Airline Industry

9 Pages 2351 Words

the business traveler. As a result, airlines must find ways to beat competitors in terms of prices. Because the leisure traveler is not loyal to any one carrier, price becomes the determining factor in deciding which carrier to fly on. Again just opposite of the business traveler, the number of leisure fliers has decreased while the number of trips has increased. While the industry seems to be doing extremely well as a whole, there have been recent problems that may continue to effect the industry in the future. The recent jump in gas prices will undoubtedly affect the industry on both the customer and corporate levels. Consumers are already feeling the punch with increases in ticket prices. This could ultimately cause the number of fliers to fall, and in turn reducing profits immensely. On the corporate level, managers are faced with the decision to raise ticket prices and risk loosing significant profit or keeping prices steady and as a result gain customers who would otherwise fly with a competitor, but have their profits decrease temporarily. Also of recent concern is the issue of safety of airlines both as a whole and on an individual basis. The recent crashes have caused safety standards to be increased across the board and are affecting profits for several reasons. Consumers are becoming increasingly skeptical and may refuse to fly if the number of incidences increases. Increased safety checks and requirements are very expensive and will cause ticket prices to increase leaving consumers other options of transportation. Porter’s Five Forces Barriers to entry- · reputation of present competitors · large capital requirements to start · expensive raw materials · potential counter attacks of stable competitors to force new airlines out of the market · potential for alliances and mergers to become very powerful · increasing gas prices Exit barriers- · high exit costs · too much invested to cease operations · inability to us...