What are the main drivers and barriers of supply in the airline industry?

The demand for air travel is considered derived demand, as it is not a direct consumer need but rather a result of the demand for other goods and services. The primary factors influencing the demand for air travel include business activities, tourism, and trade. Consequently, airlines do not have full control over this demand, as it is subject to various external factors.

In my humble opinion, the demand for air travel and transportation of goods are overwhelmingly high. Most airlines cannot meet and fulfil these demands because of several factors. Delays in aircraft deliveries from manufacturers, availability of slots in most airports, the airports and infrastructures can not meet and accommodate the traffic flow. ATC restrictions, the so called open skies are not as intended. To that extent, if the airlines cannot meet the market demands, naturally the price will increase.

The demand for air travel is sensitive to changes in prices and incomes. However, the degree of sensitivity (i.e. its demand elasticity) will vary according to different situations. To ensure that air transport policies are effective, reliable estimates for demand elasticities are essential.

The supply chain is the heart of the aviation industry because of three factors: Value, Innovation and Vulnerability. 1. First, the components, structures, systems, and technologies provided by the aviation supply chain represent most of the Value of any given aircraft. 2. Second, it is essential to note that much (and often most) of the innovation in aviation happens at the supplier level rather than at the prime level. 3. Given the enormous stresses experienced by the supply chain over the past two years, company failure, or inadequate resources for supplier capacity expansion and technology development, are some of the industry's most significant risks. The supply chain, crucial to industry success, is also its greatest Vulnerability.

to remain competitive Airline’s reduce cost. But finding ways to maximize efficiency while maintaining quality of service is key and will always lower cost by increasing a loyal customer base by focusing on 1.Customer Service: friendly and efficient ensure that customers have a pleasant flying experience and that all of their needs are met, from properly checking in and receiving boarding passes, to the in-flight experience. 3. Safety: the top priority includes regular maintenance and inspection of aircraft, and training employees to be prepared to handle any situation that may arise during a flight. And finally my Reliability.

Since World War 2, only one country (Brazil), and only Embraer has successfully entered the jetliner industry. Very few companies have successfully entered the smaller jet industry. Entry barriers at the supplier level are also exceptionally high. Most suppliers have been in business for 50-60 years, and while small, niche companies have been created, they are the exception. Very often, they are purchased by larger suppliers. There has also been a great degree of concentration in the industry. The aviation supply chain saw a series of mega-mergers over the past few decades. As a result, some companies, such as Raytheon, General Electric, or Safran, are about as large, or more significant, than some of the most critical aircraft primes.