Discussion: Applying the Porter Model to the Airline Industry MBAA 523

Discussion: Applying the Porter Model to the Airline Industry MBAA 523

MBAA 523 Module 1.4 Discussion

1.4 – Discussion: Applying the Porter Model to the
Airline Industry

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The goal of the Discussion Board is to share concepts,
theories, ideas, and to learn from the collective knowledge and experience of
your peers and instructor. Critical thinking is a valued trait in all career
fields and these discussions give you an opportunity to focus on managerial and
airline economic topics and practice your critical thinking and communicating
skills.

In this discussion forum, address the following:

Choose
one of Porter’s five forces.
Discuss
the characteristics of the airline industry within this framework.
Discussion: Applying the Porter Model to the Airline Industry MBAA 523Does
your selected market force result in higher or lower airline profits?
Remember to respond to at least two of your peers’ postings.
This is a graded activity due on the last day of the module. Review the
Discussion Rubric for detailed grading criteria.

Note:Discussion rubrics may be accessed by selecting
the gear icon above and choosing “show rubric” from the drop-down
menu.

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Five Forces Analysis
Porter’s Five Forces analysis is a useful methodology and a tool to analyze the external environment in which any industry operates. The key aspect about using Porter’s Five Forces for the airline industry in the United States is that the airline industry has been buffeted by strong headwinds from a host of external factors that include declining passenger traffic, increasing operating expenses, high fuel prices, and greater landing and maintenance costs, apart from intense competition from low cost carriers that has led to a cutthroat price war which has led the industry severely affected.

Discussion: Applying the Porter Model to the Airline Industry MBAA 523Indeed, it can be said that the airline industry globally is in a “death spiral” and more so in the United States where several prominent carriers were either forced into bankruptcy or had to merge with other airlines just to stay afloat.

Supplier Power
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. For instance, the price of aviation fuel is subject to the fluctuations in the global market for oil, which can gyrate wildly because of geopolitical and other factors. Similarly, labor is subject to the power of the unions who often bargain and get unreasonable and costly concessions from the airlines.

Discussion: Applying the Porter Model to the Airline Industry MBAA 523Third, the airline industry needs aircraft either on outright sale or wet lease basis which means that the airlines have to depend on the two biggies, Airbus, and Boeing for their aircraft needs. 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 Porter’s Five Forces framework.