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Five forces in airline industry


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apply the porters five force model to an airline

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Five forces in airline industry

  1. 1. Five forces in airline industry
  2. 2. 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
  3. 3. The Porter five forces model
  4. 4. 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 segments are:  a. geographical markets  b. demography  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.
  5. 5. 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.
  6. 6. . 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
  7. 7. 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.
  8. 8. Supplier Power  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.
  9. 9. Five Forces in Airlines  Refer to Blog:
  10. 10. The Resource Blog site: eMail : The author had work with an international airline for more than 35 years, the last 10 years in Training and development.