Potential Competitors: Low
– Rivalry among existing firms is intense, which affect the profits to be low. It¡¦s unattractive to the potential competitors.
– High initial investments and fixed costs such as lease a fleet of safe and reliable aircraft, negotiate reasonable gate access and landing fees as well as high labor and fuel costs.
– There are the price competitions in the airline industry, which some major airlines offer the low-price fares that is very difficult for new entrants to gain enough profit to cover the investment and fix cost in this industry.
Rivalry among Existing Firms: High
– Currently, there are many major airlines such as Delta, United and American that exist in the same market as Jet Blue.
Those airline companies have used similar strategies as JetBlue. United and American Airline flies to the same cities as Jet Blue and appeal to the business travelers who have the least sensitivity on price.
– Airline industry is extremely sensitive to economic cycles. Mature industry life cycle.
The Bargaining Power of Buyers: Medium to High
– Internet gives the power to the customers to search for the low fares.
– Leisure travelers who are not sensitive with the price and most of them are loyalty to the particular industry that offer the best service and offer the best flying experience.
– There are many airlines in the market that offers the same flying experience in the low-price.
Bargaining Power of Suppliers: High
– Boeing and Airbus are the only two suppliers of new aircraft for commercial passenger airlines. This allows them to have power of suppliers in the airline industry.
– Airline workers are unionized, which let them have power of labor supply.
– OPEC countries have the significant impact for airline industry. The reason is that the fuel is another substantial input cost for airlines, ranging from about 8% to 10% of revenues. Currently, the fuel for the aircraft are rising then the affect from oil price increasing push some airline companies to loss revenue in year 2005 such as Delta and Jet Blue.
Substitute Products: Medium
– For short flight, the substitute could be the automobile.
– Faxes, teleconferencing and videoconferencing can substitute traveling by plane for business travelers.
– Switching cost for customers from airplane to automobile and other technologies save the money for a lot of travelers.
Relative Power of Other Stakeholders
– Internal Revenue Service has just published the mileage deduction rate for 2006. It is 44.5 cents a mile. That’s down from 48.5 cents a mile for the last four months of 2005, which reflected a special adjustment for rising gasoline prices;
– Long Beach communities files charges against airlines for noise violations.
– Customers file against Jet Blue for showing the passengers data to the third party.
Courtney from Study Moose
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