Airline Market ? Industry Level Supplier Aircraft Manufacturer: not so much power because of fierce competition in spite of duopoly. Labor Unions: 40% of cost, potentially sign power, Northwest - giving back, Southwest - labor relations. Fuel: 15% of cost, commodity, may influence profitability but no market power. Airports: getting gates, landing rights, costly and/or timely, especially international expansion. Buyer power Pleasure: price sensitive, willing to switch. Business travelers: schedule sensitive, willing to switch, more value extraction. Business/tour operators: (some) market power if buy in large quantities. Substitutes Alternate travel: more threat for regional airlines. IT: more threat for long distance, slows down industry growth (impacts rivalry). Entrants Southwest: avoided head-to-head competition by city-city, regional. Midway Airlines: head-to-head competition with American and USAir: bankrupt. Rivalry High fixed costs, nondifferentiated, perishable product: intense rivalry!
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