Airline Industry Analysis 3

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The World Airline Industry
A European Perspective
(Case Study)

MCS-M-160
International Strategy

Student Name: Siyuan Li
Student ID: 2800712
Unit Coordinator: Robin John

Question 1
Through PESTEL analysis, identify the major external environmental drives influencing the airline industry. Since the end of the case (2003), to what extent have these driving force changed?

Question 4
Analysis the business model of the low cost airline, discuss their competitive strategies, and their future prospect in the Europe airline industry?

Contents

Introduction…………………………………………..4

PESTEL Analysis…………………………………….5

Future Development on

Airline Industry ……………………………………..8

Business Model of
Low Cost Airline…………………………………….9

Competitive Strategy………………………………..10

Future Prospects for
European Airline Industry………………………….11

Conclusion……………………………………………13

Bibliography…………………………………………14

Introduction

Airline is a large and growing industry, and it is also the most fiercely competitive sector. It facilitates international trade, world economy growth, tourism and international investment. Therefore it becomes one of the major industries in the world. However, airline as a fast growing industry, which has significant relevance with external environment and could directly affect the profitability and operation. PESTEL analysis gives a certain overview of the different Macro-Environmental factors that the company has to take into consideration (Wikipedia 2005). This assignment will through PESTEL analysis to point out the major external environment drivers influencing airline industry and explain the future change of these driving forces.

World airline industry is divided into major and low cost airline, either in US or in Europe. However the business models for both are radically different. This assignment also will focus on low cost airline and analyse the business model, competitive strategies, and future prospect in European airline industry.

PESTEL ANALYSIS

The analysis of the external international business environment is designed to identify the strategic opportunities and threats it faces; these are the key forces of change in the business environment that are likely to result in a change of strategy either positively by presenting new strategic growth opportunities to the firm, or negatively by posing threats to the continuation of present strategies. PEST analysis is a simple method of carrying out an environmental audit these influences in order to identify which factors pose these strategic challenges (Robin John 1997).

PESTEL analysis (Political, Economical, Social, Technological, Ecological and Legal) is simple business audit tool, which gives a certain overview of the macro-environment factor for an industry or a firm. These factors which airline industry embroiled in will threaten to impact its profitability and operation. Political and economical are the key drivers behind the airline industry.

Political

Drawing on the political factors in PESTEL performed on airline industry. There are three major components that have bought change to this industry. Those are Deregulation, War and Terrorists.

Deregulation

The US airline Deregulation Act 1978 and Air transportation Deregulation in Europe 1978- 1997 which have bought an evolutionary change to the airlines. In the aftermath of deregulation, the development of airline industry rises dramatically. Especially for the low cost airline, there are hundred of them were found in the US. One of the winners was Southwest Airline- today American’ s most profitable airline. In Europe, low cost airline carriers such as Ryanair and EasyJet are expanding very rapidly. However the monopolies like British Airway and Lufthansa got more landing right and privileges from government before liberalisation.

War

After few years of deregulation in the US the world airline industry...
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