1Porters 5 ForcesThreat of new entrantsSupporting Case
ExplanationThreat LevelScale and Experience- In order for one to
enter the budget airline industry, one will need to have a high
capital in order to generate high economies of scale. When barrier
of entry is high, threat is lowLAccess to supply & distribution
channels- Access to distribution channels is required. New entrants
can easily nd manufacturer via online searchHExpected retaliation-
With the e!istence of other competitors such as "yanair, #asy$et %
Aer &ingus, new entrant can e!pect a strong price retaliation
from its competitorHLegislation & government action- 'overnment
ta!es and airport charges that have been implemented will require
new entrants to oblige to itLDiferentiation- &ow di(erentiation
as low cost % no frills are the main focusLn summary! the threat o"
ne# entry by ne# players is lo#$ %e# player #ill need to be
experienced and able to reach to a certain amount o" economies o"
scale in order to compete in the industry$Large investment needed
"or airplanes and expertists$ Strong retaliation by existing
players are high and this #ill prevent ne# players to &oin in
the budget airline industry$)Porters 5 ForcesThreat of new
substitutesSupporting Case ExplanationThreat Level'rice 'er"ormance
(atio- With the e!istence of sea transports and car rental rms
which are more e!pensive, it ta*es longer time to travel. "ailway
services such as may be a cheaper option as compared to the rest
but it will ta*e longer time to travel. +ence, the barrier of
substitute is high. ,p-1./LExtra ndustry Efects- 0ther means of
transports other than by air are sea, train and car will post a
threat for short trips. +owever, if distance is further, 1ights
will be preferable as travelling in other transport will ta*e
longer time to travel. LThreat level "or substitutes is lo#$ Though
traveling by train services is a cheaper option! it #ill ta)e a
longer time to travel as compared to budget airlines$ The
availability o" other mode o" transports #ill also be costly and
time consuming! hence this concludes that (yanair have a lo# threat
o" substitutes$2Porters 5 ForcesPower of buyersBuyers Cat: Leisure
travelersSupporting Case ExplanationThreat LevelConcentration o"
buyers- 3uyers power is low as buyer have limited choices of budget
airlines in the industryLS#itching cost- No additional e!penses are
required to switch to another airline. 3uyers are free to choose.-
4witch can be done immediately without any comple! steps,H*uyer
competition threat- 3uyer has no capability to own a plane5 provide
themselves.LAs the number o" budget airlines is lo#! buyer #ill
have "e#er choices to choose "rom$ Hence! threat level o" buyer is
lo#$6Porters 5 ForcesPower of suppliersSuppliers Cat: Airplane
ManufacturerSupporting Case ExplanationThreat LevelConcentration o"
Suppliers- As there are only three manufacturers in the industry
,3oeing, 708A7 and Airbus/, bargaining power of supplier is high.
+S#itching cost- 4witching cost is high as airline will need to
train the pilots on the new aircrafts and hence high capital
investment is madeHSupplier competition threat- Aircraft
manufacturers are unli*ely to go into the budget airline industry.
7ustomers will still buy tic*ets directly from "yanair
websitesL,ith the limited number o" manu"acturers and airlines! the
threat level o" supplies is moderate$9Porters 5 ForcesCompetitive
ivalrySupporting Case ExplanationThreat LevelCompetitor balance-
:here are direct competition with other airline such as
#asy$et.Hndustry gro#th rate- No economic prot over 6; years ,p-1)/
L-ixed Cost- +igh !ed cost. +ence with the saturated industry,
"yanair will need to have a unique business model in order to
mitigate the li*elihood of low returnsLExit barriers-