Pestle Analysis Of Airline

Executive Summary ( 286 words )

The objective of this report is to assist in the scenario planning of the company. While our company is very aggressive in the domestic and Asia Pacific routes, we have still not made any impressive impact in the American and North American routes. The first part of this report is an audit on the macro environment of the airline industry sector in general, with emphasis on the American scene. The audit will be based on the PESTLE framework and will be able to identify the major environmental factors influencing the organizations operating within this industry as well as the extent of their impacts.

In the second part of the report, we will be able to formulate our corporate strategies based on the Environmental

( i ) Political and Legal

The deregulation of the world airlines have led to the government autonomy control over the air fares, route networks as well as the operational requirements. Since deregulation, private corporations now freely negotiate operating arrangements and are able to levy the prices according to market demands. In 1978, the deregulation policies in the US have reduced the entry barriers and resulted in the increase in the competition in the industry. The emergence of the low cost carriers such as JetBlue and SkyBus Airlines, compounded the pricing freedom led to a situation whereby the new entrants took up the market share with highly reduced rates. ( Carey, Susan 2013 ). This led to a major constraint in the profitability especially for the established carriers, which had higher cost

These included Pan American Airlines in 1991. By 1992, only 3 major Airlines controlled more than half of the commercial aviation market in the US – American, Delta and United. ( Bernstein, Aaron, 1990 ).

The airline industry operates in a highly regulated political environment where passenger’s safety is the priority and political regulations have implemented strict safety regulations.

The terrorist attacks in September 11, 2001 severely shook the political stability of the US resulting in a catastrophic downfall in business activities and dramatic reduction in air travel. In the aftermath of the severe liquidity crisis, the US Congress passed the Air Safety and System Stabilization Act, resulting in the 1st government bailout of the twenty first century. More than 150,000 employees were out of work and losses of more than US 31 billion ( Banber, G.J, 2009 ). Source : IATA

( ii )