Abstract
Michael Porter's famous five forces of competitive position model provide a simple perspective for assessing and analyzing the competitive strength and position of a corporation or industrial organization. Let us consider these concepts of industry analysis in the context of the US airlines industry in the past 20 years. To do so, we will analyze each of Porter's forces and its impact on profitability of the airline industry. Before 1978 the whole airlines industry was regulated by the US government, with the Civil Aeronautics Act, in order to guarantee certain stability and to administer the structure of the industry by The Civil Aeronautics Board (CAB). The deregulation in 1978 has had a huge impact on the airlines with consequences like the appearance of new entrants or an outbreak of the price competition. This new situation has deeply modified the mechanism of Porter's forces on the airline industry. The intensity of rivalry among firms varies across industries. In the case of the airline industry we can say that the competition is intense. Industry concentration: In the beginning the industry was hardly concentrated, with a concentration ratio in 1935 of 88%. There were few airlines companies (only 23) because the CAB limited their number. After 1978 and the deregulation, the concentration ratio fell to 54.2%. In 1982, the competition became more aggressive; new entrants appeared and some carriers went bankrupt. We can say that the structure of the sector was fragmented. After this period of instability the US airline industry has been consolidated: the strongest or the more profitable carriers acquired others that were in difficulties and the most successful low cost airlines succeeded in getting market shares.
