The article „The Five Competitive Forces that Shape Strategy“ by Michael Porter from 2008 investigates further his established five drivers of profitability, speaks about the importance of other factors, and the implications of these for a company’s strategy.
At several instances Porter thereby applies the airline industry as an example for a very competitive industry. Out of my experience with the European market and considering the development within these eight years since when the article has been written, I believe the US airline industry to considerably have been shaped towards a less competitive and more airline-friendly industry.
If we take a look at the first force, the Threat of Entry, I believe that one has to distinguish between small- and mid-sized airports and large domestic and international airport hubs. Porter is right in pointing out that by means of leases, capital requirements are not huge for a new entrant airline. However, the landing rights to the airport hubs often have long waiting times and therefore considerable value: Once American Airlines took over US Airways, for regulatory reasons it had to sell landing rights for the Ronald Reagan Airport and the LaGuardia Airport and it received roughly $400m for them. Thus, I believe that there exist considerable entry barriers for entrants that want to use these hubs.
The Power of Suppliers also have positively changed for the airlines in my opinion. Pilots and employees are still organized in unions but nowadays airlines are likely to have a much better influence on kerosene prices with the current oil glut. And as Porter points out, there is an intense fight between Airbus and Boeing, which together with the other two continental plane producers Embraer and Bombardier will limit their position.
The Power of Buyers is of course given in the case of almost no switching costs. However, there are few substitutes available. There is no broad fast train network as in Europe, which allows for journeys that often need only two thirds of the time a car needs. This might limit buyer’s influence in oligopolistic situations.
The Threat of Substitutes is in my mind much smaller in the US than in Europe: With no meaningful fast train network in the US, substitutes mostly stem from car driving, which is mostly much slower and does not allow road warriors to work along the way, or from video conferences that lack the personal contact.
I see the biggest changes in the Rivalry among existing competitors. In 2010 the Delta – Northwest Airline integration was complete, in 2012 United Airlines finished its integration of Continental Airlines, and in 2013 American Airlines and US Airways completed their merger. For the big hubs that Southwest does not serve this has led to an oligopoly, which from my experience often lead to identical prices for all three airlines and 90-minutes inner-US flights being almost as expensive as 8-hours transatlantic flights. In September 2015 even the US Justice Department felt compelled to investigate whether fare collusion exists.
So, I believe that for these US hub-serving airlines competitive forces have shaped very positively since Porter wrote his article.
Wikipedia regarding US Airways, Delta, and American Airlines