An Analysis of the Airline Industry

My industry analysis will be about the airline industry.

Nature of competition

The airline industry is in a state of oligopoly, bordering onto the state of imperfect competition. The various aspects that have a bearing on the nature of competition will be covered subsequently.

Imperfect information. There is imperfect information about the airline market. This can be gauged by the fact that airlines are never sure as to what is the exact demand for seats on any route over the period of the year. While airlines make fairly accurate guesses about the number of passengers depending upon season, holidays and weekdays, the goal of ensuring that each aircraft flies with passengers occupying all the seats in the aircraft is seldom met. While airlines try to make up for such lack of solid intelligence through the fuzzy logic of dynamic pricing, the results remain sub-optimal and may actually prove detrimental should the public get to believe that airlines are functioning in a predatory manner. Therefore, seat-pricing cannot go beyond a pre-defined range, and this acts as a constraint towards the use of dynamic pricing to fill seats in the aircraft.

Airlines are major consumers of fuel. The cost of fuel plays a major role in determining the profitability of an airline. Airlines are hamstrung by their inability to accurately predict the price of gasoline over the year. This is because the price of gasoline is determined through a complex mechanism of international trade practices and is subject to the shocks of international events (Wensween). For example, the Gulf War literally took Iraq off the gasoline grid and caused an increase in the prices of airline fuel.

Airlines are the weather wanes of the global economy. If the economy i...

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...sales and marketing strategies to make the airline profitable. Day to day running of the airline will involve a tight control over scheduling of the workforce, monitoring the timeliness of the aircraft, the interface with the catering industry to ensure meals are delivered on time, budgeting of the airline, and cost control.

In effect, project management professionals will have to be engaged in both the macro and the micro perspectives, in order to ensure that the airline is created with a sound vision and on a feasible basis, and then run in an effective and efficient manner in order to keep it profitable.

Works Cited

Sundaresan, Sankar Ram. “Competitive Strategy: Southwest Airlines.” BCS.Solano.edu. n.d. Web. 23 March 2014.

Wensween, John. “The Airline Industry: Trends, Challenges, Strategies.” Sydney.edu.au. 23 Feb 2010. Web. 23 March 2014.