• The threat of new entrants is low. There are two main reasons for this. The first one is very high costs of entry which require huge investment to get into the market. The second one is the number of existing firms and a harsh competition between them. Thus it would be very difficult for a new entrant to get enough market share to survive. Moreover, it is very difficult for a new entrant to get good flight schedules because existing firms already own the best ones. There is also a significant amount of airport tax to pay which is part of price to pay to enter this market.
• The substitutes must have the same features as a low cost airlines meaning cheap and fast. The threat of substitution is really serious on short distance flights which can be replaced by train, car, boat or other airlines. What make trains or cars a real threat is the price even for a low cost airlines. For instance Ryanair is threaten in Europe by Eurostar or the Thalys. Customers make there choice in terms of spot of arrival, price and distance, therefore they will always compare every mean of transport each time they have to travel. It implies a very low fidelisation rate and Ryanair understood it by not having a fidelity program.
LOW MID HIGH COMMENTS
Threats of entrants Economies of sales X To get economies of scale a plan
should be implemented all over the business area
Product differenciation X Each airline provides a different product,
the distinction is made on services provided, prices, spot of arrival
Capital requirements ...