Journal of Business Research

The competition in the airline industry is high. There are a lot of companies in this industry and especially among low-cost carriers, price-cutting competition often occurs. The pressure on profitability is high as the main objective is to minimise the cost and obtain the cost advantage in order to offer the lower price to consumers.The airline companies have high fixed costs like cost of aircraft financing, cost of aircraft accessories, tax and FAA registration fees. The airline industry is characterised by high exit barriers, competitor will not be easy to exit the airline market, Because of high competition in this sector they have relatively low returns. That leaves them in vulnerable position during the times of economic slowdown or increasing fuel prices. In order to survive and increase profits Ryanair acquire its competitor Aer Lingus to increase the market share. It can help to reduce the intensity of competitive rivalryThreat of new entrants is low and barrier of new entrants is high. There are high barriers to enter this industry as it requires a large initial capital investment. It means that new entrants need to have high capital investment on the land, plane and other facilities.It is very common for airlines to have losses in their financial statements such as Ryanair in 2009 (Ryanair Annual report 2009). Therefore a new entrant must be able to handle with losses at the beginning. Another barrier to entry is the limited availability of landing slots at the European airports, which New entrants face significant challenges in acquiring landing slots and gates at both primary and secondary airports as the existing airlines have stranglehold on most of slots and gates and they may be hard to find the suitable land to build the airport. Since the slots are already reserved by established airline and are difficult to obtain especially in airports with high passenger demand (Bray 2008).

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