Also, Southwest Airlines is heavily depended upon on the price of oil for its profit margins, which implies high bargaining power of oil suppliers.
Harvard Business School Porter. Fuel is a major expenditure for it. The aim of this essay is to carry out a comprehensive analysis of the operating environment of the airline industry using the PEST framework and identify what factors affects the way airlines do business.
It forecasts that the demand for passenger and freighter air-crafts will rise. Presently, the airline manufacturing industry is a duopoly comprising of two players: The economic recession left behind a few positive effects also.
The external environment of the airline industry can be described as very unstable as there are regular fluctuations in the macro-environments. The second funneling approach we focus on was on business professionals traveling with airlines.
This growth is also expected to continue. In Essential of Strategic Management. Future trends and requirements for change based on these trends can be identified through this analytical tool Johnson, et al, While many regulations were completely relaxed, some aspects of air travel are still tightly regulated.
Other full services airlines achieving economies of scale with increased mergers and acquisitions. External Economic Factors Affecting Airline Industry Introduction Few inventions have affected on a large scale how people live and experience the world as did the airline industry. Southwest Airlines needs to achieve higher aircraft efficiency to avert economic concerns regarding fuel costs and environmental concerns regarding high emission and noise pollution.
With this immense growth, numerous complex challenges presently beset the airline industry. However, there is still need for more negotiations to put in place the best measures that can ensure safety of passengers, sustainable operations of airline companies.
These factors such as the economy, social change and government policy affect the survival of the firm significantly Gillespie, There was no free market competition as travelers have to make do with the services and prices available to them from the few airlines.
Share on Facebook Social factors have a profound impact on businesses, as well as the overall marketplace.
The Aero planes are becoming more fuel efficient day by day helping airlines to reduce travelling costs while new technology has also enabled airlines to introduce more safety measures. For example, state and local governments control access to gates and runways, and often do not use a formal bidding process for access.
Social In the recent years, the emergence of the Millennial generation into the consumer class has meant that the social changes of a generation used to entitlement, instant gratification, and more demanding in terms of service has resulted in the airlines having to balance their costs with the increasing demands from this segment.
The Five Forces analysis is as follows: On the other hand, the tax policies may also be favorable to the airline industry, encouraging business and profitability. Added to this was the prolonged recession in the wake of the dotcom bubble bursting.
If the USA does not trade with maybe a country like Russia, it will be difficult for American airline companies to expand into the market even if it looks so lucrative.
That means there will be growing number of older passengers who will prefer air travel for shorter distances for increased comfort. Government regulation can change the course of research and impact key suppliers the aerospace industry relies on for product manufacturing.
This move would be significant because it will help the company to fly to destination such as Hawaii, and, for the first time, to destinations outside the United States Southwest, Byaverage ticket costs fell to less than half of prices. It can be beneficial for both governments and companies as well as passengers.
The Department of Transportation no longer controls ticket prices and services. The aviation industry is not immune to economic pressures. Moreover, to advance the company network of flying routes and destinations, Southwest airlines should speedily complete transition from its existing reservation system towards a new robust information system that can enable it to serve international destinations and allow for other customer relationship management enhancements.
However, the aviation industry is global and spans the entire globe. American deregulation of the airline industry occurred in and somewhat reduced government restrictions. Considering the vast regions that many airlines operate, the business environment is often regulated by on the political atmosphere in a particular market.
Though the passengers might not notice these aspects, it is the case that once one scratches the surface and does some research, it is clear that the airline industry is in a mess and only, radical restructuring can help revive its fortunes.
So, what factors are affecting the industry? And more importantly, how is the industry coping with them? And more importantly, how is the industry coping with them? Here is a PEST analysis for airline industry to give you a better idea. Political Legal Factors That Affect The Airline Industry Political factors Political risk, for examples the Gulf war and terrorism somehow damaging passenger confidence, particularly in the US.
Political factors affecting airline industry refer to a variety of government interventions that may hinder or enhance the operations of air transport.
Considering the vast regions that many airlines operate, the business environment is often regulated by on the political atmosphere in a particular market. Executive Summary. This paper discusses the external economic factors affecting the strategic decision of airline industry and how this decision in turn, affect the.
First off, when looking at the economic and political factors of the airline industry, we noticed that security was a trend between the two. With the increase of security regulations by the FAA due to terrorism, there are higher operating costs occurring at airports across the country.
Factors that cause effects on the airline industry. Print Reference this.
In fact, the change in demand is one of the most important factors which affected to the airline industry. The initial variable that can shift demand curve is income. Figure 7: US Airline industry passenger revenues –Political factors affecting us airline industry