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Five force analysis airline industry

One of the forces in Porter’s Five Forces analysis that can be applied to the airline industry is the force of rivalry among competitors. Although the system of airlines is backed up by some extent by nationalization, there is a lot of competition, especially with the entrants of cost-cutting new airlines like JetBlue. Rivalry among competitors is a problem in the airline industry, as is shown by the close proximity in which airlines work in airports, and the fact that they often order airplanes from the same manufacturers.

The main problem is that competitors tend to be equally balanced in this industry, which requires that they build to a large extent within the economy of scale in which they operate (large fuel and operational costs, liability risk, regulation, etc. ). But some airlines operations are changing with new technology that allows them to increase their output significantly, separating them from other airlines.

If United, for example, was to start an operation and raise its average passenger load per flight by thirty-five or forty, it would have a distinct advantage over competitors with its capacity and profit structure. This type of competition, though, is hypothetical, and appears in reality to be divided among

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supply side economics. “When suppliers sell to a number of industries and a particular industry does not represent a significant fraction of sales, suppliers are much more prone to exert power.

If the industry is an important customer, suppliers’ fortunes will be closely tied to the industry and they will want to protect it through reasonable pricing and assistance in activities like R&D and lobbying” (Porter, 1980, p. 31). The airline industry has a high-stakes atmosphere, the company must also pay crucial attention to issues of safety and corporate responsibility.

REFERENCE Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press

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