Competition in the Airline Industry - Essay Example

On the other hand, there is a huge upsurge in the business potential of the low-cost airlines because of their smooth accessibility to many interior cities and airports where it was difficult and a costly affair for these established airlines to access. Because of the innovative cost-cutting strategies being administered by them they are able to provide competitive pricing to the commuters Competitive rivalry using Five Forces framework: Competitive rivalry of the airline using the five forces framework As per the analysis of the Porter’s Five Force Model about the case it is observed that the threat of entrants of new low-cost airlines is very high following the deregulation of the US airline industry.

Previously only well-established big players were market leaders. In the present scenario, a number of low-cost carriers having accessibility to smaller countries have come up and many new low-cost carriers are coming up which increases the threat to the existing players. (Ahlstrom, et al.,2009) With the increase in the number of low-cost carriers there is an increase in huge rivalry among the existing players in the airline industry. There is severe competition in the industry and the low-cost service provider organizations have to come up with different innovative approaches to sustain the intense rivalry existing over there.

(Hill, et al., 2008) The bargaining power of buyers is very high in this industry. This is because, with the increase in the number of service providers, the commuters definitely choose the organization providing lower cost and decent service and safety measures. So the organizations have to come up with innovative techniques of cost reduction tools and safety provision measures to provide competitive prices to the customers to safeguard against customer switching. (Day, 2009) The major suppliers of aircraft include Boeing and Airbus.

So the bargaining power of suppliers is also high because these two are the major suppliers of aircraft. The threat of substitutes is not very high as the trains and buses normally don’t cover or access those places, which are accessed by the airlines. Conclusion From the Porter’s Five Force analysis on the case discussed it is observed that the airline industry in the US is highly competitive and the service providers have to be innovative to gain a competitive advantage. Also by forming alliances with other service providers they may gain a competitive advantage.