Airline Industry Major Players - Buyer Power

Airline Industry Major Players – FINAL

Within the U.S. the majority of the airline industry market share is held by the big three: American, Delta and United1. However there is still room for smaller players such as Jet Blue and Virgin. These smaller players have a competitive advantage of newer planes, non-unionized labor and a fresh brand image2. However they do not have the resources or the economy of scales that the big three posses. Virgin is attempting to differentiate itself by appealing to the upscale, trendy crowd. With Mac kiosks, free WiFi, plenty of laptop plugs, and slightly higher prices Virgin is carving out a niche for itself. Both JetBlue and Virgin have been gaining market share over the past few years but have recently plateau as gas prices have forced higher prices.

Airline Industry Buyer Power – FINAL

Deregulation of the airline industry, along with the technological advances of the internet, have helped to increase buyer power significantly over the past decade. Before deregulation, consumer’s bargaining power was limited because of fewer choices among airlines3. Although short travel competitors existed, such as trains, buses and cars, none could match the speed of long travel air flight.

Buyer bargaining power continued to increase with the emergence of the internet. As with many other industries, the internet shifted power into the hands of the consumer by allowing them to easily compare prices across a deregulated airline industry4. Buyer power was further enhanced by transparency of hidden fees and taxes5. Also, as the distribution of airline tickets moved from travel agents, who charge high commissions, to the internet, which charges relatively low commissions.

Another factor resulting in increased bargaining power of the consumer is the airlines inability to differentiate their products or build brand loyalty among consumers. Programs such as reward miles and loyalty programs compose only a small...