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Capacity is augmented in large increments which give increased incentive to win plane orders. Because of high switching costs for buyers, there is increased incentive to be the preferred supplier.
Entry – Low threat to long run profits
The high fixed costs (FC) and a long development period (5 yrs) create large barriers to entry. The FCs provide an incentive to sell at nearly any price with a positive contribution margin, making the entire industry less profitable. Airlines have a high cost of switching suppliers because the total cost of ownership (TCO) rises with multiple planes in a fleet (pilot/mechanic training, increased spares, maintenance, etc...
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