Five Forces Of Airline Industry

Today's global markets change too quickly and there are intensity of competition within an industry which leads to competitive pressures. Michael Porter developed five forces model which is considered as a helpful and widely used framework for classifying and analyzing the competitive environment of an industry (The Open University, 2009, P. 60). It assess the attractiveness of the industry and influence the organization's position within their industry's environment. The five competitive forces are threats of new entrants, bargaining power of suppliers, bargaining power of buyers, threats of substitutes and rivalry among existing competitors. This essay will analyze and discuss the structure and performance of Kuwait airlines by using the

Profitable industries magnetize new entrants, which limits profitability. Unless the entry of new firms is barred, the rate of profit will decline to its competitive level. The principle sources of barriers to entry are, economics of scale, capital requirements, access to channels of distribution, governmental and legal barriers, and retaliation (Dobbs, Michael E., 2012). Airline industry has a higher barriers to entry and the requirements to begin an airlines company are difficult, so the threat of new entrants has reduced. For example, Kuwait Wataniya Airways which started its services on 2009 and provided flights from Kuwait to destinations across the Gulf's countries, wider Middle East and Europe. On March 2011, Wataniya Airways ceased all its operations because of financial difficulties and the high needs required in airline industry and the intense competition between airlines companies in the region (Shannon, Darren, 2008). All of these barriers have forced Wataniya airways out of the airline industry which shows that it's difficult industry for new entrants. Moreover, brand name in airline industry is important to the passengers so for new entrant it's take long time to build their reputation. Kuwait airways has a good history as the safety and security standards and an excellent hospitality

Suppliers are equally important as the customers. They can put pressure on the firm by charging higher prices, lowering quality of product or service and shifting cost to producer (The Open University, 2009, P. 68). This is driven by some factors such as, the number of suppliers, cost of switching from one supplier to another, relative size and strength of the supplier, and lack of substitutes. For example, For jet fuel Kuwait airways get governmental support on fuel because the supplier of fuel which is KAFCO is a subsidiary of the government so the bargaining power of suppliers is not high. As well as the food service is provided by KASCO which is owned by Kuwait airways (Kuwait airways, n.d. b). Furthermore, Boeing and Airbus are competing against each other in the aircraft manufacturing industry. Kuwait airways choosing Airbus as their main aircraft , therefore, Airbus has no option to increase their aircraft prices. Kuwait airways will spend a lot of money if they changing to another aircraft manufacturer so it is a big risk because their maintenance staff are experienced with Airbus's