BLUE SKY MAN

Industry Segmentation

In the airline industry, market segmentation can be based on providing flights to domestic or international destinations and product segmentation would include the different types of fares they are offered, such as economy, business and also first class.

dustry will be low as there are high barriers to entry. Due to high cost of planes, entering airline industry requires high capital investment to commence operations. The airline industry is extremely capital intensive, due to the cost of buying and leasing aircrafts, safety and security measures, customer service and creating a brand people can trust.

In order to achieve economic of scales, many airlines creates alliance with each other therefore creating efficiency in joint purchase of aircraft, cost of maintenance and parts thus save hundreds of millions of dollars such as the Jetstar/AirAsia alliance. This creates further barriers whereby new entrants will not be able to compete in term of cost and price.

(1) Power of suppliers to the industry - Medium to High

The airline supply business is mainly dominated by Boeing and Airbus therefore they have high supplier power. For this reason, there is not a lot of competition among suppliers. Also, it is also unlikely that of a supplier integrating vertically.

Airlines are also unable to materially affect fuel prices from suppliers as the oil market dictates the fuel costs.
They also aim to use their combined scale to help influence the design of the next generation of narrow-body aircraft from both major manufacturers Boeing and Airbus, and secure more purchasing power via joint procurement orders. Strategic alliance aim is to reduce supplier power.
(2) Power of buyers - Low (Future increasing due to more access to internet and increased choice due to competition on more routes)

The power of buyer is high