Porter's Five Forces analysis of the airline industry

Airline Industry

Porter's Five Forces

Porter's Five Forces: Airline industry

Threat of new entrants

A number of new, low-cost carriers have entered the airline industry in the wake of deregulation of the airline industries, including Southwest, Jet Blue, and Spirit Airlines. At present, barriers to entry within the industry are higher than, for example, entering a small, local pizza market. But barriers are lower than before and recent "congressional mandates aimed at increasing competition at highly concentrated major U.S. airports...required airports above certain concentration thresholds to take concrete steps to ease and encourage new entry and expansion by smaller airlines, primarily by increasing access to airport facilities" (Snidery & Williamsz 2011:1)

Power of suppliers

The power of suppliers is relatively limited, mainly "Boeing and Airbus. For this reason, there isn't a lot of cutthroat competition among suppliers. Also, the likelihood of a supplier integrating vertically isn't very likely. In other words, you probably won't see suppliers starting to offer flight service on top of building airlines" (The industry handbook: The airline industry, 2012, Investopedia).

Valuable

Spirit Airlines positions itself as a low-cost airline in a price-conscious market. Spirit Airlines flies to destinations in North America and the Caribbean islands. Its major competitors are Jet Blue and Southwest. However, Spirit has been criticized for offering less value than either budget carrier. "Southwest gives you two bags and JetBlue gives you one [carry-on for free]" in contrast to Spirit, which charges a $45 carry-on fee (Greenberg 2010).

Rare

Southwest, Spirit's competitor, markets itself as a 'fun' airline with singing flight attendants and a loose and freewheeling corporate culture (its NYSE symbol is 'LUV'). Spirit does not 'brand' itself in such a unique fashion, but rather stresses its cheapness. Even its seats are more Spartan than its competitors -- they measure only 28 inches (versus Jet Blue's 34 inches) and cannot be reclined, to save space (Greenberg 2010).

Unable to be imitated

The unique appeal of Spirit is primarily its prices, as showcased in one Yelp review: "I travel on Spirit all the time. I know they suck! But, for a cheap ticket, I will endure anything" (Seaney 2010). As travel becomes more unpleasant overall and the economy remains in flux, even on luxury airlines, consumers are more focused on price. However, Spirit refuses to give refunds and when flights are delayed, does not offer free food and rooms like other carriers -- and such situations have grown more frequent in recent years (Seaney 2010).