PESTEL Analysis

The PESTEL analysis looks at the external environment in which an organisation operates, taking into account the political, economical, social and technological factors. In a dynamic environment such as the airline market where the external environment is continually changing this analysis is a vital tool for carriers to analyse the external environment of the market they are in. (Kotler, 2001)

Political Factors

• The ‘war on terror’ – these are the continuing effects of the 2001 terrorist attacks on the general level of confidence of travellers

• Security – several problems have been created for travellers as a consequence of the increased security taken as a response to the terrorist threat, such as tightening of the screening of both people and baggage at airports

• Regulatory/licensing framework – the activities of the UK airlines are regulated by a number of bodies, including the Civil Aviation Authority (CAA) and the Department for Transport (DfT)

• EU air transport market deregulation – transport markets within the EU have been progressively liberalised as a result of legislative change at both European and national level. Consequently, the market has become increasingly competitive. This new regime has also encouraged the emergence of new low cost scheduled airlines, such as Ryanair and Easyjet, that compete with the existing operators in business as well as leisure markets

• State aid to airlines – despite many changes in the regulatory framework, concern still remains to the extent to which the government can be permitted to subsidise companies that are unable to compete on equal terms in the harsher deregulated climate

• Slot allocation – producing an attractive schedule requires airlines to have access to well timed slots at airports for landings and takeoffs. The rules by which such access is available constitute a political decision, which has a substantial impact on a airlines ability to offer a competitive...