The competitive forces model focuses on five forces that shape competition within an industry. These five forces are: the risk of entry by potential competitors, the intensity of rivalry among established companies within an industry, the bargaining power of buyers, the bargaining power of suppliers, and the closeness of substitutes to an industry’s products.

The threat of new entrants in the airline industry is low. In this time of economic distress it is tough to find an institution willing to loan the necessary capital it would take to start an airline. Without a loan it is nearly impossible to start up an airline company and therefore there are not many new companies entering the market. Even if a company could surpass these economic barriers it would find it hard to compete with airlines that have established brand recognition. These solid brands in the airline industry are able to offer lower prices and better incentives than an incoming airline and these economies of scale increase entrant barriers. Also, the respectable number of established airlines that have made up the industry have a strong hold on airports hubs. These hubs are crucial to bringing and taking customers to and from airports. An entrant into the airline industry may not have these privileges which would stall their business. A greater threat to the airline industry would be substitutes. Substitutes are a medium threat to the airline industry. Recently oil prices have fallen below $30 a barrel and it is becoming increasingly cheaper to drive. The distance that one is traveling is a large determinate on the mode of transportation they will use. Planes could be replaced with cars, trains, or ships and as oil decreases, more and more travelers will choose to drive to their location instead of flying. There will always be those who fly, such as businessmen, but the trend of energy prices and