In-Depth SWOT Analysis of the Airline Industry – 360 Market Analysis

About the Airline Industry

With the invention of aircraft in 1903 by the Wright Brothers, the concept of air travel was introduced to the world. The beginning of the airline industry in specific dates back to 1909 when DELAG, a German company introduced an aircraft. This was a dramatic change from balloons and gliders which people previously used to fly in. Airplanes in themselves have changed over the decades, including everything but not limited to the exterior, interior, technology involved, in-flight entertainment and services provided, and flights available.

Top Players of Airline Industry:

Mentioned below are the top 10 airlines in 2021, all of which provide flights around the globe:

• Qatar Airways
• Singapore Airlines
• ANA All Nippon Airways
• Emirates
• Japan Airlines

SWOT Analysis of Airline Industry

SWOT Analysis is a technique that is used to identify and understand the strengths, weaknesses, opportunities and threats of an organization. It helps a company or a person identify factors that impact a company’s functioning and also helps in planning.

1. Strengths of the Airline Industry

Strengths are the advantages that help the brand to stand out from the competition. Let’s look at some of the strengths of the airline industry.

• Highly Profitable – While being the most common choice of transport for overseas travel, air tickets are still expensive. This makes it possible for only people who earn above a certain income level to afford the high fares. In turn, airline companies can earn a high revenue which leads to high profits.
• Safety and Speed – A trip to the other end of the world can be over in approximately 18 hours. This feat would not be possible with any other mode of transportation. At the same time, there is extensive research conducted to ensure that travelling in aeroplanes is safe. In comparison to other modes of transportation, airline travel is safe.

2. Weaknesses of the Airline Industry

Weaknesses are the points that can hinder the growth of the company, but if identified and worked on properly they can be avoided completely.

• Weak Infrastructure – While a lot of capital is invested in the development of state-of-the-art airlines, airports which are the ground infrastructure of the industry are yet to witness exponential improvements. Developed countries are equipped with the most up-to-date technology in their airports. However, airports in developing countries provide a stark contrast with the airlines that fly in and out of their infrastructure.
• High Cancellation Rate – Airline companies face the highest number of cancellations and passengers missing flights when compared with other means of transportation. While there are measures implemented to mitigate the risk that occurs due to this, for example, no-show charges, cancellation charges, and non – refundable policies, most airlines face major losses due to this reason.
• High Barriers to Entry – Setting up an airline company is a difficult and expensive process. Initial investments need to be of a substantial amount and the laws that need to be adhered to would be much more closely monitored by relevant authorities and law enforcement bodies.
• High Competition – The airline industry is dominated by companies that have high expenditures, and the industry has high entry-level barriers.
• High Costs – The high competition in the market often drives businesses to adopt new technologies in order to stay relevant, which can result in significant costs. As a result, new businesses may find themselves needing to constantly invest in expensive technology to keep up with their competitors.

3. Opportunities for the Airline Industry

Opportunities are important factors that can contribute to the improvement and growth of the brand.

• Growth in the Tourism Industry – People are now exposed to media and entertainment which alludes to travelling abroad and experiencing different cultures and adventures. With the widespread use of technology and social media, passengers are now exposed to more travel destinations which are added to their “bucket list” This translates to more sales and profits for the airline industry.
• Better Technology – Technology is advancing at a rapid pace with innovations being introduced every day. The airline industry can maximize the benefit they receive from technology by ensuring that it is used to minimize costs. The software can be implemented to assist with human resource management, flight booking, and reducing delays or other technical errors.
• Expansion – With the rise of globalization airlines have the opportunity to operate in countries other than that their home country. Expansion into international markets, increasing the customer base. Moreover, by offering flights to more destinations airline companies can boost their popularity which directly impacts brand image and reputation. This will serve to attract new passengers and assist in maintaining strong relationships with customers.

4. Threats for the Airline Industry

Threats are external factors that can cause potential harm to the company if not realized and worked on as early as possible.

• COVID-19 Pandemic – For the past 2 years, the COVID – 19 negatively impacted many industries. The airline industry along with mutually inclusive industries such as the hotel and leisure industry were the first to be affected. The impact was immediate with travel restrictions being placed by governments not just with domestic travel but with international travel. Strict border controls resulted in a fall in sales, and little to no passengers have even led to the closing of travel agencies and the discontinuation of certain flights.
• Increase in Competition – The airline industry market is much more competitive than it was a few decades before. Over the past decade, there has been a rise in domestic airlines, budget airlines as well as new airline companies that offer flights at cheaper rates. This results in a loss of market share for major players, with the possibility of new entrants making their way to become market leaders in the future.
• Weather – The airline industry is subjected to negative consequences imposed by changes in the weather like snowstorms, strong winds, hurricanes, and tornados. This results in the cancellation of flights by the airline of which the payments need to be refunded to passengers, causing major losses and dissatisfaction among passengers.

Conclusion

The airline industry is certainly profitable, however, the onset of the pandemic has left its mark on this industry. Despite the drawbacks it faced during the past 2 years, with the reopening of borders and travel restrictions being lifted, people are cautious yet eager to travel. This will have a substantial impact on the future growth of the airline industry.

The airline industry has its strengths, weaknesses, opportunities, and threats which will continue to change with time and advancement in technology. Cheaper travel, and flights to more destinations will increase its demand and help it reach its potential as an industry.

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