Recently most of the aviation industry across the globe is facing a problem of increasing operational cost and a decrease in profits and revenues. The airline segment is currently facing different challenges like regulatory frameworks, demanding customers, and high operational costs. Now, these characteristics are not exposed to the naked eyes of the passengers, but after widespread research, it is quite evident that the airline sector is in disarray. Now let us take a sneak peek into the factors that are upsetting the industry. Below is the PEST analysis of the airline industry to give a clear idea about the concept.
Political: The airline segment operates in a high political environment where the lives of the passengers are more favored than the airlines. Due to earlier monopolistic behavior, the airline industry has now encountered strict laws and regulations regarding the safety of the passengers by the political establishments of the operating country. Also due to heavy competition and more jurisdiction employment, passengers push for the lowest prices and additional amenities to the industry.
Economic: The attack on the twin tower in the year 2011 has left a terrible negative impact on the airline industry which they are yet to recover. Another fearful example of the negligence of the industry is the disappearance of the Malaysian airline. The other economic factors that are deliberately affecting the growth of the sector are global recession, slowdown, and fluctuations in the prices of the oil. The business has to face the impacts of decreasing passengers, heavy competition, high oil prices, increasing maintenance and operating costs, and demand of the laborers.
Social: Due to an increase in the demand of the passengers in this industry, airlines have stabilized their costs. More passengers are inclined towards economy class than the business ones. Improved communication facilities have reduced the need to fly, thus reducing the need for business class.
Technological: Due to strong competition in the industry, all the airline companies update their machinery to the latest technologies to survive in a tough rival environment. This up-gradation to the new technologies will not only reduce the amount of fuel consumption but will also improve the efficiency and costs of the operations.
Conclusion: So these are the four factors for PEST analysis that are having an impact on the external macro environment of the industry. We have observed that the increased operational costs, strict regulations and rules imposed by the authorities, rivalry from other airlines, changes in the profile of the passengers, and recent accidents have badly affected the profitability and viability of the airline industry all across the world. It will need a lot of hard work and patience for the industry to find the right way back to the correct track.