1. MARKETING THE INDUSTRY SEGMENTS
4.05 Explain the air transportation industry.

2. Airline Deregulation Act of 1978
Prior to 1978, the Civil Aeronautics Board was responsible for air fares, routes, and schedules.
In 1978, responsibility for airline travel was transferred to the FAA and the DOT.
The Deregulation Act allowed for free-market competition. Airlines could then adjust their fare structure and rates.
Deregulation forced noncompetitive airlines out of the market and increased demand for regional carriers as full-service carriers moved to hub and spoke systems. More discount fares also became available.

3. Air Carriers Full service/mega carriers Regional carriers
Supplemental carriers

4. Full service/mega carriers
Fly both domestic and international routes
Provide full service to customers

5. Regional carriers: Airlines that fly scheduled flights from smaller cities into larger cities
Lower priced
Smaller aircraft
Shorter routes

6. Supplemental carriers: Planes hired by an individual or company to fly nonscheduled flights for a specific purpose; fly to locations where scheduled flights do not

7. Classes of Service Aboard Flights
First class
Business class
Coach class

8. First Class Highest rate ticket
Located at front of plane
Wider, more comfortable seats
Extra leg room between rows
Special electronic entertainment centers on new planes
Reclining seats on international carriers
First to board and first to exit
Multiple course meals served on china
Free movies and beverages

9. Business Class A step down from first class in rate and service
More seat/leg room than coach, but not as luxurious as first class
Free beverages
Larger total area than first class

10. Coach Class Most economical ticket
Usually located in the rear of the plane
Narrow seats located closer together
Limited overhead storage space
Basic flight attendant service
Food service limited to beverages and snacks
Only level of service available on many smaller aircraft

11. Types of Flights
Nonstop: A flight from the origin to the destination with no stops
Direct: A flight from the origin to the destination with one or more stops; passengers usually do not change planes
Connecting: Flights from the origin to the destination with one or more stops and passengers have to change planes

12. Yield: The amount of profit generated per seat per mile on an airplane
Yield management: The course of action an airline takes to meet a break-even point and earn a profit
Airline product is perishable.
If space on a flight is not sold prior to take-off, that revenue is lost forever.
Fares are structured to sell as many seats as possible and create a profit for the company.
Yield: The amount of profit generated per seat per mile on an airplane
*Total passenger revenue/Total number of passenger miles flown

13. Discount fares
Airlines restrict the number of seats that are discounted.
Fares may not be refundable.
No changes are allowed.
Some require a minimum stay at the destination.
Blackout periods are times when a discounted fare is not available (peak periods and holidays).
Some discounts are based on demographic segmentation.

14. Air Travel Patterns
Hub and spoke system
Slots
Spokes

15. Hub and spoke system
Air space is restricted and carriers are not permitted to fly wherever they wish.
Airlines concentrate their ventures at airports near or in major cities.
Air carriers have maintenance repair facilities and administrative facilities located at their hub.
Delta’s hub is Atlanta; United Airline’s hub is Chicago.

16. Slots: Spaces leased at an airport by a carrier so they can conduct business there
Carriers can lose slots if they do not use them enough.
Periodically, new slots and vacated slots are assigned to carriers through a lottery system.
Carriers hold many slots at their hubs.
Many top airports are primarily served by the single carrier that dominates the slots at their hub.

17. Spokes: Flights from smaller cities that fly into the hub to help passengers make connections
Regional carriers are responsible for many of the spokes in this system.
Regional carriers make frequent trips in and out of smaller centers to the hubs which are unprofitable for mega carriers.
Problems can occur when flights are delayed from the smaller airports and passengers do not arrive at the hub in a timely manner.
Inclement weather, lost or delayed luggage, missed connections, or long waits between flights are all problems that can occur.

18. Frequent Flyer Programs
Established by airlines to reward passengers for the number of miles they fly and to encourage brand loyalty
Once customer is enrolled in program, a computer tracks the number of flight miles.
Accumulated miles can be traded for upgrades or free flights.
Restrictions, including blackout dates and controls on the number of upgrades on each flight, apply to the redemption of miles.
Expiration dates may also apply to the accumulated mileage.

19. Airline Executive Club
Passengers may join for a fee.
Airlines lease club space at the airport, and only members are allowed to use the facilities and services.
Amenities vary, but may include:
Meeting room space
Free newspapers
Check-in service for passengers without baggage
Video screens to check flight status
Beverage service
*American Airlines Admiral’s Club, Delta’s Crown Club
Air Canada’s Mapleleaf Lounge

20. Ticketing procedures
Paper ticket
Airport counters
Travel agencies
Ticket offices

21. Ticketing procedures (cont.)
E-ticket or electronic ticket: An electronically generated airline ticket representing permission to fly without the use of a paper ticket. Passengers confirm their reservations with a credit card and receive a confirmation number rather than a paper ticket.
Internet
Over the phone
Ticketing machines

22. Marketing strategies used in the airline industry
Frequent Flyer Programs
Internet
Print advertising
Publicity