1. Who are the major competitors in this industry? Where do they compete (right before this case was written) in terms of their primary markets? Are their resources different from each other? Why or why not? What are their strengths and weaknesses?
The major competitors in the industry have to be divided into three categories depending on the segment in the air carrier market. The first category is the major carriers such as American Airlines, Continental Airlines, Delta Airlines, Northwest Airlines, United Airlines and US Airways.
The second category is the low-cost carriers like for instance AirTran, America West, Frontier, JetBlue and Southwest Airlines. The third and last category is the regional carriers, including as examples, Atlantic Coast Airlines, Express Jet, Mesa Air and SkyWest. In the Air Carriers industry this are the main competitors that compete in their own segment and depending on the route with other competitors from a different segment.
As the operations field is different from one segment to another the place in the market where they compete is different.
Major carriers’ strategy is to operate from a hub where the headquarters are settled so the majors would compete if the routes concur. The other categories have different places in the market that’s why they do not always coincide and then compete even though the increasing presence of these two categories is widely spreading.
They compete essentially in price although low-cost carriers are giving way more services to clients than the majors, it could be because they are too used to be alone in the market and they do not really invest in customer service.
The resources initially are the same but the difference is the moment of entrance in the market and the barriers that new entrants have. In the case of low-cost carriers they have to make a high capitalized investment to enter in the market while the regional carriers have the support of their matrix companies.
The strengths of low-cost carriers against major carriers are the following; Lower management expenses, higher margins, full capacity utilization of the planes, the elimination of tickets and agents, better use of fuel and brand image.
The weaknesses of low-cost carriers in front of major carriers are the long term sustainability of the leadership in price, high initial capital investment, high levels of innovation, majors have more conveniences of flights and availability on airports.