Analyzing The Airline Industry In Australia Characteristics, Strategies, And Implications

The airline industry in Australia presents a unique case study of market concentration, a market structure dominated by a small number of large firms. In this context, two major players, Qantas, and Virgin Australia, have historically held a duopoly, controlling a significant share of the market. The Australian airline industry's is rooted in high entry barriers. These include the substantial capital required for aircraft, staff, and technology, along with rigorous safety and operational regulations. Additionally, established players like Qantas, which enjoys brand loyalty and a comprehensive network, further discourage new entrants. Virgin Australia's entry in the early 2000s disrupted the market but did not fundamentally alter its structure. Airlines are interdependent, meaning that the actions of one firm can significantly impact others. This interdependence often leads to price leadership, where one firm (usually the largest) sets prices that others follow. In the Australian context, Qantas has often played this role. However, unlike in a monopoly, competition still exists. Qantas and Virgin Australia, for instance, compete on routes, service quality, and customer loyalty programs.

Analyze the industry and business characteristics of Airline companies operating in Australia.

1. Research and outline the benefits and cost of Product/service differentiation, in the context of the Airline industry.
2. Discuss various possibilities of profit maximization for the Airline companies in the short Use diagrams to illustrate your answer.
3. Discuss the factors affecting demand and elasticity of demand for Airline products/services in Australia.
4. Analyse long-run trends in the Airline industry over the years regarding the number of customers and profit-making orientation of these Airlines.
5. Consider a 20% increase in the travel cost from your home country to Australia; what you would do:
   • if you need to travel for holidays.
   • if you need to travel for Education (need to join your course). Would you cancel your trip Yes or Why or why not?
6. Conclude your findings.

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