1 Marketing Environment Airline Business Marketing Strategies Chapter 3 & 4.

Marketing Environment

Airline Business Marketing Strategies

Chapter 3 & 4

Aviation Management College

AIRLINE MARKETING

MARKETING ENVIRONMENT

1.The PESTE Analysis

AIRLINE MARKETING

-Political-Economic-Social -Technological-Environmental-Legal

AIRLINE MARKETING

a)Political Factors- Fear of Terrorism eg., Sept 11 2001- Political Instability eg., Thailand,

AIRLINE MARKETING

a)Political Factors- Deregulation; government

policies, etc- Privatisation; national, local

airlines

AIRLINE MARKETING

b)Economic Factors- grow with the economy- over invest during good

times- not able to control cost

duringbad times eg., salary, etc

AIRLINE MARKETING

c)Social Factors- Ageing population; n America,

Europe- Changing family structure:

small family, single parent,

AIRLINE MARKETING

1.The PESTE Analysisc)Social Factors

- Fashion & taste in holidays; hobbies, adventure, etc

- Female business traveler

AIRLINE MARKETING

1. The PESTE Analysis

d)Technological Factors- Video conferencing; a threat- Internet; a challenge- Surface transport investment; competitor

AIRLINE MARKETING

e)Environmental- Global warming; temperature &

cost- Shortage of infrastructure;

Atmospheric & noise pollution- Tourism saturation; limited or

over exploitation

AIRLINE MARKETING

Airline Business &

Marketing Strategies

1. Porter’s 5 Factors of Strategic Issues2. Cost Leadership Strategy3. Differentiation strategy4. Focus Strategies5. Common Mistakes

AIRLINE MARKETINGAirline Business & Marketing Strategies

1. Porter’s 5 Forces of Strategic IssuesAccording to Porter, the strategic issues are coloured by

the interplay of the 5 forces

1.1 Rivalry amongst Existing Firms- competition between old/existing airline in pricing, product, services and can be a head-to-head competition- similar aircraft, seating configuration, frequency & ticket

1.2 Substitution- new & better ways in meeting customer needs- electronic communication (video conferencing)-improvement in surface transport, comfy, efficient, fast..

1.3 New Entry - protected by due long learning curve- mostly in short-haul & domestic sector- barrier: resource (human, equipment, experience)- must be ready for challenges from new entrants-

1.4 Power of customers- bargaining power of Business Travelers- structure of travel agency industry- price-sensitive leisure travelers; bucket seat/consolidators- internet as airline communication channel- tour operators grew bigger; have their own charter- Integrated Carriers ; customers demand for additional

services,

1.6 “Disintermediation” - the removal of intermediaries in a supply chain: - "cutting out the middleman".- GDS companies vs. using internet bookings- Forwarders own freighter

1.5 Power of Suppliers - airline dependent on monopoly supplier- manufacturers, ATC, airport services- GDS/CRS- 80%-90% travel bookings

2. Cost Leadership Strategy

- Able to achieve and able to sustain, - lower operating cost than rivals- knowing what customers willing to give up;

comfy- what customers not willing to give up; poor

schedules

2. Cost Leadership Strategy – Business Model

- Simplicity; no ticket or small office- Technology; minimise operating cost- Door to Door; service on return journey- New market; express market (small parcels)

big customers

COST LEADERSHIP in the AIRLINE INDUSTRY

Background

1. 1973 Southwest Airline, USA2. 1990 Ryanair & Easyjet, Europe3. Air Asia & Firefly

Reasons For Growth

1.Regulatory Liberalization – opportunity for entrepreneur2.Internet – a speedy & cost-effective channel3.Increase in independent business traveler4.Corporate purchase, price sensitive5.Travel agent, for value-for-money package

Fundamentals of Business Policy

1.Simplicity - using computers for business communication & transaction2.Integrated services – shipment, packages3.Growing Express Market – small, urgent, fast

Success Factors

1.Low Fleet Cost - Common fleet; A320, B7372.Low Landing Fees - remote, unused, underutilized airport3.Short Turnarounds/High Aircraft Utilization - 20/25mins vs. 50mins, no aerobridges, rush in..4.Limited Cabin Service - F&B act as revenue

Success Factors

5. Point-to-Point - own transfers & connection 6.Simple Fares – one fares vs. many on same route7.Low Distribution Cost – eliminate agents8.Non-refundable Tickets -

3. Differentiation strategy

- Pricing; domestic, regional & inter- Service; full, half or non- Product; package, frills, convenience- Place; airport location, reservation

counters, internet

4. Focus Strategies

- Concentrate on one activity only- Become expert in the business, - Able to withstand challenges

DIFFERENTIATION in the AIRLINE INDUSTRY

- Via innovation, brand building- Emirates & Singapore Airlines- Cabin comfort- In-flight service- In-flight entertainment- Transfer desk; baggage, check-in, transport- FFP

FOCUS STRATEGIES in the AIRLINE INDUSTRY

a) Value Added Focusing- Integrated carriers – next-day delivery-Servicing the niche market – status, exclusive business traveler

b) Low –Cost Focusing-Charter- Inclusive tour-

5. Common Mistakes

a)Objectives - state own airlines

-Service vs. profit-Ego-drive (publicity vs. profit) - international flights, global HQ/offices-Government interference, not paying bills

5. Common Mistakes

b)Over-diversification

-Into travel related; car rental, hotel (one-stop shop)-Cyclical problem - no pox, no guest, no customer-Broad network, fewer aircraft - low frequency, lack reliability, room for competitors

5. Common Mistakes

c)Competitive Response

•Successful airlines - manage their competitive strategies well•Problem for new & small airlines•Small airlines start by giving problem to larger airlines•Larger airline responded with aggressive campaigns•Making life difficult for smaller airlines

5. Common Mistakes

c) Competitive Response - cont

•Local policy protecting the smaller airlines •Manufacturer support on price and terms•Financial support and assistance•They grew bigger and becoming a threat to bigger airlines •Since 1978 more than 90& fails

5. Common Mistakes - cont

d) Control

•Excessive spending•Expensive cars & prestigious offices•Funding lifestyle of Directors & Sen. Managers

5. Common Mistakes –

g)Over-optimism/Fall Back position

•Aviation industry a roller-coaster ride•Recessions, wars, terrorism, epidemics, political, uncontrollable cost (fuel), etc•All can come at the same time as experienced

5. Common Mistakes

g)Over-optimism/Fall Back position-cont

Fall-back -Short-term measure,

•Lease instead of buying•Re-negotiate contracts•Consolidate routes•Consolidate services

• 19 Airline Marketing• The trend among the airlines now are going

towards selling their tickets through the Internet (on line). Explain the advantages and disadvantages of this new concept as compared to the traditional methodology.

Aviation Management College Airline Business

& Marketing Strategies

Aviation Management College Airline Business

& Marketing Strategies

1 Marketing Environment Airline Business Marketing Strategies Chapter 3 & 4.

family structure

new entry

cost duringbad times

small family

substitution new better

power of customers

good times

existing firms competition

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