ACA Airlines

5 Pages 1185 Words

As Atlantic Coast Airlines(ACA) begins to make the transition from regional commuter to low cost airlines there are a lot of different aspects of the industry which they needed to look at before the final decision could be made. The first and made the most important was factor they needed to examen was what type of industry there where going to be competing in and what there competition was going to be. The airline industry today is what is know as an oligopoly which is a market structure dominated by a small number of large firms, selling identical or similar products, and there are significant barriers to entry into the industry. ACA knows the risks that it faces in making this decision, but they feel confident that there new Dulles International Airport based airlines will be successful as a low cost air carrier.
There where several barriers to entry which made it difficult for ACA to get to this point, but they have proved through market research and financial forecasting that they have what it takes to succeed. The main barrier to entry was the shear cost of this type of venture, starting an airline is a very expensive business proposition. After studying ACA’s past financial report it show that they have been able to make a profit for the last five years as regional carrier and plan do continue to do so as a low cost carrier. The cost part of the transition was made even easier due in part to there large cash reserve, and the fact they already have a lot of the assets they need in place to make the conversion, such as facilities, equipment, employees. Another barrier ACA faced when trying to form this new airlines was there regional air carrier contract with United airlines. As of earlier this year when United Airlines filed for bankruptcy they contract was considered null and void due to stipulation in the contract. This open the way for ACA to go ahead with there plans.
Several other barrier to entry existed while ACA pl...