Brief Overview of Domestic Airline Industry:
Airline industry is oligopolistic in nature, where only few players operate and the products/services offered are very similar. There might be slight variations in services offered which is mainly to increase sales or cater certain category of customers. Though there are only few players, pricing is not an advantage to them. Firms often compete on advertising, product differentiation and barriers to entry. Very quickly looking at Michael Porter’s five forces can summarize all the factors in one snapshot.
Dynamics mentioned in above picture give a good overview, however there are few factors which come into light when we take a closer look at how domestic airlines operate. We will look at three main factors driving revenue, cost and operations. When these three factors are looked in relation to each other and understood the effect of one on each other, we can then start looking into further details for an opportunistic investment in this sector.
