PESTEL analysis on European airline industry 7页

PESTELanalysisonEuropeanairlineindustryPESTELanalysisisanupdatedversionof“ETPS”,amnemonicforthefoursectorsofhistaxonomyoftheenvironment:Economic,Technical,Political,andSocial(Aguilar,1967).PESTELanalysisisananalysisoftheexternalmacroenvironment(bigpicture)inwhichabusinessoperates.Theseareoftenfactorswhicharebeyondthecontrolorinfluenceofabusiness.Airlineindustryisoneofthemostimportanttransportationsectorsforanarea’sprogresswhichmakescrucialcontributiononaneconomic,politicalandsocial,culturallevel(Button,2008).Inthefollowingpart,thisessaywilltargettheEuropeairlineindustryanalyzingthepolitical,economic,social,technological,environmentalandlegalaspectsoftheEuropeanairlineindustry.InthepoliticalaspectofEuropeanairlineindustry,EUhasliberalizedtheaviationmarketoftwodecades.EUadoptedthefirstdirectivein1983soastoliberalizesomeinter-regionalservices.Theseconddirectivewasadoptedin1994.IntheseconddirectivemademostoftheEuropeanmarketopenedup.Fromthenon,airlinesregisteredintheEUandcontrolledbyEUnationalshadtherightofestablishmentthroughouttheEUandwerefreetoflywithinandbetweenallmemberstates(Starkie,2012).Forexamplethebiggestlow-costairlinecompanyRyanairhasthebasesallovertheEuropeancountries(listbelow). RyanairBasesJanuary2010.SourceAirlineBusiness,January2010.AlongwiththeliberalizedprocessoftheEuropeanairlineindustry,EUpoliticiansalsofocusthedevelopmentofthefull-serviceairlinecompaniesinordertosatisfiedmultipledemandoftheairlinepassengers.WiththeincreasinggrowthofLCCs,theFSCshavechangedtheirbusinesspolicies(EuropeanCockpitAssociation,2006)andhavebeenforcedtoimplementreforms(pricingstructures,cost-cutting,changestoon-boardservices,etc.)toincreasethecompetitivity.IntheeconomicaspectofEuropeanairlineindustry,theupwardmomentumisobvious.EventheeconomicrecessiondidnotstoptheupwardtrendoftheEuropeanairlineindustrymarket.AneasyJet’stableunder,takenfromaneasyJetfinancialpresentationinlate2008showsthecapacitychangesinvariousEuropeanmarketsplannedforthewinter2009season,atatimewhenoverallcapacityplacedintothemarketbyeasyJetchangedlittleduetothesevereeconomicrecession.BenefitfromthematurevisasystemoftheEuropeancountriesandthewidelyappliedlow-costcarriers,theairlinepassengersgrowseveryyear.TheupwardeconomictrendinspiresmoreairlinecompanypurchasemoreairplanesandopenmoreroutesintheairportsallovertheEUregions.Theresulthasbeenabigincreaseinthebuyingpowerofairlines.Europeanairportsnowalsocompetewitheachothertoattracttheservicesofairlines,especiallytoattractbaseaircraftandappeartodosovigorously.BesidestheupwardtrendofEuropeanairlineindustry,priceelasticityofdemandvariesmuchacrosscountriesorregions,typesofpassengers,stagelengthandevenovertime.Butitiswidelyrecognizedthatpriceelasticityislowerforbusinesspassengersandforlonghaulflights(Bronsetal.,2002). InthesocialaspectofEuropeanairlineindustry,theappearanceofthelow-costcarrierisacrucialpart.“Theestablishmentofthesingleaviationmarketactedasacatalystforthelaunchofnewinnovativeairlinebusinessmodels,predominantamongstwhichwasthelow-costcarriermodel,toanextentinspiredbySouthwestAirlinesintheUSalthoughthelong-standingEuropeancharterairlineshadalreadyadoptedmanyofitsfeatures”(Starkie,2012).InEurope,theappearanceoflow-costcarriershasbeenamajorfactorinthedemandforairtransport(Dobruszkes,2006).Today,low-costcarrierscarrymorethanonethirdofthescheduledpassengertrafficwithinEuropeandtheirmarketshareevenexceeds50%onsomelargeintra-Europeanmarkets(Klophaus,2012).Furthermoreinthesocialpart,pilotsalaryresearchisalsoahotsubject.AccordingtotheresearchbyGinieis(2013),RCCsarealwaysthosethatpaythelowestsalariestotheirpilots.ItisworthhighlightingthatFLAGsgenerallyhavethewidestrangeofsalariespaidtopilots.InthetechnologicalaspectofEuropeanairlineindustry,theenergy-savingtechnologyistheheatissue.Itisestimatedthataircraftaccountforapproximately3%oftotalglobalCO2emissions,yettheysupport8%ofglobaleconomy.HoweverfromtheresearchfromHighamandCohen(2011),respondersallconsiderlessprioritytothe carbonemission.In2008,theEuropeanCommission,theEuropeanParliamentandtheEuropeanCouncilagreedonincludinginternationalaviationinthealreadyexistingEuropeanUnioncarbonmarket.OnDecember3rd2009,AirNewZealandconductedthefirstflighttestofasecond-generationbiofuelblend(Warwicketal,2009).Followedthisaction,airlinecompaniesintheEuropeanalsohighlighttheenergy-savingtechnologiesinvention.IntheenvironmentalaspectofEuropeanairlineindustry,therelationshipbetweenairlinecompaniesandairporthasbeenstudiedrepeatedly.“Givenairportchargescanrepresentaround12%oflow-costcarriers’costs”(Doganis,2001).ForRyanair,airportchoicefactorsforlow-costcarrierscompaniesincludedlowairportcharges,quickturnarounds,simpleterminals,rapidcheck-infacilities,goodpassengerfacilitiesandaccessibility(Barrett,2004).IntheresearchofSmithandPotter’s(2005)study,theRankofairportchoicefactorsforthefullsampleoflow-costcarriersislistedbeow. InthelegalaspectofEuropeanairlineindustry,thelegalcontractbetweenlow-costcarriersandairporthasbeenhighlightedalot.ThenewnatureoftheEuropeanaviationmarkethasledtoyetanotherfundamentalchange.Ithastransformedthetraditionalbusinessrelationshipbetweenairportandairline.Intermofthis,thecontractofthelegalcontractbetweenlow-costcarriersandairportalsohasbeenmodified.Thetopissueistheinstability.Generallyairportsincreasinglyhaveofferedairlinesdiscountedchargesinreturnforlongtermcommercialcontractsinordertotryandestablishamorestableenvironmentfortheiractivities.ThetablelistbelowistheLiverpoolairport’splanningassumptionsbasedoncontractcommitmentsbyairlines.Fromthis,itisobviousthataroll-outprogrammeaddingadditionalaircraftagainwithindicativedateshasbeenthelatestchangesinthelegalcontractofEuropeanairlineindustry. 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Klophaus,R.,ConradyR.andFichert,F(2012)“Lowcostcarriersgoinghybrid:EvidencefromEurope”JournalofAirTransportManagement23(2012)pp54-58.SmithD.R.andPotter,A.(2005)“AnexploratorystudyintoairportchoicefactorsforEuropeanlow-costairlines”JournalofAirTransportManagement11(2005)pp388–392.Starkie,D.(2012)“Europeanairportsandairlines:Evolvingrelationshipsandtheregulatoryimplications”JournalofAirTransportManagement21(2012)pp.40-49.Warwick,Graham,AviationWeek&SpaceTechnology(2009)GREENDAY.00052175,Vol.170,Issue1.