Porters Five Forces Model & the Airline Industry Essay example

1371 Words Dec 21st, 2011 6 Pages
Porters Five Forces Model & the Airline Industry

Robert Warren

6/11/2011

Abstract Having conducted research on Porter’s Five Forces Model and the current business climate of the airline industry, I will be analyzing the industry using the Five Forces Model. Porter’s Five Forces model is a highly recognized framework for the analysis of business strategy. Five forces are derived from the model that attempts to determine the competitive intensity, competitive environment and overall attractiveness of an industry. The framework is based on five forces that describes the attributes of an attractive industry and suggests when opportunities will be the greatest and threats the least within an industry. The five forces include
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The main barrier to new entry is the extremely high cost involved. The airline industry is one of the most expensive industries to enter for several reasons. The cost of purchasing and leasing aircraft is enormous. Safety, security measures are highly regulated and can be expensive and burdensome. Manpower, including customer service, pilots and maintenance employees can be expensive. Probably the most difficult barrier to entry is brand identity. Most of the major airlines have been around for decades and have high brand loyalty. Over the years, frequent flier programs they been successful in enticing fliers to travel with certain carriers. This incentive can create brand loyalty so strong that, a lower price is sometimes not enough to choose another carrier. Finally, an entranced “hub” system within the American and International airline structure allows the larger and more established airlines to support more cities and have more regional control of cities. Essentially, these hubs create enormous market power for the larger and older airline carriers. Over the last several decades, only a few new airlines have been profitable. These airlines have typically been small, regional carriers. The power of suppliers within the airline industry is relatively low. The main factors relating to the bargaining power of suppliers is the concentration of supplies within the airline industry. Suppliers include aircraft manufacturers,

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