Factors mainly manufactured by both Airbus, and Boeing. This

Factors that are connected with the bargaining power of
suppliers include the threat of forward integration, which is when companies
attempt to control the direct, and in some cases the indirect distribution of
its products, it also includes the concentration of suppliers in the industry. The
position supplies play decreases the ability for competitors in the industry to
earn higher profits.1

The main power of the suppliers in
the airline industry can be summed up by the effects it has on all three inputs
that airlines are composed of in terms of fuel, aircraft, and labor. For
instance, the price of aviation fuel can be described as constantly affected by
the flux in the oil prices as offered in the global market, which can gyrate wildly.
Similarly, labor is subject to the power of the unions who often bargain and
get unreasonable offers of compromises from certain parties, in other cases
they might pose a disadvantage to the labor market itself. Third, the airline
industry needs aircrafts that are mainly manufactured by both Airbus, and
Boeing. This is why the power of the suppliers is categorized as high according
to the Porter’s Five Forces framework.2

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

It is an
almost impossible process to change suppliers for airline companies; most firms
have long-term contracts with their suppliers. Planes normally require a high
capital investment, which explains the long-term deals companies enter into. It
is difficult to enter into the plane manufacturing industry because of the
capital needed. The amount of money and expertise needed to make one plane is
around 200 million dollars, give or take, not to mention the test trials and
specialists being hired for this sole purpose. For the above reason, it is
clear that the number of suppliers in the industry will remain relatively low
in the near future. Based on these points we conclude that the bargaining power
of suppliers poses a low threat. Customers are price sensitive in the sense
that prices and offers are considered essential to them. We should include that in general, airports
are in limited supply and we need airports to land planes and board passengers,
Suppliers are under the threat of bankruptcy if they are more profitable more
that buyers are.3

To be exact,
Power of suppliers can be summarized in three main factors:

We have summarized
the power of suppliers in three main factors beginning with fuel.The
price of fuel is one of the main issues to take note of when addressing the
airline industry, which is greatly unstable because of geopolitical and other
factors such as taxes and exchange rates. Fuel suppliers such as Shell, British Petroleum
and Chevron Texaco are considered market giants; Fuel providers have an
excellent bargaining position as they can increase fuel prices without
regarding the airlines as an important customer group. To
prevent losses in the form of costs from fluctuating market prices of fuel
airline companies regularly hedge fuel. Hedging can save a lot of money for the
company by reducing the risk exposure when market prices fluctuate