PESTEL Analysis of External factors: Navigating Political, Economic, and Environmental Factors to Guide organizational success

1. Macro-Environment Analysis

To conduct macro environment analysis, PESTEL analysis is recommended by past studies, especially in terms of the airline industry (Jakobsen, & Laugesen, 2023). So, now PESTEL analysis is used to analyze the whole Australian Airline industry, focusing on the following factors:

Political Factors

The aviation industry is influenced by government policies, tax policies, trade agreements, and international relations (Jakobsen, & Laugesen, 2023; Rhoades, 2016). Like any industry, the airline industry is affected by the unstable conditions of the nation. Australia is a stable and peaceful democratic country, with stable political conditions. However, unstable political situations in other countries can impact airline routes and operations (LEK, 2023).

Economic Factors

The airline industry is highly impacted by economic conditions and economic indexes (Hanson et al., 2022). Another study confirmed that there is a causal link between airline services and economic growth (Baker et al., 2015).  The Australian economy is a highly developed country and is known to be the 13^th largest nation, in terms of economy and nominal GDP.

Australia's economic performance directly impacts the airline industry. Australian GDP, population, and growth rate of regional, domestic, and outbound international passenger movements have an impact on the Australian aviation industry (LEK, 2023). It also affects the consumer demand for air travel. Also, economic parameters of population and employment rates directly affect flight demand in Australia (Mohammadian et al., 2019).

Social Factors

According to (Sun et al., 2024), emotional responses, and social influences of individuals have a significant impact on brand reputation, airline choice, and word-of-mouth recommendations (based on rational choice theory). Customers are inclined to pay more for airlines with better images and service quality (Sun et al., 2024).  Customer preferences, lifestyles, social needs, and choices (low-cost or premium airline type) directly impact the airline business (Krairat, & Lertkulprayad, 2019).

Based on an Australian aviation report, stakeholders including customers, suppliers, investors, and international parties have a direct impact on the Australian industry. Where, customers use their purchasing power to control the airline prices and alter their policies (LEK, 2023).

Technology Factors

Technological advancements are a continuous requirement in the aviation industry. For example, new technological demands such as automated security gates and aircraft technology have required Australia to make many infrastructure and technological improvements in its airports and different aircraft (LEK, 2023), which has direct impact on the technological upgradation of different airline companies operating in this sector.

Environmental Factors

Many stakeholders are sensitive to environmental concerns related to the airline and aviation industry. The environmental concerns of travelers have directly impacted travel demands and have affected domestic and international passenger movements (LEK, 2023). The airline industry faces significant pressure to reduce its environmental impact, particularly its carbon emissions. Beyond the aviation industry, international organizations such as the International Civil Aviation Organization (ICAO) and various countries' laws, regulations, and policies are implemented to reduce aircraft greenhouse gas emissions. Hence, airline companies make ongoing efforts to manage environmental efficiency and meet local and international benchmarks (Kim & Son, 2021). Similarly, Australia is strict and sensitive to environmental issues, which has led to stricter environmental regulations (Australian Government, n.d.).

Legal factors

The Australian airline industry is also governed by a variety of laws, such as domestic aviation laws, international agreements, and labour regulations, safety standards, environmental regulations, and competition laws. The competition in the Australian aviation industry is regulated by the Australian Competition and Consumer Commission (ACCC) (Contact, 2024). The Australian airline industry is subject to strict regulations enforced by the Civil Aviation Safety Authority (CASA), which regulates safety, aircraft and pilot licenses, and operational standards, etc. (Australian Government, n.d.).