Five forces in airline industry
The Porter Five Forces Model.
The Porter five forces model can be used to assess
the competitiveness of the airlines industry.
It can review the competition within the industry
It also check for the threat from outside
Concerns of an Airline
1. Competitive within the airlines – This is the rivalry with
other airlines in your existing markets or future markets.
Take for example of Malaysia Airlines, The possible market
a. geographical markets
c. Travel purposes.
Let view one of the segment, geographical .. for Malaysia.
Then we can see straight away the prominent competitor
which is Air Asia. The competitor will be one of the
considerations for us to develop or strategy.
Threat from substitution
Let have a look at the market segment based on travel
purposes. So one of the purpose of travelling is for
business dealing, like meeting or discussion. With the
advance in internet, some of the discussion can be
done online, either through video conferencing or the
simple chatting. Now we can see the real meaning of
the threat to substitution.
. Threat on new entrance
Like the case of the two airlines in Malaysia, MAS and
Air Asia, there is always possibility that another airline
will be formed to service the existing market. The
likeliness of another airlines being formed, will
depend so much on the barrier to entry and
the lucrativeness of the business
The Power of the Buyers
Some company have small number of customers which
purchase a high volume of the products. Taking the
example of Malaysian Helicopter Services (MHS) who
has customer like SHELL and PETRONAS, will
acknowledge the power these two buyers have. They
can dictate what type of helicopter to operate and the
price of the tickets. For airline such as MAS, with
multiple segments and without single large customer,
the power of the buyer is not too obvious.
Some airline operate using a single type of aircraft, for
example Boeing. Then the seller, will have greater
power over the airline. For that reasons, most airlines
will opt for multiple suppliers. It will also has the
added advantage of getting a better deal, because the
like of Boeing knows that if the deal is not attractive,
the airline will go to Airbus.
Five Forces in Airlines
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The author had work with an international airline
for more than 35 years, the last 10 years
in Training and development.