The UK Airline Industry

According to SCP, the industry structure is deduced from salient information about the number and size distribution of buyers and sellers, entry and exit conditions, product differentiation, vertical integration and diversification.Pertaining to the UK airline industry, Button (1989, p. 197) stated that ‘The key point is not how many airline companies serve the market, but rather the degree and nature of competition which exists between them.” Clearly, the industry is not one wherein entry barriers are understandably high because of the existence of government franchise and high capital investment in order to operate. This is why Pryke (1987) said that considered ‘route-by-route, the airline industry is incurably oligopolistic’ (p.9).At one time, the airline industry was government-owned and controlled and seen more as a public service. Understandably, the competition was non-existent. In the 1980s, however, the national airline company was privatized and the industry was deregulated. More than other European Community countries, the UK is the only member to have implemented a relatively long-term policy of liberalization within its domestic and international scheduled airline industry.Today, there are many variants, generally classified into two main groups: the regular, full-service airlines, and the relatively recent low-cost carriers. Low-cost carriers have entered the market and established themselves by penetrating significant parts of the markets. Whereas before, the industry used to be regulated and dominated by government players, it is now shaped by competitive offensives of companies. There is therefore the need for a market-oriented approach to product optimization (Pels, Njegovan Behrens, 2009).Pels, et al. determined that in the new competitive environment, the three key dimensions of passenger choice appear to be airfare, surface-access costs and frequency.