Low Cost Airline Industry in Europe

0 Comment

This paper examines the rivalry among the competitors and the effect this has on the profit potential. Moreover, it also unravels the threats of substitute for a product in the low cost airline industry in Europe. As asserted by Cameron and Quinn (2011, p. 2), the airline industry has changed largely due to deregulation act of airline that occurred in America. These effects of deregulation act that occurred in America extended to the entire world. The results of liberalization of airline industry resulted in the emergence of a low-cost airline. The act helped in abandoning the status quo of the restrictive pricing model that inhibited the growth of the airline industry. Deregulation act helped in removing the state control over airline routes and it promoted the entrance of other airlines into the market (Airlines Industry Profile: Europe, 2014, p. 9). Therefore, the act exposed the airline industry to competitive market forces that have resulted in rivalry among different firms. Nonetheless, the passenger’s fares decreased in a number of the market because of the growth of competition in the industry. The competition came because of the new entrance of airline of low cost into the market (Airlines Industry Profile: the United Kingdom 2014, p.8). The strategy of the low-cost airline has been so appealing especially to traditional airlines and this led to Southwest airline being the pioneer to introduce low fares airline for short routes. In Europe, the deregulation act helped in the emergence of the first European low-cost airline after which, rivalry competition have dominated the market due to a high number of low-cost airlines. Low-cost airlines have a lower cost compared to the cost of their competitors. Thebusiness model of low-cost airline is a characteristic of products simplicity and low cost of operation that enable them to offer lower prices to their customers but with fewer services