Airline Industry: a Competitive Structure

Topics: Southwest Airlines, Delta Air Lines, Airline Pages: 2 (623 words) Published: July 28, 2013
Airline Industry
Competitive Structure
The market structure of the Airline industry consists of a few corporations making its market structure an oligopoly. The airline industry is very volatile to changes in oil prices and can lead to fare increases and reducing overall profits. In 2011 for example jet fuel cost was at 2.84 a gallon up 243% from 1995 adjusted with inflation. In addition to what the current market is charging for a barrel of oil airlines have to deal with the “crack spread”, which is a fee such as 5 dollars added to what the current cost of oil is. This has forced all airlines to cut costs were they can as well as add fees such as, adding a 20 dollar fee to check in your luggage. As result there are now less airlines operating in the U.S through mergers dominated by the big 4 making it an oligopoly. Competitors

The major companies operating in the airline industry are U.S Airways, Jet Blue, American Airlines, U.S Airways Group, Alaska Air Group, Delta-Northwest, United-Continental, Southwest-Airtrans, and Republic Airways holding. A new development in the industry has been the merging of several airlines such as United-Continental. The result of these merges has created an industry dominated by 4 major U.S Network carries (United, Delta, American, and U.S Airways). Of the big airlines American Airlines currently faces a unique problem reporting losses near 5 billion since 2008. Unlike its competitors the company did not declare bankruptcy which, other airline companies used to cut down costs as well as missed an airline consolidation package. A new marketing strategy offered by select airlines such as Delta and American Airlines is the use of a Wi-Fi system called GOGO offering customers the use of Wi-Fi during flights which in turn attracts more business customers. In 2008 American Airlines began to charge for checking in a second bag and this began a new pricing strategy using “ancillary” fees. In using this pricing strategy American...
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