Porter’s ‘Five Forces’ analysis
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Threat of new entrants (High – 7/10)

In 1987, the European airlines industry has started to experience a major changes in the air traffic regulation when the European Commission announced a vast deregulation in the industry. Indeed, packages of deregulation measures have included (Mintel, 2008):   To limit the right of governments, for example, to prevent the introduction of new fares, and gave some flexibility to airlines concerning seat capacity sharing; To open up the market further, allowing the right to carry passengers from one’s own country to another and the right to carry passengers from another country to one’s own to all EU carriers and offering greater flexibility for the setting of fares and capacity sharing. To give all EU carriers the right to take an unlimited number of passengers or cargo between their home country and another EU country; To introduce the freedom to offer services within the EU and the right to practise the transport of passengers and goods within the national boundaries of another member state; To allow airlines the full freedom to set competitive fares, as airlines were no longer required to submit their fares to national authorities for approval.

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This liberalised market prepared the ground for the emergence of low-cost airlines, and thus making the barriers to entry lower and the threat of new entrants high. Moreover, the access to the industry distribution channel has become easy throughout the use of internet (booking tickets). However, a significant barrier to entry is the large fixed cost that accompanies airline operations and start-up. For instance, the most used commercial Boeing 737-800 jet costs (Boeing.com http://www.boeing.com/boeing/commercial/prices/), and maintenance costs (http://www.aviationpros.com/article/10387195/maintenance-costs-significant-but-tricky).