Competitive Advantage European Airlines

• Eastjet

• British Airways Plc.

• Thomson Airways

• Flybe

• Ryanair

• Lufthansa Group

• Air France KLM

• Bargaining power of buyers/customers

• Threats of new entrants

• Bargaining power of suppliers

• Threats of substitutes of products or services

• Rivalry among existing airlines

Purchasing power of buyers/

customers

With the proliferation of online ticketing and distribution systems, fliers no longer have to be at the mercy of the agents and the intermediaries as well as the airlines themselves for air ticketing needs. Apart from the entry of new carriers and the resultant price wars has greatly benefited the fliers. Moreover, the tight regulation on the demand side of the airline industry meaning that passengers and fliers have been protected by the regulators means that the balance of power is tipped to their favour. All these factors make the airline industry cede power to the consumers and hence the power of the buyers is too high. Buyers also engage in price discovery since they have multiple channels.

Threats of entry and exit barriers

•        The airline industry needs huge capital investment to enter and even when the airlines have to exit the sector they need to write down huge obsolete assets, engineering assets leading to huge losses. This means, the entry and the exist barriers are high for the airline industry. As entry into the airline industry needs high infusion of capital not many investors can enter the industry.

Bargaining power of suppliers

The power of suppliers in the airline industry is immense because of the fact that the three inputs that airlines have in terms of fuel, aircraft, labour and ACMI (aircraft, crew, maintenance, insurance) are affected by the external environment. For instance the price of aviation fuel is subject to fluctuations in the global market for oil.

Threat of substitutes and

complementarities

According to Brown, et al (2009), The airline industry faces substitute threats in the form of strategic substitutes. Strategic substitutes are products or services that provide the same function but come in different form. Train, automotive, and technology industries are all strategic substitutes to airlines. While trains and automobiles are less threating in the case of longer destination, computers and technology innovations such as videoconferencing, WebEx, have facilitated virtual communication.

Airline industry has differentiated itself in many

ways. One way is through providing the

consumers with a variety of different services

such as food,  on board bars, and good quality

flight attendants, also various types of up to

date technologies.

•                  .

Potential

New Entrants[pic 1]

Foreign carries,

regional carriers, cargo strategy

Bargaining

Power

of Suppliers[pic 2]

Aircraft manufacturers, Aircraft leasing companies,  fuel companies, airports.[pic 3]

Intra-Industry Rivalry

Substitute

Products