Government Impact on the Air Transport Industry Before we discuss government intervention and its effect on an industry's competition, we must first try to understand the structure of the five forces. The theory, discussed in 1979 by Michael Porter, seeks to evaluate the attractiveness of an industry. In this essay I will explore the theory and then relate government action and its well-documented effects on the airline industry. The strength or weakness of each competitive force in the model will determine the overall attractiveness of a market. The following diagram (adapted from M. Porter, Competitive Strategy CH.1) shows in simple form the five forces, which can be seen as determining the profitability of an industry. There are two reasons why a company can perform well in an industry: 1) the industry is attractive to any company 2) the company is better and outperforms its rivals. Porter's theory can then be used to discover markets that attract companies or, in those that do not break down the five forces, so that a successful strategy can be developed. In general the firm will be more profitable if each of the forces is low, i.e. if there is a low threat of entry of new firms, if buyers and suppliers have little power over the firm, if there is a low threat from substitute products and whether competitive rivalry is low. The five forces in the airline industry can be easily broken down, primarily the threat of new competitors. Over the last 10 years there has been a huge influx of new low cost airlines into Europe such as “Easyjet” or “Ryan Air” as the low cost niche slowly becomes fuller and fuller, we see fewer and fewer competitors as the market has become saturated . The better an airline's brand image is, for example British Airways is a recognized name, and the use of frequent flyer or airline miles programmes, the less likely it is that a new competitor with lower prices will be able to enter the market. Next we have the power of suppliers and buyers in the industry. In terms of aircraft suppliers, the two main ones are Airbus and Boeing and so it may seem that these few suppliers have a lot of power over the airlines, but if intact they tend to increase competition between suppliers as they fight for bigger contracts with the big companies aerial. The bargaining power of customers in