Unit-2 Essay Australian Airline Industry
Unit-2 Essay Australian Airline Industry has seen a relatively very stable Economic environmental over the past two decades, with a democratically elected government ruling the state. The stable and a strong government at the center has also had the power to bring in some important rules and acts related to deregulations which has brought about an evolution of the airline industry and they are now more governed by the market factors than anything else. This is also resulting into better profitability and efficient functioning of the airline industry as a whole. The rules for foreign ownership and foreign direct investments have also been eased and foreign institutions can now invest in the Australian airlines, which has resulted in to more investments in the airline industry and the companies have been able to increase their profitability by using these investments to improve their profitability. The skies have also been opened for international airlines that are now looking at Australia as a very favorable destination for their businesses. So all these changes from a political point of view have been very favorable for the airlines industry on an overall basis
The demographics of the population in Australia have also seen a major change in the last decade, with the percentage of young population in the country increasing tremendously. This population is well educated and a majority of them work in the service sector. This being the case, time is a very important factor for them. But however, there are other facets to this culture as well. With the increase in the number of terrorist attacks and the tragedy of 9/11. People have gotten very scared to travel by air as they are concerned about the safety measures that the airlines take while providing them the services. So the airlines have had to do a lot to convince the consumers that they are safe to travel by air and utmost measures have been taken for their safety (Thompson,Strickland, Gamble, 2010).
Airlines at all points of time have to comply with some Legislative compliance requirements as per the aviation industry standards. Failing to do so, can get their licenses terminated immediately. The airlines have also been legally sued by various consumers groups of carrying out misleading advertisements on their part and hence duping the consumers into travelling by their airlines. There have also been allegations made on the airline industries that they have created cartels in past, inorder to prevent the prices from falling down and hence assorted to anti-competitive measures to make profits at the expense of the consumers. The airlines at their end have always derided these allegations and fought them tooth and nail.
The biggest jolt that the airline industry has faced has been from the Global Economic Crisis that has taken place on the world since 2008. Secondly the real disposable income per household has also been hit and the consumers are now more looking at savings rather than going for unnecessary travel expenditure. The fluctuating currency has also resulted in the companies looking at buying the fuel at higher costs which has affected their bottom line tremendously. Not only this, the fuel costs have also risen tremendously over the last three years. This has made the model of low cost airlines almost unsustainable and here the industry has seen a period of consolidation with a lot of mergers and acquisition happening during the same time
Unit-2 Essay Australian Airline Industry
The increasing using of technology like Internet and Video Conferencing has made the air travel redundant in certain cases. This has prevented in companies spending unnecessary dollars on the travel expenses of their executives and they have started setting up facilities in their own office premises wherein they can sit and talk to any one present anywhere in the world, using the video conferencing facility. This has caused a tremendous impact on the travelling patterns of the consumers. The technology has become so easy to use now that a normal internet connection is enough for people to connect and talk with each despite of them being present anywhere in the world. Secondly better technology has also made the aircrafts more efficient and the travel has also become safer due to the same reason. The airlines are looking at more investment in the technology of their aircraft that would make their aircrafts more efficient and also lead to better travelling experience for the consumers.
The increasing focus of the governments and the customers all over the world have initiated a debate on the greenhouse gas emissions that are being done by the aircrafts and the airline industry as a whole, all over the world. The airlines have been forced to take measures with regards to the increasing noise levels. Hence this has indirectly resulted in affecting the revenues of the airlines. There is still a considerable lack of infrastructure facilities at the ground level that is available for the airlines to use. So there is a lot of scope for coordination and co-operation amongst the players to utilize these scarce resources to their maximum capacities (David, 2009).
Due to the recent change in market dynamics and the evolution of Tiger Airways as a potential big player in the industry, the industry is witnessing a major and an influential change. This has resulted in the suppliers like Qantas and Virgin Australia losing the monopoly in the market that they had enjoyed for such a long period of time. As a result the supplier’s bargaining power has reduced considerably and all of them have gotten into a price war in order to woe more customers, giving the power back to the buyers. So overall the bargaining power of the suppliers is low in the industry at the current moment of time.
Bargaining Power of Buyers
The entry of a new player in the industry in the form of Tiger Airways, the existing economic downturn resulting in lesser people travelling by air and the difficulties faced by the suppliers in running their operations has resulted in a power shift. Hence the buyer power at the current point of time is high. However this still doesn’t mean that the buyers will be getting the best prices in the market due to these factors (Adlakha et. al, 2010).
The industry is highly capital expenditure oriented. Any new player entering the industry would be required to make a huge investment for getting the license, buying or leasing the aircrafts, getting the resources to run the airlines etc. So keeping all these points into consideration, it indicates that it is very difficult for any new player to enter the industry at this point of time. Also keeping the recent economic scenario into consideration, it is not a very viable option for any new player to enter the market and make profits. Order Now