US Airlines Industry - Porter's Five Forces Strategy Analysis

Air travel remains a large and growing industry. It facilitates economic growth, world trade, international investment and tourism and is therefore central to the globalization taking place in many other industries. In the past decade, air travel has grown by seven percent per year. Travel for both business and leisure purposes grew strongly worldwide.

The US Airlines Industry has grown dramatically since the end of World War II. In 1945, the major airlines flew 3.3 billion revenue passenger miles (RPMs). By the mid 1970s, when deregulation was beginning to develop, the major carriers flew 130 billion RPMs. By 1988, after a decade of deregulation, the number of domestic RPMs had reached 330 billion.

Aruvian Research analyzes the US Airlines Industry in Michael Porter's Five Forces Analysis. It uses concepts developed in Industrial Organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Porter referred to these forces as the microenvironment, to contrast it with the more general term macro-environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace.