BMO6630 - Competitive Analysis of the Airline Industry Report

This report provides an analysis of the competition within the airline industry, highlighting factors contributing to stiff competition such as customer loyalty, oil prices, and operational costs. It discusses the role of IATA in governing airlines and addresses challenges like maintaining customer expectations, managing fuel costs, and improving operational efficiency. The report also touches upon the impact of alternative transportation methods and technological advancements on the airline industry. Furthermore, it examines other challenges affecting airline operations, including airport development, weather conditions, government regulations, and the need to adapt to changing customer preferences and technology. The conclusion emphasizes the importance of customer relations and technological advancement for maintaining a competitive edge and suggests strategies like joint tariffs for enhancing customer loyalty. This document is available on Desklib, where students can find a wealth of academic resources and study tools.

Airline Industry competition 1
Airline Industry Competition
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Table of Contents
Table of Contents.............................................................................................................................2
Introduction......................................................................................................................................3
Factors Contributing to Stiff Competition in Airline Industry........................................................3
Findings and Discussion..................................................................................................................5
Other Challenges that Affect Airlines Operation.........................................................................5
Conclusion.......................................................................................................................................6
References........................................................................................................................................6

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Airline Industry Competition
Introduction
Airline industry began to have continuous drastic growth after the and during the both world
wars. The commercial airline began operation in Europe where it has since spread throughout the
entire world and has become a great dependence as means of fast and safe transportation. There
are over 2000 airlines in the global market serving also approximately over 3700 airports in the
world. As the world is changing in the diversity of different cultures and the business world, the
airline industry has also continued to grow with an average of about 5% growth per year in the
last 30 to 35 years. The statistics record show that it is set to hit double the growth in the coming
10 to 5 years.
Airlines are governed by the international body known as IATA (International Air Transport
Association) with about 247 member airlines that belong to 117 countries in the world. It formed
in the year 1919 and was formally known as International Air Traffic Association but as it
expanded it was later changed to International Air Transport Association in the year 1945. The
body is mandated major airlines priorities such as safety, security, environmental standards,
services, provision and management of strategic partners (Barnhart, et al., 2012).
Factors Contributing to Stiff Competition in Airline Industry
The airline industry is a key back bone structure to many country economies where apart from
becoming a key source of revenue generation many countries. Many business, organizations and
non-governmental and governmental corporates rely on air transportation in daily business
activities such as importation and exporting of cargo, business trips and also governments rely a

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lot on the airline transport for tourism growth and development. The airline industry faces a great
competition and challenge which act as set back in the airline transport system.
A major increasing threat in the airline industry is the ability of every individual airline to
maintain its customer loyalty from the continuous growth of customer expectation. The airlines
have a dramatic change of events in the service offering of their customers; some even offer their
customer hotel accommodation at their various stopping points. The class and standard of an
airline have been the greatest field that the airlines compete for one another and also through
offering their customers a great discount price. Through this advantage given to the customer,
they have high bargaining power due to the even being able to get access information easily. Oil
price is one major factor that affects the price tickets of the airlines, and thus this may become a
unseeingly fair competition to the airline industry. The oil price is a direct factor that creates the
price of a flight to be either high or low; the operating cost of fuel in airlines with the oil
dominating regions can be very different in comparison to one another. A good example, North
American airlines, and Middle East airlines enjoy favorable economic scale which as compared
to other airlines in non-oil producing regions. The operational cost has also been a great
challenge to the entire airline industry, and it’s a huge task for every airline to have the ability to
cut down its cost and also to continuously improve the efficiency in the operation and high-
quality standards. For the airlines to have proper cost reduction, the airline should be able to
implement efficient operation structure and technological advancement that will also enhance
efficiency (Ishii et al., 2009).
According to the research the entry of airline industry is very open although the existing airlines
continue to enjoy the low entry competition in the market. Airline service requires a very great
amount of capital to start and be able to operate effectively. Although the existing airlines enjoy

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low entry of competition in the market, airlines have formed alliances to maximize their profits
and also compete effectively with other airlines. The joint airline ventures have given the strong
airline that has a great number of customer loyalty ability to explore even more on the market on
another airline customer through the extension of airline routes. Also, good examples of airlines
that greatly rely on joint tariffs are the Middle East countries airlines that have a low population
that provides very poor market.
The airline industry also in general faces stiff competition from other substitutes of transport and
communication such as trains, ships, yacht, ferry, and most widely used transport through
vehicles. The improvement of the technology and communication has also greatly been a great
competition to the airline industry. A good example, through telecommunications and internet
the world has been made like a “global village” where it does not require one to move from one
place to another to carry their usual business activities. Also, people may prefer to use the other
means of transport such trains which are far much cheaper than air transport and also very fast
especially the electric trains.
Findings and Discussion
Other Challenges that Affect Airlines Operation
The other major challenges that will affect the operating system of airline and also even create
competition are the improvement and the purchasing power of airlines, airport development with
the required set standards, weather, government support and regulation, and the ability to cope
with change in the customer preferences and technology. The issue of safety is also a major
concern to all the airline industries; this also reflects directly to environmental management
hazard where the high expansion of airline industry this means the environment is also at a much
higher risk of destruction.

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Conclusion
In summary, the airline industry is a very competitive economic sector, and this to have good
records of performance, the airlines should be able to have good customer relation thus as to
know how best to maintain customer loyalty. Also, the technological advancement is a major
great factor in maintaining competition through meeting customer expectation. Through joint
tariffs, airlines should be able to have good customer advertising and maintain its customer
loyalty. The challenges also can curb through proper strategies that will enable the airlines to
operate effectively and also gain good customer loyalty (Clemes et al., 2008).

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References
An, M. and Noh, Y., (2009). Airline customer satisfaction and loyalty: impact of in-flight service
quality. Service Business, 3(3), pp.293-307. (theory research).
Barnhart, C., Fearing, D., Odoni, A., & Vaze, V. (2012). Demand and capacity management in
air transportation. EURO Journal on Transportation and Logistics, 1(1-2), 135-155.
(quantitative research).
Clemes, M.D., Gan, C., Kao, T.H. and Choong, M., (2008). An empirical analysis of customer
satisfaction in international air travel. Innovative Marketing, 4(2), pp.50-62. (qualitative
research).
Ishii, J., Jun, S. and Van Dender, K., (2009). Air travel choices in multi-airport markets. Journal
of Urban Economics, 65(2), pp.216-227. (qualitative and quantitative research).