Macro Environment

Executive Summary

The main purpose of this coursework is to use the key frameworks of international business to evaluate and analysis the U.S AIRLINE INDUSTRY in 2004 and using PEST, 5 force and SWOT to analyze the macro- and micro-environments of the US AIRLINE INDUSTRY.

Introduction

The airline industry was first introduced in the United States; the US airline Industry has always been the world leader in this field. Basically its development can be viewed as 2 separate periods: that before 1978 was under regulation, the other is following deregulation in 1978.

During the regulation era, there was a downward trend of the 4 largest airlines’ concentration ratio which measures the share of the industry’s passengers miles accounted, due to relevant low barriers in this industry. However, some arguments appeared to reform the regulation after 1978, the concentration ratio of the 4 largest airlines at that time showing an upturn. It was 54.2% in 1982 and increased to 71% in 2002.

During the 1970s, economic liberalism was increasing its support. It is the demand for less government regulation and massive reliance on market forces. The CAB was abolished in October 1978 which has become a big turning point from regulation to the deregulation era. Due to economic liberalism and deregulation, the airline industry was growing rapidly.

On the other hand, some big events also affected the performance of the US airline industry hugely. For example, during 1978-82, the industry undertook the massive loss due to widespread bankruptcy and following the “9-11” terrorist attack, the airlines lost significant numbers of their customers.

Main Section

Using the PEST and 5 Forces to analyze the macro and micro environments of the period of regulation and deregulation and then compare these. (in the Appendix)

1978 is an important year for the US airline industry; it is seen as a transition point for this business and it also breaks down into two main phases:...