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분야
docx Why Airline Industry?
Brief introduction
Industry’s Characteristics
B. Company Analysis
1. Korean Airlines
2. Southwest Airlines
C. Ratios and Financial Analysis
1. Tests of Probability
2. Tests of Liquidity
3. Tests of Solvency
4. Market Tests
We analyzed the industry based on three key factors: customers, structures, competitors.
1. Customers
Basically, it is very easy for the customers to choose which transportation service to use; there are a great number of substitutes. Consequently, due to this low switching cost, airline companies should make an effort to differentiate themselves by increasing their asset value through high-quality services and improved branding. For example, many companies are trying to get qualifications for high-quality service, safety, strong brand name, and competitiveness based on low cost. However, there is also a limit to increasing the quality or service unless the objective is a luxury liner like the Concord Jet.
2. Structures (Features of the market)
- Nation-based Competition: Airline industry’s competition has been nation-based. In other words, their major focus was narrowed down to national customers only. However, due to more globalized circumstances, they are seeking more foreign customers and extending their influence into other countries as well.
- Very High Entry Barrier: The entry barrier of airline industries is very high because of cost problems, pre-occupation effect, and regulations. Consequently, it is quite difficult for the new entrants to participate actively, considering the cost. However, it does not mean that there is none; the general structure is changing. Those who are focused on penetrating the niche market are promoting low-price marketing strategies to lure new customers.
- On the other hand, the competition among suppliers is quite low. This is because it is mainly dominated by Boeing and Airbus and it is unlikely that suppliers will also compete with providing flight services, instead of building the airplanes.
