Strategic Plan

Porter 5 Forces Example - Airline Industry

Strategic Business Unit

Airline Industry

Plan Details

A worked example showing a Porter's 5 Forces Analysis of the Airline Industry. Adapted from Michael Porter.


Porter's Five Forces Analysis

Threat of substitutes

  • Increasingly prevalence of remote working (instead of business travel)
  • Fast trains are seen as a more environmentally friendly options

Bargaining power of suppliers

  • Powerful labour unions control operations at network hubs
  • Aircraft and engine manufacturers are concentrated oligopolies
  • Airlines are local monopolies with significant power
  • Airport services (handling, catering, cleaning) are also concentrated, but switching costs are low


  • Rapid but volatile growth
  • Perishable product: unsold seats per flight are a sunk cost leading to steep discounts to sell them
  • Limited product differentiation
  • Limited economies of scale
  • Significant exit barriers (sunk costs)

Bargaining power of buyers

  • Website increase price transparency and reduce switching costs
  • Travel agents focused on driving costs down (especially corporate buyers)
  • Many fragmented buyers
  • Low switching costs for most customers (except airmiles)
  • Price sensitive because air travel can be a significant portion of holiday budget (for the least enjoyable part)
  • Airlines perceived as largely undifferentiated
  • Growing market of customers who can afford to travel, especially in emerging markets

Threat of new entrants

  • Capital outlay
  • Access to landing slots
  • Diseconomies of scale

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