This website uses cookies to ensure you have the best experience. Learn more

Industry Analysis On Airline Industry

1115 words - 5 pages

Industry Analysis

The Airline is one of the major industries in the world today and is majorly affected by Michael Porter's Five Forces model. In case of the Airline industry, this is the most important force today, especially since the market is completely saturated. There are more service providers than needed in both local as well as international markets. The airlines are continually competing against each other in terms of prices, technology, in-flight entertainment, customer services and many more areas.

One of the forces that Porter describes is Threat of New Entrants which refers to the possibility of new competitors entering the industry and undermining the profits of the ...view middle of the document...

Individuals wishing to travel to and from the KLIA are presented with various choices when selecting an airline but price is usually the most important factor, especially for students and families. Hence, the bargaining power of customers in the airline industry is very high since they are price sensitive and search for the best deals available. AirAsia attracts travellers that are price sensitive by offering them low fares and those that are convenience oriented by providing them with frequent flights.
In addition to buyers, suppliers can also exercise considerable pressure on a company by increasing prices or lowering the quality of products offered. The bargaining power of suppliers depends on supplier concentration, substitute supplies, switching costs, threat of forward integration and buyer information. Suppliers within the airline industry are concentrated since Boeing and Airbus are the main suppliers. As the supplier industry is dominated by Boeing and Airbus the concentration undermines the ability of airlines such as AirAsia to exercise control over suppliers and earn higher profits. Since AirAsia has a fleet of 26 Boeing 737 aircraft its supplier has a high bargaining power over AirAsia. However, other suppliers who work with the airline such as the providers of on board snacks do not have the same bargaining power as they are a larger industry which allows for AirAsia to have a choice over who they are purchasing from. AirAsia will purchase their on board snacks from the supplier which is the most economic so AirAsia can make a higher profit margin from the goods when they are sold.
The availability and threat of substitutes is another factor that can affect competition within the airline industry. It refers to the likelihood that customers may switch to another product or service that performs similar. Substitutes for air travel include travelling by train, bus or car to the desired destination. The degree of this threat depends on various factors such as money, convenience, time and personal preference of travellers. The competition from substitutes is affected by the ease of with which buyers can change over to a substitute. A key consideration is usually the buyers switching costs, however due to their low fare non-stop flights, AirAsia can lure both price sensitive and convenience oriented travellers away from these substitutes. AirAsia has actually joined forces with its substitutes, such as car...

Other Papers Like Industry Analysis on Airline Industry

European Airline Industry Essay

952 words - 4 pages Airline Industry Slideshare presentations on airline industry Wiki article on Porter 5 An analysis of the European low fare airline industry

U.S. Airline Industry Essay

626 words - 3 pages On the surface, the players in the U.S. Airline Industry appear to be in an enviable industry filled with glamorous perks and a solid business model. However, analysis paints a different story. Digging deeper reveals significant issues with little possibility for industry wide solutions, therefore making the industry unattractive. Rivalry is one of the main issues in this industry. While rivalry may not typically doom an industry, the airline

Airline Industry - A Study

2269 words - 10 pages trade, economic growth, tourism and international investment, and is therefore central to the globalization of many other industries. This paper will discuss the characteristics of airline industry in the United States with more focus on passenger airlines, its market structure and competitive environment, market shares and profits, recent developments, technology and innovation, and the future of the industry. U.S. AIRLINES The airlines

Price Discrimination, Airline Industry

2929 words - 12 pages Same point of departure, same destination, the same snacks. Why is it people sitting next to each other on the same flight can pay such different amounts for their tickets? Airline pricing seems to be a great mystery. The airline industry refers to their pricing game as “yield management” or “revenue management.” Meaning prices on the same plane can fluctuate widely based on available seats at the time of purchase. Even though this seems to

Overview of Airline Industry

2448 words - 10 pages Overview of Airline Industry Air travel has grown in the past decade. Travel grew strongly for both leisure and business purposes. India will have nearly 800 to 1000 airplanes by 2023, it was estimated by Airbus. In spite of growth between 30 to 50 per cent in Indian aviation industry, losses of approximately 2200 crore is estimated for the current year. During 19991-1992, Modiluft, East West and Damania went bankrupt. Air Sahara and Jet

