Porter Five Analysis of the European Airline Industry Essay

period the air model existed for some time (first such in 1973 US), the appearance of these in the European grocery store infallible the liberalization brought forth by the EU, implementing the Freedoms of the air in three stages. In 1997 the first LCC (Low Cost Carrier), the Ryanair began its operation, and in a few years a few more followed, which gave the national and network airlines a new-fashioned problem to the existing economic problem, shrinking market and others such as 9/11. By straight off the changes in the past two decades have shifted and diversified the industry, which was once a mature and to some direct declining in structure.The new regulations, companies, investors and consumers have brought new life, the industry once again mature with fragmented characteristics. The paragon tool for the assessment of the airlines industry is Michael Porters five force model. It aims to find and demonstrate the forces in the microenvironment which influence the industry, internal and external as well. Threat of new entrants (barriers to entry) High capital investment ? smashing intensive ? Airport slot availability ? Predatory pricing ? Brand loyalty/frequent invoice ? Economies of scale ? Limited emergence of routes The threat of new entrants, due to the barriers largely set by the nature of the industry and by the existing companies, are actually low. Yet sometimes when the possibility arises, new companies divide in the past few years many national companies went bankrupt leaving a market to take by the existing companies or new upstarts. Bargaining power of suppliers Aircraft manufacturers Relatively low form of suppliers Suppliers are concentrated Airlines are valued clients ? Airports Slot availability Alternatives to the primary airports ?The bargaining power of suppliers is mostly two-legged, and both have a medium threat. For both parties it is best to find a mutually workings solution on a long term, because it is a industry w ith relatively small number of players loosing tear down one can have an impact on both sides. Threat of substitutes Alternative transport (bus, car, train) Videoconferencing ball-shaped environmental awareness The threat of substitutes includes a broad variety for the different needs. All-in-all it still only gives a medium threat, since the quick transport to a distance has no alternative.Bargaining power of customers Price ? meshwork/social media Customer orientation ? Choice With the first LCCs the customers had no bargaining power if you choose to go with this low price, accept the services as it is. However, nowadays with more alternatives and the ever-reaching internet and social media a elusive customer satisfaction can be a disaster. This can however be mitigated with customer orientation, but still customer had the choice, it is a medium high level. Rivalry within the industry among LCC and national/network airlines Between LCCs The rivalry within the industry i s high due to the high number of big and medium sized companies. The airlines industry is highly competitive, with very high barriers and medium to high threats within. While there is a relatively low threat from a new market entree, the existing world(prenominal) competition is fighting over all the resources more and better airports possibly with mutually excluding contracts, picking up the customers fed up with their previous carrier or starting a price war on a selected destination, binding the newly aquired flyers with brand loyalty programmes.Unless there is an opportunity, it is not an attractive industry to write down due to the high number of barriers. However, once established a foot, it is a very interesting and very intensive industry with intimately possibilities. The major LCCs depending on how low cost they are making good profit and there is still room for growth. The key factors for success should include Efficiently utilizing the resources (financial, time, huma n resources) Utilizing a network of business partners (complementary) Timely expansion (trying new destinations, increasing frequency) Customer orientation (with following trends eg. ocial media) These above should be observed by both LCCs and traditional airlines. The industry standards are given, those companies will become in(predicate) which can effectively utilize them.