Collaborations, privatisation and forming alliances are some of the strategies pursued to cope with competition.
Analyzing the Environment .
Environmental analysis is about analysing the external factors affecting organisations. The recent world events such as terrorism, global economic slowdown, structural weaknesses, high fuel costs and labours have had negative effect on the industry as a whole. Further more factors such as deregulation, Customer preference, and speed of technology are all good examples of drivers of change. The key however is whether the airlines can see the pattern of change coming, and the underlying forces driving the change. .
.
The PESTEL Framework .
In order to analyse the external environment of the industry it is useful to apply the PESTEL framework, which will further help identify the opportunities and threats that might exist within the industry. The framework categorises environmental influences into six main types: Political, Economic, Socio-cultural, Technological, Environmental and Legal. There is a need to understand the different impact of these external influences and drivers. .
Political.
The political environment includes political systems, regulations and laws as well as political stability and risks within a country. Political systems or types of government are an important environmental consideration especially for multinational firms. One of the major developments in the airline industry during the last decades has been deregulation. The sudden change of the competitive situation "from tight regulation to free competition" has opened great opportunities but also caused many problems. Former secure markets turned to be highly vulnerable. As the rules of competition were changed, different market segments emerged (Chan, 2000). .
In general, new airlines entered the markets with costs 30 to 40 % lower than the established carriers. This forced larger carriers to reorganize and reduce their operating costs.
