The recent era of economic depression shook all industries and airlines’ industry was no exception. Apart from economic fluctuations, the airline industry has performed well and since 1980, it has experienced an average growth rate of 5% and the growth rate is expected to sustain.
Nevertheless, there are various challenges that the airline industry faces which includes high operational costs, regulatory frameworks and demanding clientele. PESTLE analysis is a strategic method through which airline companies can weigh all external factors that are affecting business.
In most countries, there are strict regulations for the aviation industry. This is mainly because of the risks associated and which can result in deaths or accidents or any irreparable damage. Several policies have been devised to protect passengers more than the aviation industry. Insecurity or war factors that affect particular countries always have a negative impact on the airline industry. This is a major obstacle as airlines will start losing customers in areas that have high-security threats.
Economic factors have a deep influence on the airline industry. The recent economic recession made the travel market to see its lowest period. Both economy and premium travelling declined. Additionally, airlines were also under the pressure to cope up with the increasing fuel prices. These factors made it difficult to generate profits. Moreover, airlines also struggled with increasing labour demands from the part of employees. All these economic factors resulted in increased bankruptcies of major airline companies.
Airlines also create social values like any other business as the consumer of today has changed. In order to meet the changing demands of consumers, airlines are required to incorporate changes. Now passengers prefer those airlines which are providing extended services at low fares. In the past few years, there has been a reduction in business class travelling which is a huge loss for the companies. Automation is yet another factor affecting the airline industry as people make use of Skype features or hold a conference call instead of travelling.
The importance of technological factors can be understood from the heavy use of technology in the global airline industry. Passengers now prefer to access ticketing and check-in services through their hand-held devices instead of forming a line or booking manually. The aviation industry also conducts advertising campaign on the social platform for attracting more clients. Failing to be tech-savvy can result in loss of clients. Additionally, technology also means that aircraft are lighter which provide speed and fuel economy. Increased technological advancements can make airlines gain profits through offering safety and enhanced services.
Similar to economic or political factors, legal factors also hold special importance for analyzing the external environment of the airline industry. There are many laws devised for air traffic and the safety and security of passengers. There are many regulations which require airlines to offer safe travel along with high-quality services. Airlines are made responsible for air crashes or any other type of damage or disaster. Many laws have been proposed which regulates how the airlines treat its passengers.
Ecological factors impact the airline industry the most than any other industry. Fuel is a very major expenditure of the industry and airlines are required to invest more in environmentally friendly and fuel-efficient aircraft. Climate changes also have an impact on the aviation industry as airlines are now required to practice ‘green flying’ procedure for protecting the environment. This process involves huge finances; however, airlines cannot even compromise because even the passengers are held accountable for their carbon footprint.
Concluding, it can be said that the global airline industry has become very competitive and is a very expensive business as well. This increasing cost of doing business, facing competition from low-cost airlines, abiding with the rules and regulations imposed by the government as well as changes in the profile and demand of consumers have led the industry to make its external factor analysis for meeting the industry requirements.
Additionally, recent crashes and attacks have affected the profitability and viability of the aviation industry quite badly. Making a PESTLE analysis will help in determining the weak areas and how much efforts are required to invest so as to get back to the right way.