Airline Industry

Ray KhorasaniGustavo GarciaErnest Casiano

Jenna vrzal

Introduction

•09/11/01• $8.3 Billion loss

•Government intervention•Bankruptcies• United, Delta, Northwest

• 2 types Airline carriers• Major (A.A , Delta ,United, U.S airway,

continental)

• Region ( Southwest, Jetblue, Alaska Air, AirTrans)

Metric measurement

•Aircraft Utilization•Load factor•Available Seat-Miles (ASM)•Revenue Passenger-Miles (RPM)•Fuel Costs

Porter’s Five Forces industry analysis

5 (strongest)

1 (weakest)

4

3

4

4 4

BARRIERS TO ENTRY

•LARGE CAPITAL•HIGH CONGESTION OF MAJOR AIRPORTS•TIGHTLY REGULATED INDUSTRY•BRAND LOYALTY

Barrier to entry –HIGH

4Porter’s Five Forces industry

analysis

5 (strongest)

1 (weakest)

Substitutes

•ROAD•RAIL•MARINE

Threat of Substitutes–Moderate

3Porter’s Five Forces industry

analysis

5 (strongest)

1 (weakest)

•Deregulation•Technology•Customer loyalty

Buyers

Bargaining power of buyer–HIGH

4Porter’s Five Forces industry

analysis

5 (strongest)

1 (weakest)

Suppliers

•Degree Differentiation• Airline Manufacturer• Jet fuel•Labor•Substitute•Switching cost

Bargaining power of Suppliers–HIGH

4Porter’s Five Forces industry

analysis

5 (strongest)

1 (weakest)

Competitive Rivalry

•Crowded, 34 U.S based companies•Intense price competition•Slow Growth rate•High fixed cost•low marginal cost

Competitive Rivalry

•High exit barrier•Low product (in this

case service) differentiation•frequent flyer programs

Degree of competitive rivalry –HIGH

4Porter’s Five Forces industry

analysis

5 (strongest)

1 (weakest)

Accounting

•Aircraft Utilization•Load Factor •Available Seat-Miles (ASM)•Revenue Passenger-Miles (RPM) •Fuel Costs

•Barrier to entry –HIGH•Threat of Substitutes–Moderate•Bargaining power of buyer–HIGH•Bargaining power of Suppliers–HIGH•Degree of competitive rivalry –HIGH

Summary

Overall NOT attractive Industry