Brief Analysis on Pestle Analysis of the Global Aviation Industry

PESTLE is a great instrument for analysing the present situation of the aviation sector. The PESTLE analysis of the airline industry will help us understand how the political, economic, socio-cultural, technological, legal and environmental factors impact the industry.

We normally associate airlines with luxury and splendour, as well as comfort and ease. However, due to the multiple variables highlighted in this article, airlines throughout the world are locked in a cycle of increased operating expenses, reduced earnings, and falling margins. Though passengers may not notice these features, it is evident that the airline business is in shambles, and that only reorganisation will help it recover. 

Background of the airline industry

Air travel began in the 1920s. However, it was confined to the airmail routes of the European countries.

Despite rising levels of airborne passenger and cargo traffic, the global airline industry’s revenue has grown slowly over the last five years. Fluctuating fuel prices and increased competition have put downward pressure on freight shipping rates and airline ticket prices, limiting revenue growth. Moreover, during the last few years, the overall value of global commerce has decreased, reducing the demand for transportation services of cargo. Meanwhile, recent increases in worldwide per capita income have propelled the airline passenger transportation business. Going forward, industry revenue is expected to expand as global per capita income and travel activities continue to rise, aided by economic expansion in emerging nations.

PESTLE analysis of the airline industry

Let us look at how PESTLE analysis of the airline industry can help us dive deep to know the recommendations for making it successful.

• Political

Airlines operate in a heavily regulated political system that benefits passengers over airlines. This is because the global aviation industry considers passenger safety of paramount importance. This is also a sector where previous tendencies toward monopolistic behaviour by airlines have made the political establishment wary of airlines, leading to tighter regulation of airline operations similar to the PESTLE analysis of the European airline industry. 

In addition, the global aviation sector is defined by deregulation on the supply side, which means more competition among airlines, and regulation on the demand side, which means passengers and fliers may demand more facilities and lower pricing.

• Economic

The global aviation sector never fully recovered from the terrorist events of September 11, 2001. The lengthy recession that followed the dot-com bubble crash added to it. Moreover, the fluctuating price of oil as a result of the Second Iraq War and the ensuing surge in oil prices immediately before the Great Recession of 2008 further contributed to the woes of the aviation sector. 

This last facet of the continuing global economic recession has resulted in rising maintenance and operational expenses for already struggling airlines, increasing labour demands and aviation fuel prices, competition from low-cost carriers, and decreased passenger traffic. Furthermore, the pandemic of 2020 added to the downfall of the global aviation industry.

All of these reasons have resulted in airlines losing money and being vulnerable to bankruptcy and shutdown since they can no longer afford to conduct profitable operations. Of course, as airlines strive to utilise the efficiencies of economies of scale and the synergies of mergers with other airlines, this has resulted in more consolidation.

• Social

The advent of the millennial generation into the consumer class in recent years has meant that the societal shifts of a generation used to entitlement, quick gratification, and higher service needs have forced airlines to balance their expenses with the increased demands from this group. Add to that the retirement of the Baby Boomer generation, and the airlines have lost a significant source of revenue. The passenger profile has also evolved, with more budget-conscious travellers replacing business-class passengers who prefer to use enhanced communication services to hold meetings virtually rather than travelling down to meet their business colleagues.

• Technological

Although the airline sector makes substantial use of technology in its operations, it is restricted to aircraft and airline operations, omitting ticketing and distribution. Many experts have urged airlines to make use of technological advancements in customer-facing or front office tasks as well. In other words, in terms of customer support, distribution, and ticketing, the technical advancements must be modified to embrace mobile technology as stated even in the PESTLE analysis of the aviation industry in India. Furthermore, airlines must use social media to guarantee that larger social and technical developments do not pass by the airline business.

• Legal

The number of lawsuits filed against airlines by both consumers and employees has increased in recent years. In addition, authorities are becoming more severe with airlines, implying that they are being more cautious of their plans and implementing them only after they are certain they are not breaking any laws. The “double whammy” of more expensive lawsuits and increased regulation, as well as the legal system’s indifference to delays, safety issues, and other factors, have only added to the airlines’ fears as their every move is being scrutinised.

• Environmental

Passengers are now relying even on their carbon footprint as climate change has entered the public consciousness, making them more environmentally conscious. As a result, airlines have been pushed to embrace “green flying” and be more receptive to environmentalists’ concerns. Furthermore, as activists and consumers turn a critical eye towards airlines and their corporate social responsibility, social responsibility programmes are becoming more prominent and under investigation.

Conclusion

The current discussion concludes that the global aviation sector has entered a period known as the “Airline Death Spiral.” This has resulted in a worldwide wave of airline bankruptcies and closures. Moreover, when airlines want additional time or less stringent rules and regulations, authorities are not sympathetic. Besides, full-service airlines are unable to stay competitive on volume or price due to demanding passengers and low-cost airline competition. Finally, the global airline industry’s profitability and viability have been harmed by rising operating expenses.