PEST Analysis of the UK Airline Industry

The PEST Analysis of the UK airline industry must take into account the Political Economic, Social and Technological environment in which the industry is operating in. It will also include how these environmental factors will impact on the airline operations. Political The political stability of the United Kingdom was severely tested by the London terrorist bombings in the summative years of the last decade. This led to a slight drop in the fortunes of the airline industry (Keynote, 2010). Personal air travel reduced while costs incurred by their airlines in their efforts to beef up airport and flight security reduced the profitability of major airlines. Other political factors that have impacted negatively on the operations of major airlines in the UK industry include recent pricing regulations laid out by the British government, wage legislations and union requirements. Economic Economic factors have been working in favour of the UK airline industry for a long time. The increasing strength of the pound against major global currencies is a boon for the UK airline industry. The inflationary and fluctuation tendencies of the dollar have worked to the advantage of the UK airline industry (Keynote, 2010). However, the slowdown of the domestic economic growth has affected the UK airline industry since it has reduced the power of the people to use air as their preferred mode of travel. The recent global economic meltdown hit the airline industry very hard. All major players in the UK airline industry reported massive losses during the global economic meltdown (Business Week, 2008). Some of them had to lay off their workers during the recession. The other economic factor is the increased cost of fuel. This has impacted on the profitability of the airline industry and the situation has been worsened by the situation in the Arab world (Done, 2011).

Social Factors Threat of terrorism has created fear among people in UK and other destination countries and people are flying less frequently. Most people who used to prefer air travel as a means of short distance travel now prefer rail or road due to the vulnerability of air transport to terrorism. The global economic crisis saw many people getting laid off their jobs and this impacted on their economic potential. This has led to a sharp decrease in lower and middle class air travels. The threat of substitutes has also affected the airline industry. Emergence of cheaper airlines like Rynair has affected the domestic market of most players in the UK airline industry. The last social factor is the decrease of airline related travel destinations domestically and internationally which has affected the number of people using air travel. Technological Technological factors have worked in favour of the UK airline industry. Players in the UK airline industry have a superior technological edge and this has created a competitive advantage over their rivals in Europe and the world at large. UK airliners have used technology to add value for their customers. There is a wide range of technologically driven entertainment tools in most airlines and they have made travel quite comfortable. Internet has impacted immensely on business and customer habits and this has changed the manner in which airlines conduct their business. Most airlines are using the Internet to sell tickets and also market their services (Mintel, 2010). However, technology is a double-edged sword. Though technology is a source of competitive advantage for a company, companies are forced to invest millions of dollars in replacing technologies that are rendered obsolete after a short period of use because of dynamism in the technological world.

List of References

Business Week. (2008). Global Economic Crisis and its Impacts on the Airline Industry http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId= 24963869 [23rd July 2008] Done, K. (2011). Financial Times: Oil prices destroying airline profitability. Retrieved 11th April 2011 from http://www.ft.com/cms/s/0/acace9ba-0e6e-11de-b0990000779fd2ac.html#axzz1J8js06RW http://oxygen.mintel.com/sinatra/oxygen/display/id=417675 Keynote (2010). Airline Market report. Retrieved 8thApril 2011 from https://www.keynote.co.uk/marketintelligence/view/product/2388/airlines/chapter/1/e xecutive_summary?highlight=airlines
Mintel. (March, 2009). Ticketing and Distribution in the Airline Industry International. Retrieved 9th April 2011 from http://oxygen.mintel.com/sinatra/oxygen/display/id=417675