Marketing Environment AIRLINE MARKETING Chapter 3 & 4 Marketing Environment Airline Business Marketing Strategies AshariAbuHasan

Aviation Management College MARKETING ENVIRONMENT AIRLINE MARKETING Aviation Management College MARKETING ENVIRONMENT The PESTE Analysis

Aviation Management College AIRLINE MARKETING Aviation Management College MARKETING ENVIRONMENT The PESTE Analysis Political Economic Social Technological Environmental Legal

Aviation Management College AIRLINE MARKETING Aviation Management College MARKETING ENVIRONMENT The PESTE Analysis Political Factors - Fear of Terrorism eg., Sept 11 2001 - Political Instability eg., Thailand,

Aviation Management College AIRLINE MARKETING Aviation Management College MARKETING ENVIRONMENT The PESTE Analysis Political Factors - Deregulation; government policies, etc - Privatisation; national, local airlines

Aviation Management College MARKETING ENVIRONMENT AIRLINE MARKETING Aviation Management College MARKETING ENVIRONMENT The PESTE Analysis Economic Factors - grow with the economy - over invest during good times - not able to control cost during bad times eg., salary, etc

Aviation Management College AIRLINE MARKETING Aviation Management College MARKETING ENVIRONMENT The PESTE Analysis Social Factors - Ageing population; n America, Europe - Changing family structure: small family, single parent,

Aviation Management College AIRLINE MARKETING Aviation Management College MARKETING ENVIRONMENT The PESTE Analysis Social Factors - Fashion & taste in holidays; hobbies, adventure, etc - Female business traveler

Aviation Management College AIRLINE MARKETING MARKETING ENVIRONMENT 1. The PESTE Analysis Technological Factors - Video conferencing; a threat - Internet; a challenge - Surface transport investment; competitor Aviation Management College

Aviation Management College AIRLINE MARKETING MARKETING ENVIRONMENT The PESTE Analysis Environmental - Global warming; temperature & cost - Shortage of infrastructure; Atmospheric & noise pollution - Tourism saturation; limited or over exploitation Aviation Management College

Aviation Management College AIRLINE MARKETING Aviation Management College

Aviation Management College AIRLINE MARKETING Airline Business & Marketing Strategies Aviation Management College Porter’s 5 Factors of Strategic Issues Cost Leadership Strategy Differentiation strategy Focus Strategies Common Mistakes

Aviation Management College Porter’s 5 Forces of Strategic Issues Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College Porter’s 5 Forces of Strategic Issues According 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..

Aviation Management College Porter’s 5 Forces of Strategic Issues Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College Porter’s 5 Forces of Strategic Issues According to Porter, the strategic issues are coloured by the interplay of the 5 forces 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 -

Aviation Management College Porter’s 5 Forces of Strategic Issues Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College Porter’s 5 Forces of Strategic Issues According to Porter, the strategic issues are coloured by the interplay of the 5 forces 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,

Aviation Management College Porter’s 5 Forces of Strategic Issues Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College Porter’s 5 Forces of Strategic Issues According to Porter, the strategic issues are coloured by the interplay of the 5 forces 1.6 “Disintermediation” - the removal of intermediaries in a supply chain: - "cutting out the middleman". - GDS companies vs. using internet bookings - Forwarders own freighter

Aviation Management College Porter’s 5 Forces of Strategic Issues Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College Porter’s 5 Forces of Strategic Issues According to Porter, the strategic issues are coloured by the interplay of the 5 forces 1.5 Power of Suppliers - airline dependent on monopoly supplier - manufacturers, ATC, airport services - GDS/CRS - 80%-90% travel bookings

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Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 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

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 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

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College COST LEADERSHIP in the AIRLINE INDUSTRY Background 1973 Southwest Airline, USA 1990 Ryanair & Easyjet, Europe Air Asia & Firefly

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College COST LEADERSHIP in the AIRLINE INDUSTRY Reasons For Growth Regulatory Liberalization – opportunity for entrepreneur Internet – a speedy & cost-effective channel Increase in independent business traveler Corporate purchase, price sensitive Travel agent, for value-for-money package

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College COST LEADERSHIP in the AIRLINE INDUSTRY Fundamentals of Business Policy Simplicity - using computers for business communication & transaction Integrated services – shipment, packages Growing Express Market – small, urgent, fast

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College COST LEADERSHIP in the AIRLINE INDUSTRY Success Factors Low Fleet Cost - Common fleet; A320, B737 Low Landing Fees - remote, unused, underutilized airport Short Turnarounds/High Aircraft Utilization - 20/25mins vs. 50mins, no aerobridges, rush in.. Limited Cabin Service - F&B act as revenue

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College COST LEADERSHIP in the AIRLINE INDUSTRY Success Factors 5. Point-to-Point - own transfers & connection Simple Fares – one fares vs. many on same route Low Distribution Cost – eliminate agents Non-refundable Tickets -

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College Differentiation strategy Pricing; domestic, regional & inter Service; full, half or non Product; package, frills, convenience Place; airport location, reservation counters, internet

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 4. Focus Strategies - Concentrate on one activity only Become expert in the business, Able to withstand challenges

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 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

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 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

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 5. Common Mistakes Objectives - state own airlines Service vs. profit Ego-drive (publicity vs. profit) - international flights, global HQ/offices Government interference, not paying bills

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 5. Common Mistakes 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

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 5. Common Mistakes 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

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 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

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 5. Common Mistakes - cont d) Control Excessive spending Expensive cars & prestigious offices Funding lifestyle of Directors & Sen. Managers

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 5. Common Mistakes – 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

Aviation Management College Airline Business & Marketing Strategies AIRLINE MARKETING Aviation Management College 5. Common Mistakes 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.

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