Competitive Advantage of American Airline Industry

Running head: COMPETITIVE ADVANTAGE OF AMERICAN AIRLINE INDUSTRY
Competitive Advantage of American Airline Industry
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COMPETITIVE ADVANTAGE OF AMERICAN AIRLINE INDUSTRY
Table of Contents
Introduction:...............................................................................................................................1
Overview:...................................................................................................................................1
Five forces analysis:...................................................................................................................2
Diagram:.................................................................................................................................2
Components:..........................................................................................................................3
Advantages and disadvantages of Porter’s Five Forces analysis of the US airline industry: 5
Advantages:............................................................................................................................5
Profitability analysis:.........................................................................................................5
Facilitates decision-making:...............................................................................................6
Disadvantages of the Porter’s model:....................................................................................6
Not always accurate:..........................................................................................................6
Incomplete with PESTEL:.................................................................................................6
Economic Performance of the American airline industry:.........................................................7
Capital Generation:................................................................................................................7
Revenue generation:...............................................................................................................9
Identifying strategies for airline profitability:..........................................................................11
Product line extension:.........................................................................................................11
Product line bundling:..........................................................................................................11
Discussion:...............................................................................................................................12
Conclusion:..............................................................................................................................12

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COMPETITIVE ADVANTAGE OF AMERICAN AIRLINE INDUSTRY
References:...............................................................................................................................13
Introduction:
The airline industry in USA is playing an important role and act as a crucial
transportation system for the people (passenger airlines) and for delivering the goods (air
cargo). Importance of the airlines in USA has been observed since its incorporation in 1903
and it has become one of the most preferable transportation medium for the people
(Belobaba, Odoni and Barnhart 2015). There are several airline companies in USA and it has
been observed that all of them are working within the specific purview of the aviation body in
USA. Proper licensing is required to run the business and agreements are required for
partnerships (Zou et al. 2014). Considering the significance of the airline industry, there are
several airlines companies start up their business in USA and therefore, a competitive market
has been grown up. There are certain frameworks that are helping to analyse the nature and
scope of the competitive business and five forces framework of Porter’s is one of them
(Treanor et al. 2014).
The main aim of the report is to analyse the airline industries in USA and discuss
about the theoretical view of five forces. It has also discussed about the economic
performance of the industry and recognises the strategies for airlines profitability.
Overview:
The airlines industry is one of the best popular transportation industries in USA
and it has been observed that the success of the industry has been growing in nature. There
are one hundred passenger airlines are operating in the U.S market and there are certain
models and drivers works to help the industry so that it can work promptly (David 2013). The

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COMPETITIVE ADVANTAGE OF AMERICAN AIRLINE INDUSTRY
airlines industry has a very successful historical background and development has been
observed since 1945. However, the market of the airlines industry becomes more competitive
and the low-cost airlines are trying to attract the customers. More dilemmas cropped up when
there is a declination observed in case of crude oil and prevent the flight operating system to
generate the revenue through fuel surcharge price. The total revenue of this industry is $132
billion for the year 2017 and the annual growth has been calculated as 1.5%. The airline
industries are creating significant implication on the American economy and it is expected
that the annualised rate will be increased up to 4.5% per annum. However, the industry is
facing the threat of bankruptcy and the network airlines have made an attempt to reduce the
mainline cost up to $20 billion. The airline industry also suffers from certain geo-political
issues like terror attacks, security burden and hike in the fuel price. The rise of the low-cost
carriers and declined ticket price are also generating certain dilemmas. Certain airline
companies like Alaska Airlines, Jet Blue, Delta Airlines and American Airlines have lowered
the cost of the tickets and ease the way of flight servicing. A new tendency has been observed
now days in the airline industry. Many airline companies are making alliances with the
banking companies strategically to offer new products to customers like travel insurance and
airline packages which they can avail by using debit and credit cards.
Five forces analysis:
Diagram:
Due to the increment in the American aviation industry, certain competitions have
been observed and it is important to analyse the business perspectives. Five forces framework
is the most common model to justify the competitive intensity. The founder of this theory was
Michael E. Porter and was first published in the year 1979. The external environment of an
industry has been analysed by the theory. The main objective of applying this theory is to