Airline Industry Breakup of Velvet

1621 words - 7 pages or bought over time), safety records, cost of tickets and types of on board service will rate the quality of the airline. Added to these ever present industry factors is competition. The early market comprised of the ‘traditional’ airlines, SAA and Comair. South African Airways was founded in 1934 after the acquisition of Union Airways by the South African government. The airline was initially overseen and controlled by South African Railways

Five Forces Model of Airline Industry

1235 words - 5 pages allowed Jetstar and Tiger Airways enter the market and reduce the market share for Virgin Blue and with the added competition, together with pricing freedom, means that there is a major constraint on profitability for the airline industry. Moreover if borrowing is cheap the likelihood of more airlines entering the industry is higher. Bargaining power of Buyers is high The bargaining power of buyers is another force that can affect the

Competitive Advantage In The Us Airline Industry

5037 words - 21 pages analysis based on Porter’s Five Forces framework and explores a business strategy to reposition our medium-sized airline in the US market. Furthermore the document contains suggestions for an implementation plan. Competitive Advantage in the US Airline Industry The GREENair Strategy Subject Page Module 4 - Strategy & Organization - Assignment 4/17 2 2.1 The US Airline Industry Industry competitors The abolition of controls resulted in

The Airline Industry in 2001 - 2004

1166 words - 5 pages to give up within days. Some observers have also commented that the industry's problems are exacerbated by bankruptcy laws that keep troubled airlines such as United in the industry by allowing them time to reorganize under Chapter 11 bankruptcy protection rules. Case Discussion Questions 1. Using the competitive forces model to analyze the structure of the airline industry during 2001 – 2004. How well does this analysis explain the low

Strategic Commitment in the Airline Industry

2244 words - 9 pages , is used would depend on the type of relationship that exists within an industry amongst its competitors, (eg. Cournot/Bertrand). Strategic Commitment in the Airline Industry Within the airline industry there are examples of strategic commitments. One example of strategic commitment is hedging fuel through price locked contracts, which is a common strategy found in European airlines but not as often seen in US and Asian airlines {Wall

Five Forces Model of Airline Industry

1644 words - 7 pages Centre. Refer to Subject Guide for further instructions on completing assignment. Any queries on the assignment should be directed to the On-line tutor. You will also be able to access other student enquires and replies – your problems or difficulties may be others! Assignment topic Undertake a market analysis of an industry. Use Michael Porter’s ‘Five Forces Competitive Framework’ as the basis of your analysis. Clearly indicate in your

Related Essays

Analysis Of European Airline Industry

3723 words - 15 pages AN ANALYSIS OF BUDGET AIRLINE- ‘RYANAIR’ Module Name: Management and Strategy (MBA INTERNATIONAL) Module Reader: Claire Devlin Student Name: Varghese Jacob Student Number: 8202730 Date: 16/03/2007 Introduction Air line Industry can be called as one of the biggest industry in the world. In that huge industry European Airline industries part is very high. European Airline industry consists of

Airline Industry Essay

804 words - 4 pages . The competitive nature will continue each airline must strive to separate itself from the others and make it more desirable to utilize. By ensuring that customer satisfaction is met and the operating costs are minimized, the airline industry will remain a powerhouse.   References Grabianowski, E. (n.d.). How budget airlines work. How stuff works, Retrieved from Grant, R. M. (2010). Cases to accompany contemporary strategy analysis. (7 ed.). Wiley. Grant, R. M. (2010). Contemporary strategy analysis. (7 ed.). Wiley.

Airline Industry Essay

2458 words - 10 pages have far-reaching effects on the industry's trend towards expanding domestic and international services. The ability to generate adequate revenues that cover operating costs has hampered the airlines ability to be profitable. Another factor that has a major impact on the airline industry is the gas prices; the gas prices are at an all time high. A one dollar increase per barrel of crude oil translates to anywhere from 50 to 80 million dollars

Airline Industry Essay

626 words - 3 pages [pic] [pic] As shown on the income statement the profit margin has been negative in the airline industry since 2000. However, in 2006 U.S. airlines generated an operating margin of 4.6 percent on operating profits. After factoring in $4.1 billion in interest expense, $653 million in income taxes and $301 million in miscellaneous non-operating income, the industry posted net earnings of $3.0 billion and net profit margin of only 1.9 percent