PESTEL Analysis of the aviation (airline) industry

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PESTEL analysis of the aviation (airline) industry

This detailed PESTEL analysis of the aviation (airline) industry aims to examine some of the macro factors that impact on the airline industry in a number of countries, notably the USA, the UK, Canada, Australia, China, and India. The global airline industry is really enormous and plays an important role in global trades. However, it is worth noting that it is currently going through a very challenging time.

Political factors that impact on the aviation (airline) industry

Political stability is essential for the airline industry to thrive. Geo-political crisis and trade disputes may impact on it badly. For example, the US sanctions may ban some airlines from flying to certain destinations. Likewise, many airlines reduced or cut their services to and from Hong Kong in 2019 as political unrest resulted in declining passenger numbers and unprofitable routes (Martin, 2019).

The will of the governments around the world impacts of the development of the airline industry. Many countries are building new airports and extending the existing ones to handle more travellers better. For instance, China’s mega airport ‘the Daxing International Airport’ was opened in 2019. The total cost of building it was $11 billion (BBC, 2019). Likewise, India has recently opened or started building a number of airports e.g. Jewar Airport, Purandar Airport, Orvakal Airport, Mopa Airport, Navi Mumbai International Airport, Kannur International Airport, Sabarimala Airport, and Rourkela Airport.

Most of the major commercial airports in the UK have plans to expand with a view to doubling the number of passengers by 2023. However, though the USA is one of the global leaders in transportation and infrastructure innovation, Denver International Airport was the last new major airport built in the country in 1995.

Economic factors that impact on the aviation (airline) industry

Mazareanu (2021) reports that the global aviation industry was valued over $801 billion in 2019. However, it went down to $686 in 2020. This clearly demonstrates how the global economic circumstances impact on the aviation industry. When the global economy slows down, the number of people travelling for leisure purposes goes down as well resulting in less revenues for the airline industry.

As finical positions of different demographics vary, so vary the services and types of airlines. For example, for luxury travels around the world, many passengers will perhaps go for Singapore airlines, Emirates airline, and the American airlines. Likewise, some of the airlines that offer low-frills and affordable prices are easyJet and Ryanair in Europe, Swoop in Canada, Spirit Airlines, Frontier Airlines, and JetBlue Airways in the USA, and Jetstar in Australia. In fact, Malaysian airline Air Asia was named the best low-cost airline and Qatar Airways was named the best airline in the world in 2019 (Skytrax, 2021).

Social factors that impact on the aviation (airline) industry

Exploring social factors is the next stage in the PESTEL analysis of the aviation (airline industry). Global airline industry has created social values as many industries are supported by it and generate profits from it. For instance, this industry supported around 66 million jobs and contributed around $2.7 trillion in global economy in 2018.

However, Ziady (2020) reports that the economic challenges in 2020 put 46 million jobs at risk. A huge number of job losses are expected in 2021 at airlines, airports and civil aerospace companies. This is going to impact badly on the livelihood of those people involved creating socio-economic challenges for them and their families.

Perception of many people about the airline industry has changed over the years. This industry is now seen as safer and convenient. Though it is going through a challenging time, many people consider it an industry where masses can pursue their careers and fulfil their dreams.

Technological factors that impact on the aviation (airline) industry

Certainly, without technology, the aviation industry cannot function for a second! In fact, introducing commercial airline flights was one of the greatest technological achievements of the last century. However, many analysists argue that the use of technology in aviation industry is somewhat limited to the development and the operations of the airlines. More innovations are indeed needed in the ticketing, front office, and customer facing functions.

The global aviation industry has made a very good use of social media to reach out the target audience. Technology has also been used to make the industry safer, more efficient, and eco-friendly.

However, the development of technology may reduce the demand for the airline industry in the future as well. For instance, many companies and government departments around the world are using Zoom, MS Teams, and other similar technologies to conduct meetings remotely instead of flying down to the meeting venues. This will certainly reduce the demand for the business class for many airlines.

Environmental factors that impact on the aviation (airline) industry

The aviation industry has been blamed for being a big contributor to global warming. It is responsible for around 5% of global warming (Timperley, 2020) which causes a huge public concern. Therefore, it should explore ways to reduce its impact on the environment. It is worth mentioning that solar powered, electric, and zero-emission planes are some of the ideas the industry is exploring to be more environmentally friendly.

Legal factors that impact on the aviation (airline) industry

The aviation industry is widely impacted by a number of rules and regulations. For instance, Canada has considerable restrictions on foreign ownership of Canadian airlines which makes it a difficult place to start an airline. The UK has a number of Acts governing the aviation industry e.g. Civil Aviation Act 1982, the Operation of Air Services in the Community Regulations 2009, and Civil Aviation Act 2006.

The Airline Deregulation Act 1978 in the USA lifted the federal government’s control on the aviation industry which resulted in increased number of flights, increased number of passengers, and decreased fares.

We hope the article ‘PESTEL analysis of the aviation (airline) industry’ has been helpful. You may also like reading PESTEL analysis of the fashion retail industry in the UK. Other relevant articles for you are:

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Last update: 09 February 2021

References:

BBC (2012) Beijing Daxing: China’s huge new ‘starfish’ airport opens its doors, available at: https://www.bbc.co.uk/news/world-asia-china-49750182 (accessed 06 February 2021)

Martin, G. (2019) Airlines Slash Service And Prices To Hong Kong Amidst Protests, available at: https://www.forbes.com/sites/grantmartin/2019/09/15/airlines-slash-service-and-prices-to-hong-kong-amidst-protests/ (accessed 01 February 2021)

Mazareanu, E. (2021) Market size of the airline industry worldwide from 2018 to 2021, available at: https://www.statista.com/statistics/1110342/market-size-airline-industry-worldwide/ (accessed 05 February 2021)

Skytrax (2021) World’s Best Low-Cost Airlines 2019, available at: https://www.worldairlineawards.com/worlds-best-low-cost-airlines-2019/ (accessed 06 February 2021)

Timperley, J. (2020) Should we give up flying for the sake of the climate? available at: https://www.bbc.com/future/article/20200218-climate-change-how-to-cut-your-carbon-emissions-when-flying (accessed 05 February 2020)

Ziady, H. (2021) The collapse of global air travel is putting 46 million jobs at risk, available at: https://edition.cnn.com/2020/09/30/business/coronavirus-aviation-jobs-atag/index.html (accessed 07 February 2021)

Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.