Threat of New Entrants: Low
It is also one of the major aspects of the five forces. There is low threat for the airline industry due to low-switching cost, and there are no proprietary products and services involved in it. Airline industry needs ample amount of capital investment to survive and it also requires strong customer base. Companies who are already capturing the market keep their dominance and hardly give opportunities to the new players due to their strong customer loyalty. Customers are eager to travel from structured brand images because airline tickets are expensive and passengers do not take risk of travelling with unworthy airline due to lack of trust. The main worry for the passengers is the safety; they are eager to travel in a secure and friendly environment with highest quality, that’s why they opt for the best airline services. Airline industry also requires the flying experience professionals, which also lowers the threat of new entrants. This is a great opportunity for Air America to enter into the airline industry because entry in this market is very difficult due to various problems and macroeconomic factors.
Threat of Substitutes: Medium
It is also one of the essential factors of the porter five forces within the airline industry. Threat of substitute is low because there are substitutes available for customers in the airline industry. For instance, domestics travelling passengers can opt to travel via other modes of transportation like train, bus, car or boat so as to reach to their required destination but they have to compromise the quality factor, which is very important for many users. It is up to the needs and priorities of the customers to opt the mode of transportation, it all depends upon purchasing power of customers; therefore, if they can afford then they prefer to use airline travel otherwise if they cannot afford then they have an alternative of traveling from other options. One thing should be kept in mind, the threat of substitute is medium only in the case of domestic travel but in case international travel, this threat is always low. Air America will utilize this force and offer cheap rates and good quality services to the passengers in order to strengthen their brand image.
Rivalry Among Existing Players: High
The last force is rivalry among existing players in the industry. The competition in the airline industry is massive for a variety of reasons. The airline industry is very lethargic and exists in the maturity stage of the business cycle. Competition among existing rival firms is one of the influential forces in the airline industry. Usually, competitors in the airline industry do not increase rapidly due to the high fixed cost in the airline industry and long term loan agreements as well. As a result of these restrictions and commitments, organizations are not be able to quit from the industry. Some companies’ aim is to provide top quality services to the passengers and some focus on charging low fares to gain the market share. For instance, “Jet Blue” is known for its best quality services and “Southwest” is recognized for charging low fares. Competitors in the United States rating wise are Jet Blue, Southwest Airline, Delta Airline, American Airline and U.S Airways (Paul, 2014).
SWOT Analysis
Strength
Air America is providing cheap and affordable services to the customers; this is one of the major strength as compared to other market players, who are charging much more than that. Air America is offering low prices because financial position of the owner is very strong and it will help a lot to boost the business and to motivate the customers to become a part of the Air America.
Weaknesses
Air America is a new traveling company and requires lot of technical personnel including engineers and programmers. One of the weaknesses that Air America has is the lack of industry experience because competitors are old and have sound knowledge of the industry including the buying trend, how to encourage the passengers and how to deal with the suppliers effectively...................................
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