Threat of New Entrants. In the airline industry, the arrival of a new airline can be disruptive, particularly since new carriers tend to focus on high-value route corridors and bill themselves as bargain carriers. On the other hand, the cost of entry into the market is fairly high, and that fact together with the industry’s reputation for lim-ited profitability makes such disruptions rather rare. The airline industry needs huge capital investment to enter and even when airlines have to exit the sector, they need to write down and absorb many losses. This means that the entry and exit barriers are high for the airline industry. As entry into the airline industry needs a high infusion of capital, not everybody can enter the industry, which in addition, needs sophisticated knowledge and expertise on part of the players, which is a deterrent. Moreover, the airline industry leverages the efficiencies and the synergies from the economies of scale and hence, the entry barriers are high. …show more content…
There is also a huge safety aspect involved and most consumers feel safer with firms that have been around for a long period of time. This industry requires plane and flying experience which also lowers the threat of entry. When firms decide to enter the market they first have to become licensed which can take about a year. After that they are con-stantly being regulated by several organizations such as the Federal Aviation Administration and the Department of Transportation. The time and money spend to solely open an airline company is enough to prevent most people from entering the industry (Cascade Insights, 2015, see also Anony-mous,