Airline Industry PESTEL Analysis
1. Introduction
It is very crucial to do the PESTEL analysis. It helps to analyze the business condition and potentials of any company or service. The user can get an idea of the external conditions that can hinder their growth or be catalytic in their growth. Like other industries, airline industries are also get affected by social conditions. The whole world is connected via airlines. There are domestic and international flights. For this reason, the aviation industry is widespread and may get affected by different external factors. The PESTEL analysis airline industry can help them to have an idea about those conditions.
2. Background of Airline Industry
Air transport started in the 1920s. However, it was limited to the airmail routes of European nations. India got its first airline in 1932. The firm initiating it was Tata. It's still running with the name of Air India. As per the latest record, more than 5000 airlines are operating worldwide with ICAO codes. Currently, about 11.3 million people are working in the airline industry, and it also has the potential to create more jobs in the future due to its growth.
3. Airline Industry PESTEL Analysis
The PESTEL analysis of the Airline industry can give an idea about how multiple external factors like politics, economy, sociology, technology, ecology, and law can affect the business of an airline company. Most of the countries have multiple operating airline companies, which makes it a highly competitive market.
Though the number of passengers has increased over the years, most airline companies failed to see a surge in their revenue. Many external factors contributed to this situation. The PESTEL analysis of the airline companies can show how the external factors have affected them.
Political Factors:
Like most other businesses, the airline industry is also affected by the nation's unstable political condition. The airline companies, which operate in countries with political turmoil, may see a sharp decline in revenue. Here are some issues which can directly impact the business of airline companies:
- Internal emergency, war, or political instability can hinder the business of any airline company. Most of the tourists are not interested in visiting countries that have threats due to political conditions. The airline may lose customers for the lack of security to those parts.
- The government has set up some strict rules and guidelines for the operation of an airline which can ensure the utmost security of the passengers. For international flights, the regulations are strict, and this situation may lead an airline to push for more amenities to keep up with the competitors.
- As the aviation business can be profitable in the long term, the government may want to invest. If a company can secure a tie-up with the government, that can be highly beneficial for them.
Economic Factors:
A country's economic condition is directly related to the business operating within the country. The airline industry is not an exception. PESTEL analysis airline industry can show how the financial situation of a nation can impact the airline industry:
- Recession and unstable economic conditions can severely affect the airline industry. The number of passengers may decrease while the cost of raw materials may increase. It may lead the companies to lower their prices, and as a result, thousands can lose their job.
- Due to the pandemic, many countries have temporarily suspended flights from other countries. It has affected the airline industry to a certain level. At the same time, the economic condition of all the countries has experienced some depression which can affect the airline industry as well.
- The rising cost of oil and other necessary machines can impact the airline industry. However, at the same time, the number of passengers is declining, which can show a negative result in the long run.
Social Factors:
The sociological conditions of any state gravely impact the airline industry. In the case of companies running international flights, the impact can be deeper and more long-lasting. Here are some sociological conditions which can impact the airline industry:
- The industry, like airlines, needs to maintain a clear image. Otherwise, they may see a sharp decline in passenger numbers. If there are airline accidents, and if that is related to the company’s carelessness, their business may get severely affected.
- The airline companies are all about hospitality and services. Hence, an airline must have a good reputation. For example, if there are cases of employee harassment or passenger mistreatment, those events can create a deep impact on their business.
- The airlines also need to keep an eye on the comfort of the passengers. It can add to the clear image of any aviation company.
Technological Factors:
The airline industry’s technology is intricately related to its growth. The companies must take advantage of technological innovations to offer a satisfactory service to their passengers. PESTEL analysis airline industry can show how technical issues can work upon the growth of the airline industry:
- The companies need to invest in technology and bring in continuous changes to ensure the security and safety of the passengers.
- As a service-providing industry, the airlines can incorporate constant technological changes to improve their services.
- The airline industry needs to do regular technical up-gradation of their system and work on the communication with the air traffic. It can help them to stay away from crashes or technical faults.
Ecological Factors:
The significant environmental factor that has been a concern for environmentalists is its CFC emission. It has been a worry for the airline companies and the government at the same time. Here are a few ecological issues that can potentially affect the airline industry:
- The airlines need to improve their systems and flights to decrease harmful emissions. Otherwise, this can be a massive concern in the future. They can calculate the carbon footprint for being responsible to the environment.
- The company needs to set a research team that can work on creating a more environment-friendly aircraft. It will help them to improve the service and can make an impression. It will also give them an opportunity of getting investors.
- The companies can take on some corporate responsibilities and include environment-conscious messages in their campaigns. It can also be a responsible step to protect the environment.
Legal Factors:
Though the legal issues may not have much to do directly with the growth of airline companies, indirectly, it can severely impact their business. PESTEL analysis airline industry can show how legal issues can impact their business:
- Most countries have some rules concerning the service. The rules help to protect the environment and to ensure the safety of the passengers. The airline companies must be well aware of them and abide by those rules to avoid legal proceedings.
- There are some conditions with the employee conditions and flight times of which the airlines should be careful. It can help them to offer a safe and comfortable service.
- As for the disasters and accidents, on most occasions, Airlines are held responsible. They may get stuck in legal proceedings. It can harm their image and have some negative impact on their business.
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4. Key Takeaways
The PESTEL analysis airline industry shows how the business has a broad scope for growth with a few minor negative issues. Proper strategies and plans can be very fruitful in this case. As the airline industry continues to grow, they need to pay more attention to improve their service. They need to upgrade continuously and incorporate the “green flight” ideas as much as possible. A keen eye on the security of passengers and technical superiority can help the airline industry concerning their business expansion.
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5. References
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Contributor, P., 2021. 'A Concise PEST Analysis for Airline Industry', PESTLE Analysis, [online]. Available at: https://pestleanalysis.com/pest-analysis-for-airline-industry/ (Accessed 21 June 2021).
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Managementstudyguide.com. 2021. 'PESTLE Analysis of the Global Aviation Industry', PESTLE Analysis, [online]. Available at: https://www.managementstudyguide.com/pestle-analysis-of-global-aviation-industry.html (Accessed 16 June 2021).
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Pratap, A., 2021. 'A PESTLE analysis of the aviation industry', notesmatic, [online]. Available at: https://notesmatic.com/airlines-industry-pestel/ (Accessed 21 June 2021).
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Shaw, A., 2021. 'PESTLE Analysis of Airline Industry | Marketing Tutor', Marketing Tutor, [online]. Available at: https://www.marketingtutor.net/airline-industry-pestle-analysis/ (Accessed 21 June 2021).
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SpendEdge. 2021. 'PESTLE Analysis | Generating Better Profit Margin for an Airline Industry', PESTLE Analysis, [online]. Available at: https://www.spendedge.com/casestudy/pestle-analysis-of-airline-industry (Accessed 21 June 2021).
