Jessica Fogler Christi Louis Adam Wandy Jennifer Zupnick The Airline Industry an external analysis

Industry revenues: est. $90.5 billion 75% of all American flown at least once Passenger air travel dominates all other types of transportation in commercial inter-city mkt –91% of airline industry revenues Industry Characteristics

Passenger airline contingent upon dev. of aviation industry –Began in 1903 w/ the Wright brothers flight Air as travel method popularized in 1927 Mail service spurred further development Currently technology booms led to extreme maturity –Jumbo jets able to carry hundreds of passengers This leads to extreme competition between industry leaders Industry Maturity

Major Airlines >$1billion annual rev. United Airlines American Airlines Delta Airlines Southwest Airlines Aviation Industry Mail Service Aeronautic/Gov’t Passenger Air Travel National Airlines $100mill-$1bill revs. Regional Airline <$1million rev.

Opportunities Globalization World Wide Web –Home page –Community websites (Priceline, Expedia)

Threats Fear –Terrorism –Disease Substitutes –Car Services, Train Services Weather Conditions Staff strikes

Suppliers Dependent upon numerous suppliers High level of power: Airports Fuel Companies Labor Unions Low level of power: Aircraft Manufacturers Food Service Companies

No switching costs between airlines Internet prices comparison websites Business travelers and travel agencies have ability to exert more power Power has decreased recently due to “Baby Boomers” maturing and using travel for vacation purposes Buyers

Strong brand identification, customer loyalty Extremely large capital requirements Trend towards fewer, but larger carriers Limited number of gates and restrictions at major airports Porter’s Five Forces Entry Barriers

Increased in recent years Videoconferencing, groupware Numerous other forms of transportation, could substitute for flying short distances. Trains, automobiles, buses Highs peed trains have increased threat for longer distance Porter’s Five Forces Substitutes

Travel Agencies Snack food & Convenience Meal Cos. Airline Attendants Porter’s Five Forces Complementors

Porter’s Five Forces Rivalry Consolidation of firms Mature industry with slow growth High fixed costs, low variable costs No switching costs Difficulty of differentiation High exit barriers Domestic:Northwest & United Hub and spoke & LCC Transatlantic:BA & Virgin Airways

Segments National Majors (hub and spoke) Regional Low Cost Carriers

Trends for the Future Global Alliances Expansion Revamping Removing First Class

2002