The U.S. Airline Industry Essay Example for Free

The U.S. Airline Industry EssayThe U.S. air duct industry provides a unique answer to its customers. It transports people and goods with efficiency and lash-up which is not achieved by any some other service. The purpose of this article is to collect data on the U.S. air passage industry and conk out the state of the industry today. information came from sources such as the Federal Aviation Administration, scholarly articles, and websites such as dallas.culturemap.com and airwise.com. Tools used to analyze the data include P. E.S.T., and Porters five forces. The compend also focuses on the industries drivers of change and its key survival accompanimentors.Key Survival Factors IncludeLocations that an air hose services The servicing of particular markets is essential in the nature of the airline industry. Airlines need to reacher routes between markets that are desired by customers. Cost structure of an airlines operations The costs of operations for an airline are a limit to how low airfares sens be. Costs include maintenance, give the axe, labor, fees and lease payments for operating in airports. Those airlines that are able to control costs can attract customers with lower fares and can improve overall profitability. (Site this web article here http//dallas.culturemap.com/news/ pass/05-19-14-southwest-airlines-virgin-america-new-low-fares/) An airlines men and its interaction with customers A Pleasant workforce can encourage repeat business. An unhappy workforce can drive customers away to rivals.Reliability of Service An airline with a reputation for reliable service has a positive image among customers, which can lead to repeat business. Issues with reliability include mishandled baggage, the on-time arrival of shoots, overbooking flights, and passenger complaints. Those airlines that are able to control these elements provide make better service to the customer.Drivers of Industry ChangeConsolidations and Alliances Many airlines operating in the U.S. have recently consolidated due to high competition and improper cost structures. These new consolidated firms are also establishing alliances with international carriers which enable them to expand their market participation strategies. Globalization Growth potential in the globaltravel market has led to a drive for globalization in the airline industry. U.S. airlines are lobbying for open skies treaties between the U.S. and other nations. The U.S has signed much than 60 open skies treaties with nations nigh the globe.Low-cost Competition The rise of the low-cost carriers has forced a change in the competitive environment of the airline industry. Southwest, JetBlue, People Express and Airtran operate off of low-cost strategies that allow them to offer lower airfares. These low fares put pressure on the industry and force rivals to lower their costs to stay competitive. (http//www.nbcnews.com/business/travel/new-low-cost-airline-peoplexpress-tickets-go-sale -n122971)(P.E.S.T.) Political, Economic, Social, and Technological forces that impact the industry.PoliticalSecurity Regulations from FAAWar on Terrorism led to stricter guidelinesCustomer Protection Regulations must show fees (http//www.npr.org/2014/05/31/317429334/regulators-and-airlines-fight-over-fares-fees-and-fairness) Economic superior operating costsAirlines mergingFuel Costs are hugeLess people traveling due to expenseVery high immovable costImpact of holiday travelCancellation fees/checked bag costSocialSecurity Is it safe to fly?Crashes/failureCustomer service (friendliness, flight attendant/pilot being funny) TechnologicalBusiness changes (using Skype instead of traveling)Buying tickets online/cancel onlinePorters Five Forces Model is one way to analyze the environment in which airline companies operate. This model shows the major forces that form the industry threat of new entrants, bargaining power of buyers, threat of substitutes, bargaining power of suppliers, an d competitors. panic of new entrants is relatively high in the airline industry. It seems like it would be hard to enter the airline industry due to the large amount of contumacious costs however lending has made it not only possible but fairly simple. New entrants will have to endure years of fiddling or no profit until a strong customer base is established though. Meanwhile existing companies will be able to lower prices and conduce losses against their capital reserves just to drive a new competitor out of business. Further, consumers prefer well-known brands mainly due to safety concerns.Lastly, squiffy licensing requirements and heavy regulations by organizations such as the Federal Aviation Administration and the Department of Transportation require significant knowledge base and time investment on the part of the new entrant. Bargaining power of buyers is also relatively low in the airline industry. Two main groups of buyers exist individual buyers buy tickets for pers onal or business travel, and travel agencies and/or online portals that work as a middle man between the airline companies and individual buyers. There is definitively a large amount of buyers compared to the number of airlines therefore, loss of one customer does not strongly affect the bottom line of a given airline. Typically, each airline has a niche. Some airlines focus on cost, while others focus on having the best amenities, etc.Although switching costs are low for buyers, they tend to bear within a niche and purchase tickets based on their price vs. amenities preferences. Threat of substitutes is medium in the airline industry. Consumers can choose other forms of transportation such as a car, bus, train, or boat to get to their destination. However, there is a cost to this switch, mainly time. For long distance travel, airlines usually choke all other forms of transportation when it comes to cost and convenience. Nevertheless, there is one important development that should be noted technological advances are allowing business people to telecommute, this significantly cuts down on required business travel. Bargaining power of the suppliers presents a medium threat in the airline industry. Major suppliers include the airplane manufacturers, aircraft leasing companies,fuel companies and labor unions. Although airline companies cannot easily switch suppliers, most firms have long term contracts with their suppliers.On the other hand, there are very few suppliers in the airline industry because of the amount of money and expertise required. Airlines represent the main source of income for these suppliers so airlines business is extremely important to them. ambition among existing players is very strong in the airline industry. The first reason is the fact that the airline industry is currently stagnant the number of competitors remains more or less the same and the industry does not have overcapacity. The fixed costs are extremely high and it is hard f or an airline firm to offer the industry because of the long term debt obligations. The rivalry is reduced by the brand identities of different airlines.Some are known for exceptional amenities, others for low prices. The market seems to be equally divided as each company maintains its own niche in the market. Highly competitive industries such as the airline industry typically see low rates of return due to the fact that they competition drives down prices. Couple this with the high amount of government regulation in the airline industry and the investor may be weary of investing in the industry. However, the next five years look promising for the U.S. airline industry due to the fact that many of the participant firms will be newly consolidated and have influence in markets outside of the U.S. as well as those inside.