Airline Industry Pestel
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It is interesting to do a PESTEL analysis in order to have a better idea of the context, the challenges and the main influences of the environment on the airline industry.
The political environment has influences on the airline industry. The first one concerns the deregulations that occurred from the 1970s. It consisted in removing governmental imposed entry and price restrictions for airlines. It started in United States in 1978 with the Airline Deregulation Act and has been followed by the European Union and other countries. The second political influence, which is a result of the first one, is the Open Skies agreements. It consists in bilateral agreements between United States and other countries, to open the aviation market to foreign airlines and barriers to competition. Thirdly, governments sometimes support national carriers where it is allowed. However, in more and more countries it isnt allowed anymore. The last political influence is conflicts between countries: when there is a war in an oil producing country, it impacts oil prices and then airlines.
The economic environment has a crucial influence on airlines. Firstly, airlines are heavily affected by the booming oil prices. The economic crisis and wars in oil producing countries also have an influence on it. Nowadays, fuel accounts for nearly 35% of the total costs of an airline, and it is growing. The recent economic crisis has also a big influence: it has slowed down national growth rates, impacted household budgets and sent lot of companies bankrupt (airlines but also suppliers and companies with employees travelling around the globe for business purposes). Fluctuating exchanges rates also affects airlines operating or purchasing planes on different continents.
The socio-cultural environment impacts the industry as well. Firstly, we travel more than before and flying as become “normal” in comparison with some decades ago. Indeed, more and more students study abroad (exchange programme, Erasmus). The population is also ageing, what allows more time to seniors for travelling. Thanks to low cost airlines it has also become more democratic and then city trips and one-day trips are more frequent than before. We can also mention the fact that the passenger traffic is growing. In the coming years, thanks to the development of the BRICS countries, there will be millions of new potential passengers. Moreover, people are more concerned by corporate social responsibility and airlines have to adapt and take measures. Finally, terrorism (especially 9/11) has had a negative impact on passengers, who are more reluctant to fly and have growing safety concerns.
The technological environment is deeply affecting airlines today. The biggest impact comes from the Internet, who is becoming the distribution channel. All the major airlines offer online reservation and ticket printing. It is cheaper, easier and faster for both