The Airline industry provides a very unique service to its customers. It transports people with a high level of convenience and efficiency that cannot not be provided by any other industry or substitute. Airline companies pride themselves on the way they treat their customer during the flight. They have things such as food, drinks, entertainment, and a welcoming staff.
In the 21st century, the aviation industry has kept growing in popularity and demand. Apart from a fast growing world economy, there are several forces that have affected its growth.
It is a lucrative industry. However, several forces decide the level of competition and competitiveness in the industry. These forces are in every industry and market. This is a five forces analysis of the aviation industry that explains how these forces affect the competitive strength of any company in the industry.
The threat of new entrants in the industry is low which is mainly because of the high entry and exit barriers. These barriers deter new entrants from entering the industry.
Apart from economic factors there are regulatory factors that make both entry and exit difficult. Entry requires large capital investment apart from skilled human resources and technical knowhow. All these factors act as big barriers deterring nay new players.
So, only the determined players enter the market, which know they would be forced to bear major losses if they ever decided to exit. Moreover, aviation companies gain from economies of scale, and so operating on a large level is generally considered more profitable.
Overall, the barriers are too high which keeps the threat from new layers minimized. Brand loyalty to existing airlines is also a reason that restricts new players. There is a big investment in marketing and building customer loyalty too.
Bargaining power of buyers: The bargaining power of the buyers following recession has risen.
Apart from technological innovation, economic factors have also allowed huge power in the hands of customers. Each individual passenger is important. Moreover, the law is tilted in the favour of the passengers and their safety and convenience are important concerns for the aviation brands.
To acquiring customers to building customer loyalty, Airlines have to focus a lot on creating a great customer experience and managing prices. Customers have several options, as there are several players in the industry which provide matching experiences. Prices become important basis of gaining customer loyalty and market share.
Customers can easily check and tally prices online and buy from their preferred airline. All these factors have given customers sufficient power which is moderated only by pricing and customer convenience.
Overall, the bargaining power of customers is moderate. Bargaining power of suppliers: The bargaining power of suppliers in the aviation industry is high. The key inputs include aviation fuel, craft and technology and skilled labor. The prices of fuel are subject to fluctuations based on economic and political reasons.
The craft and technology suppliers are limited in number and aviation brands depend upon them to supply fuel efficient, fast and well-designed aircrafts. Two leading names of aircraft manufacturers are Boeing and Airbus.
Similarly, the labor force in the aviation industry mainly consists of well-paid high level professionals. Airlines focus on hiring as well as retaining the best talent. Overall, the bargaining power of the suppliers is high. There is a big investment in purchase, maintenance and running of aircrafts.
The threat of substitutes is low in the developed countries where people mainly use airlines for both short and long distance travel. In the developing world however, there is some threat from other modes like trains.The airline industry needs to ensure that all customer feedback has been reviewed and proper actions are taken to avoid similar situations in the future.
In-depth Competitor Analysis. Sometimes customers prefer one airline over the other because of minor differences in . Airline Industry Overview Framework • Market • Product • Customer • Compeon – Revenues – Cost • Externals Global Market • Airlines operang more than 23, aircra.
This is a five forces analysis of the airlines industry that explains how these forces affect the competitive strength of any company in the industry. Aviation Industry Five Forces Analysis.
There is a big investment in marketing and building customer loyalty too. The airline industry needs to ensure that all customer feedback has been reviewed and proper actions are taken to avoid similar situations in the future.
In-depth Competitor Analysis Sometimes customers prefer one airline over the other because of minor differences in service offerings, seasonal promotions or other facilities. ing complexity of customer choice drivers, e.g. ﬂexibility and price as a result of liberalization in the airline industry.
Thus, there is a need to re-evaluate the traditional market. Brand name recognition and frequent fliers point also play a role in the airline industry.
An airline with a strong brand name and incentives can often lure a customer even if its prices are higher.