Pressures faced by the airline industry in the 21st century

Pressures faced by the airline industry in the 21st century

Introduction

The present assignment focuses on the pressures faced by the budget airline industries in the present times. There are a number of inherited challenges which the industry has been coping with for many years. It is highly dependent on a number of internal and external factors, such as economic cycles, commodity prices and security issues (Belobaba et al., 2015). Internally, an airline company manages a significantly high-cost bases and usually it has to operate for many years before it achieves breakeven (Morrison and Winston, 2010).

Business Models in the Airline Industry

As explained in the introduction of this assignment, one of the main challenges faced by the sector is that it operates with a high fixed cost base. In this respect, to achieve profitability, the airliners need to continuously attract customers and have their plane seats occupied (Cento, 2008). Moreover, airliners are also facing a challenge related to applying a differentiation strategy. As the services which they provide are comparatively similar across the sector, it is hard for these companies to identify market niches and target audiences to outperform competitors with an innovative strategy (Ben-Yosef, 2006).

The high costs of operations are not the only natural barrier which new entrants are facing. Market knowledge, access to talent and even customer loyalty are important factors to be considered (Snider and Williams, 2015). For example, a pilot training programme is a complex and expensive endeavor and with the growing number of new airline companies targeting the market, there are growing shortages of staff (Mavin and Murray, 2010).

Moreover, even though it can be proposed that brand loyalty is hard to achieve especially across budge carriers, many airlines are trying to gain recognition by offering a great service consistency (David, 2013). For example, leaving and arriving on time, allocated baggage allowance and customer loyalty points, are some of the few approaches which airline companies employ.

Budget Airline Industry Pressures

There are a number of other pressures which can be identified in the industry associated with the aircraft manufacturing, availability and price of commodities. The costs and efforts of manufacturing an aircraft are significant, and therefore any failure in the quality of the product would not only have substantial cost implications but it would put the life of passengers at risk. This was the case with Boeing’s 737 Max, which is a new resource-efficient airplane which was the cause of two crashes and hundreds of fatalities. This has resulted in great losses not only for Boeing but also for the many airline companies which made orders for these airplanes which are currently grounded and under investigation (Boeing, 2021).

Corporate Governance and Environmental Sustainability

An area which airlines have received a significant pressure from is related to their corporate governance and environmental sustainability. Many carriers are criticised for the negative impact they have on the environment and global communities (Cowper-Smith and Grosbois, 2011). One approach for improving their environmental sustainability is by increasing their efficiencies and improving their fuel consumption.

Another approach to increasing corporate social responsibility would be noise reduction which is usually seen as a primary complaint by communities based near airports. Although these initiatives would require certain levels of investment, they are important strategic decisions which would improve the longevity of the whole industry and wellbeing of passengers (Kuo et al., 2016).

Another strategy to improve their corporate governance and contribution to global communities is by participating in charitable initiatives and contributing with donations. In addition, they can work on engaging their passengers in donations and cooperate in social initiatives (Fenclova and Coles, 2011). This would improve brand recognition and can also lead to better customer loyalty. For example, British Airways collects donations from passengers on board of their airplanes for UNICEF (Balmer et al., 2009).

Covid19 Pandemic

The Covid19 pandemic is one of the most significant global health events of recent times. It has affected a great number of industries and hundreds of businesses ceased their operations (Fabeil et al., 2020). The pandemic has affected the airline industry which resulted in job losses, shares value decline and bankruptcy of carriers. The industry was grounded for almost a period of one year with severe disruptions still taking place.

In 2021, the pandemic is far from over and there is a growing complexity associated with t