Two important macro-environmental factors affecting the airlines industry

Question

Select two (2) important macro-environmental factors that may affect the business you are focusing on. Provide reasons why these macro environmental factors are selected. The chosen business is the airlines industry.

Answer

One framework used to analyse the macro environment is PESTLE analysis, which is a framework used to scan the organization’s external environment. PESTLE stands for Political, Economic Socio-Cultural, Technological, Legal and Environmental. Two important macro-environmental factors that may affect an organisation in the airlines industry are Economic and Technological factors.

Economic Factors - These factors represent the wider economy. The airline industry is highly dependent on the economic situation. With some countries experiencing prolonged recessions, and fluctuations in oil prices worldwide, as well as an imminent global slowdown (exacerbated by recent events such as the Brexit vote and terrorist attacks around the world), this has resulted in increased demand for low cost airlines like Ryan air and Easy Jet. An increase of fuel prices leads to increased costs of operations, and this leads many airlines to adopt different strategies in order to lower their operational costs. Likewise, if fuel prices are low, airlines will be able to recover losses and generate profits.

Technological Factors - These factors refer to the rate of new inventions and development, changes in information and mobile technology etc. Technology heavily impacts the airline industry as well. The intensity of the competition in the airline industry requires airliners to adapt to the latest technology in order to survive in the already tough environment. The aeroplanes are becoming more fuel efficient, helping airlines to reduce travelling costs. In addition, new technology has also enabled airlines to introduce more safety measures (the airline industry is highly regulated and passenger safety is paramount, this constitutes a Legal factor). In addition to increasing efficiency for airlines, many airlines are increasingly making use of technology to facilitate their customers, for example, mobile phone applications have been introduced to facilitate customers.