Inc., 16.1%; AMR Corporation 10.3%; U.S. Airways Group Inc., 7.7% (Brennan, 2013, p. 24). In November 2013, the proposed merger between AMR and U.S. Airways was allowed, which, if approved by a federal judge, will make it the world’s largest airline in terms of traffic. While experts are still debating the effects of the merger, it may be a possible opportunity for Southwest to gain gates at busy airports that were divested by the two airlines (Nicas & Kendall, 2013). Major industry customers fall into two groups: individuals/households and business travelers. The former accounts for about 71.3% of industry revenue in 2013, which includes both coach and first class seating. Another 24.6% of the market comes from business travelers. While this group of consumers is smaller than the individual group, it is a desirable segment. According to Brennan, “Business travelers usually pay a premium for their tickets (business class) because payment is usually made under the company’s account or through last-minute bookings that command a higher price” (2013, p.15). However, the size of the private individual/household group gives them power in this industry. Two major suppliers to the airline industry exist, and their products have the ability to affect the profitability of companies in it. The first is the airplane manufacturers. They have power because few firms supply large jet airplanes to the market. Boeing and Airbus are the two major manufacturers, but their power is somewhat mitigated because they are fierce competitors with each other. Boeing’s 2012 Form 10-K describes the commercial jet aircraft market as “extremely competitive” with “aggressive international competitors who are intent on increasing their market share” (Boeing, 2013, p. 4). At the same time, some airlines such as Southwest, which uses Boeing aircraft, are brand loyal and exclusively use one manufacturer’s product.
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