the power of suppliers in the airline industry is immense because of the fact that the three inputs that airlines have in terms of fuel, aircraft, and labor are all affected by the external environment. this is the reason the power of the suppliers in terms of the three inputs needed for them is categorized as high according to the porters five forces framework. moreover, the tight regulation on the demand side of the airline industry meaning that passengers and fliers have been protected by the regulators means that the balance of power is tipped in their favor.
as entry into the airline industry needs a high infusion of capital, not everybody can enter the industry, which in addition, needs sophisticated knowledge and expertise on part of the players, which is a deterrent. the exit barriers are also subject to regulation as regulators in the united states do not let airlines exit the industry unless they are satisfied that there is a genuine business reason for the same. what this means is that flying is a natural phenomenon for the consumers and hence, the substitutes in terms of the train and bus is minimal in its impact. apart from anything else, the airline industry is regulated on the supply side more than the demand side, which means that instead of the airlines being free to choose which markets to operate and which segments to target, it is the fliers who get to be pampered by the regulators.
as one of the largest airline carriers in the world, delta air lines faces competitive challenges and threats that can impact its performance and profitability. porter’s goal was to develop a thorough system for evaluating a company’s position within its industry and to consider the types of horizontal and vertical threats the company might face in the future. the vertical threats come from the increased bargaining power of suppliers and the increased bargaining power of buyers. the level of competition in the airline industry is high.
because the air travel experience for customers is remarkably similar no matter which airline they take, airlines are constantly threatened by the prospect of losing passengers to competitors. the barriers to entry in the airline industry are remarkably high. the list of airlines for suppliers to sell to, however, is short. thus, a united flight from new york to los angeles is not considered a substitute for a delta flight with the same start and endpoints. until a new technology comes along that supplants air travel as the fastest and most convenient way to travel long distances, delta faces little threat from substitute methods of travel.
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