US Airways Industry Analysis

U.S. Airways Company Background

One of the major companies operating in the American airline industry is the U.S. Airways, which is owned by American Airlines Group. The airline company was founded in 1939 as All-American Airways that focused on delivering air-mail to the Ohio Valley and Western Pennsylvania through the use of a single engine Stinson Reliant aircraft. After its inception, the company rapidly developed into Allegheny Airlines, U.S. Air and eventually U.S. Airways following a series of acquisitions and mergers. Throughout its years of operation, U.S. Airways has developed to become one of the greatest success stories of the United States, especially in relation to the airline industry.

After being founded as All-American Airways in 1939, the company changed its name to Allegheny Airlines in 1953 after acknowledging the mountains and river of the similar name that acted as the core of its airline's network ("U.S. Airways Chronology," n.d.). The airline changed its name to U.S. Air in 1979 after enactment of the Airline Deregulation Act and started to extend its operations. In 1989, the company acquired Pacific Southwest Airlines and Piedmont Airlines to remain one of the transcontinental legacy carriers in the United States. U.S. Airways has developed to an extent that it currently operates a wide domestic and global network with more than 190 destinations in 24 countries across Europe, the Americas, and the Middle East.

Industry Analysis

As previously mentioned, U.S. Airways operates in the American airline industry that has experienced consolidation over the past six years. This industry is regarded as one of the most dynamic and diverse airline industries across the globe. Apart from being labor intensive, fast-evolving, and capital intensive, this industry is increasingly competitive and more vulnerable to external factors that may hinder successful operations of major competitors. In the past few years, the industry has increasingly been affected by external factors like increased costs of operations, high fuel prices, decreasing passenger traffic, and intense rivalry. A proper analysis and understanding of this industry can be achieved through completing Porter's Five Forces industry analysis.

Supplier power in the American airline industry is high since the three inputs that act as the core of operations of airlines i.e. aircraft, labor, and fuel are largely affected by the external environment. The presence of relatively fewer companies that provide these essential components for airlines' operations also contributes to high supplier power.

The emergence of various sophisticated tools at the disposal of buyers in the past few years has contributed to moderate to high buyer power in this industry. Apart from having various Internet-based tools for buying tickets, buyers have the capability of switching among airlines without extra costs. This means that buyers are no longer subjected to agents, brokers, and airlines themselves, which result in high buyer power.

The American airline industry is characterized by intense competition that is brought by various factors including entry of low cost carriers, operations based on outdated business models, and tight regulations ("Porter's Five Forces Analysis," n.d.). Therefore, it is characterized by high intensity of competitive rivalry since there is large number of competitors and increased product differentiation among the various carriers.