as other transportation methods exist but planes are often the fastest. Finally, competitive rivalry in the mature airline industry is intense due to stagnant growth, high fixed costs, and commoditized planes. One complementor is the tourism industry which benefits from airline passengers.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    MARQUEZ, DENISE S.

    PORTER’S FIVE FORCES ANALYSIS OF THE AIRLINE INDUSTRY

    THREAT OF NEW ENTRANTS


    - This aspect has a low threat for the airline industry. It takes quite some
    upfront investments to start an airline company. Like for example, purchasing
    aircrafts. Moreover, new entrants need licenses, insurances, and other
    qualifications that are not easy to obtain when you are new to the industry.
    There are two aspects that do however raise the threat level. First, there are
    extremely low switching costs. Second, there are no proprietary products or
    services involved.
    Even with these two aspects the industry still has a very low threat overall.
    Existing firms have a large cost advantage. This industry requires a large amount
    of capital and without a strong customer base there will be little to no profit in
    the first few years. Existing firms can and will use their high capital to retaliate
    against newer firms with whatever means necessary such as lowering prices and
    taking a loss.

    THE BARGAINING POWER OF BUYERS


    - The bargaining power of buyers in the airline industry is high. Customers
    can check prices of different airline companies fast through the many online
    price comparisons websites such as Skyscanner and Expedia. In addition, there
    aren’t any switching costs involved in the process. Customers nowadays are
    likely to fly with different carriers to and from their destination if that would lower
    the costs. Brand loyalty therefore doesn’t seem to be that high. Some airline
    companies are trying to change this with frequent flyer programs aimed at
    rewarding customers that come back to them from time to time.

    THE BARGAINING POWER OF SUPPPLIERS


    - The bargaining power of suppliers in the airline industry can be
    considered very high. When looking at the major inputs that airline companies
    need, we see that they are especially dependent on fuel and aircrafts. These
    inputs however are very much affected by the external environment over which
    the airline companies themselves have little control. The price of aviation fuel is
    subject to the fluctuations in the global market for oil, which can change wildly
    because of geopolitical and other factors. In terms of aircrafts for example, only
    two major suppliers exist: Boeing and Airbus. Boeing and Airbus therefore have
    substantial bargaining power on the prices they charge.

    THE THREAT OF SUBSTITUTES


    - This industry has a medium substitute risk level. There are substitutes in the
    airline industry. Consumers can choose other form of transportation such as a
    car, bus, train, or boat to get to their destination. There is however a cost to
    switch. Some means of transportation can be more costly than a plane ticket.
    The main cost is time. Planes are by far the fastest form of transportation
    available. Airlines surpass all other forms of transportation when it comes to cost,
    convenience, and sometimes service. Consumers do sometimes choose other
    methods for various reasons such as cost if they are not traveling very far which
    raises the risk.

    THE INTENSITY OF COMPETITIVE RIVALRY


    - The rivalry in the airline industry is very intense for many reasons. The
    industry is currently very stagnant. It seems to be in the mature stage of the
    business cycle. The number of competitors stays the same in the long run and it
    doesn’t seem to be under or over capacitated. The fixed costs are extremely
    high in this industry. This makes it hard to leave the industry because they are
    probably in long term loan agreements to stay in business. The products involved
    or the planes are highly complex which also heightens the competition.

    COMPLEMENTORS
    - One complementor of the airline industry is the tourism industry. When a
    consumer heads to a tourist destination, he or she often gets there on an
    airplane. Similarly, whenever a consumer travels on an airplane, that consumer
    is most likely going to visit a destination which is a part of the tourism industry,
    such as a hotel or a rental car agency.

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