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OF THE AIRLINE
Prepared by BooM
BARGAINING POWER OF
Boeing and Airbus are the two suppliers of aircrafts in the airline industry,
this means in the airline industry, the suppliers have a high bargaining
In this industry, the buyers; the airlines have a lower bargaining power, as
there are few suppliers and many buyers.
In terms of switching cost, it might be low due to the competition between the
Switching cost is also high as many airlines are tied to long term contracts
with airline manufacturers.
BARGAINING POWER OF THE
The buyers in the airline industry have a high bargaining power.
Customers have better access to information about ticket prices. Yeoman, I.
(2013) posits that “Soaring rates of smartphone ownership mean the global
consumer is becoming better equipped to chase value right up until the
moment of purchase.”
The switching cost is also low, customers are not loyal to any brand.
Deloitte "Rising above the Clouds” survey found that airlines customer
reward programs aimed at driving brand loyalty was not effective
50 percent of overall respondents were enrolled in two or more airline loyalty
THE THREAT OF POTENTIAL
Airlines are capital and labour intensive, there are low net profit, high fixed
costs relative to revenue and high taxes.
Economies of Scale
Existing airlines in the industry enjoy economies of scale. The size of their
operations helps cover their fixed costs, and their experience helps improve
People are less likely to patronize airlines they do not trust, due to safety
concerns. Customers feel safer with airlines with have a proven safety track
record. This would not be available to new entrants.
THE THREAT OF POTENTIAL
Access to low cost inputs
Established airlines have better credit worthiness than new airlines.
Established airlines also benefit from long term relationships with
There is low brand loyalty in the airline industry, Customers are price
sensitive, they have access to latest prices, and this makes it difficult
for airlines to establish any strong loyalty in their customers.
The airline industry is heavily regulated and monitored by both local
and international authorities.
THE THREATS OF
The airline industry faces competition from direct sources like trains, Ferry,
Yacht, Ships and even vehicles.
There is also teleconferencing which is an indirect substitute for Business
There are now several viable alternatives available to business traveling.
Teleconferencing and improvement in communication technology provides
cost-efficient and time-conscious alternatives to Business travelling.
EXTENT OF COMPETITION
The extent of competition in the airline industry is high, as there are many
airlines competing for the ever growing number of passengers patronizing
the airlines operating in the industry. Airline operating in this industry strive to
ensure their customers are very satisfied with the services they offered, this
is to ensure that the customers patronize them repeatedly.
In conclusion, the airline industry is not an attractive industry to invest in, the
capital requirement is high, the suppliers and consumers have high