Continental Airlines
Customer Analysis
Chris Dwyer, Meghan Murphy, Kassonga Mwamba
Overview
• Industry Trends
• Product Markets
• Domestic vs. International
• Types of Passengers
• Market Opportunities/Strategies
• Potential Problems
• Future
Trends ~ Airline Industry
• Rapid Growth in International Demand
• Steady Growth in Domestic Demand
• Increased On-Line Distribution
• Decrease in Airline Capacity (due to bankruptcy)
• Increase Price per Flight
• Continued Pressure from LCCs in Domestic Market
• Alliance Agreements
2
Positive Growth
• Continued Growth for 32 of the past 35
years
– 1991 ~ Desert Storm
– 2001-2002 ~ 9/11 Terrorist Attacks
• Continued Economic
Growth
• Continued Increase in
World Trade
Boeing · Current Market Outlook · 2005 · Demand for Air Travel
See Source 2
Product Markets
• Domestic
–
–
–
–
–
Point to Point Routes
Short-Haul Flights
Highly Price Sensitive customer segment
Increased Competition From LCCs
Lower RASM
• International
–
–
–
–
–
Network-Hub Routes
Long-Haul Flights
Less Price Sensitive Customer Segment
Less Industry Competition
Higher RASM
Domestic vs. International
•
2004 International Growth
Increased 13.9% vs. Domestic
12
Growth 4.8%
•
“Majors” Shifting to More
Profitable International Segments
•
Typically Less Competition for
International Travel
Revenue Percentage by Segment (Int'l)
41%
38%
35%
32%
29%
26%
23%
20%
17%
14%
American Airlines
Continental Airlines
United Airlines
Delta Airlines
Northwest Airlines
2001
2002
2003
2004
2005
Revenue Percentage by Segment (Domestic)
•
•
Growing Demand in Latin
American, Atlantic, & Pacific
Segments
International Yields Higher RPSM
86%
82%
78%
74%
70%
66%
62%
58%
54%
50%
American Airlines
Continental Airlines
United Airlines
Delta Airlines
Northwest Airlines
2001
2002
2003
2004
2005
Data taken from 05’-02’ 10K reports: See Sources #1,5,6,10,14
See Source 12
Types of Passengers
• Leisure Traveler
Preferences
- Lower Price
- Willing to Sacrifice Service
- Limited Route Needs
• Business Traveler
34% of Domestic Revenue in 2000 (Only 10% of Capacity)
Preferences
- Price Sensitivity Driven by Economic Conditions
- Higher Class of Service
- Seeing Shift Towards LCCs
See Source 11
11
Frequent Flyer (FF) ~ Demographics
3
A person that takes AT LEAST 4 flights per year (17 Million Americans)
•
Average FF takes 9 flights per year
•
Only 18% of Total Airline Travelers BUT Account for 58% of
ALL Flights Taken
•
68% of FF have College or Graduate Degree
•
75% are Employed Full or Part-time
•
Majority are Male ~ Accounting for 58% of all FF
– 61 % of those are between the ages of 25-54 years of age
See Source 3
Frequent Flyer Programs
• American Airlines
– AAdvantage Miles
• Continental Airlines
– OnePass
• United Airlines
– Mileage Plus
• Southwest Airlines
– Rapid Rewards
Market Opportunities
• International Segments
– Pacific/Asia
– Latin America
– Atlantic/Europe
• Frequent Flyer Programs
– Travel Industry Alliances
– Miles Auctions
• Higher Level of Service
– Concierge
International Opportunities
• Continental Has More International Exposure than any
13
of the Other “Majors”
• Current Hub and Spoke System Ideal for International
Expansion
– Houston – Latin America
– Newark ~ Serving Richest DMA in the U.S. – Europe and
Asia/Pacific
• Purchasing Power Growth of U.S. Hispanic and Latin
American Market Segment
• International Revenues Grew 29% in 2005
See Source 13
13
International Strategies
• Continental Plans to Expand International
Routes by 15% Over the Next Several Years ~
vs 2-4% Expansion in Domestic Market13
• European Routes to Lower-Traffic European
Airports8
• Chinese Routes to Beijing and Hong Kong
Serving Economically Expanding China
Market
• Launch of Spanish-Language Web Site
See Source 13
See Source 8
FF Opportunities
11
• Frequent Flyers Make Up Significantly Large
Portion of Flight Segments
• Show High Level of Brand Loyalty
• Focus on Online Booking
See Source 11
FF Strategies
• Forming Alliances with Other Airlines
• Increase Route Availability
• Allow Usage of FF Miles in Network
• Decreases Need for FF to Go Outside Network
• Enhance Web Site Booking System for FF
• Checking Points/Miles Status
• Booking Capabilities
• Miles Auctions
Service Opportunities
• Differentiation with High Service Levels
• Adding Service When Other Airlines Cutting
Service Costs
• U.S. Economic Growth Trends Promising for
Increased Service Requirements for Business
Travelers
– Segmentation of “Top-Tier” passengers
Service Strategies
• Additional Focus on “Top-Tier” Customers
and Business Travelers
• Enhancing In-Flight Reports for Flight
Attendants4
• Corporate Hosting of Discussion Groups for
Frequent Travelers
- Gathering Complaints and Suggestions for Improved
Service11
See Source 4
See Source 11
Potential Problems
• Increased Globalization
• Liberalization of International Regulation
• Domestic LCCs
• Potential Terrorists Attacks
Future Strategy
• Enhance/Expand Transcontinental Routes
• Continued Customer Service Focus
• Strengthen Alliances for Customer
Convenience
• Focus on Top Revenue Producing Segments
References
1.
American Airlines, February 24, 2006. 2005 Annual Report. [on-line]
http://www.shareholder.com/aa/edgar.cfm?DocType=Annual&SECYear=All ~ citg April 2,
2006.1
2.
Boeing, 2005. Current Market Outlook 2005. [on-line]
http://www.boeing.com/commercial/cmo/pdf/cmo2005_OutlookReport.pdf ~ citg April 2,
2006.
3.
Bouvard, Pierre and Williams, Diane. August 2005. The Arbitron Airport Advertising
Study. [on-line] http://www.arbitron.com/downloads/Arbitron_Airport_Study.pdf ~ citg
March 21, 2006.
4.
CIO Magazine, February 15, 2004. Getting To Know Them. [on-line]
http://www.cio.com/archive/021504/customers.html ~ citg April 3, 2006.
5.
Continental Airlines, February 24, 2006. 2005 Annual Report. [on-line]
http://www.continental.com/company/investor/reports.asp ~ citg April 2, 2006.2
6.
Delta Airlines, March 27, 2006. 2005 Annual Report. [on-line]
http://investor.delta.com/edgar.cfm ~ citg April 2, 2006.3
1. Same site used for 2003 Annual Report
2. Same site used for 2003 Annual Report
3. Same site used for 2003 Annual Report
References
7.
Donofrio, Susan. Cathay Financial, January 27, 2006. Continental Airlines: Initialing with
Outperform Due to Low Costs & Strong International Presence.
8.
Keeton, Ann of Dow Jones Newswires. March 31, 2006. US Airlines Seek Revenue From
More International Flights. [on-line] MorningStar.com.
9.
Lindsay, Greg. “Airworld Part 7: The ‘Demon Customers’: Inside the “FlyerTalk”
Community.” Ad Age Magazine, September 20, 2005.
10. Northwest Airlines, March 16, 2006. 2005 Annual Report. [on-line]
http://ir.nwa.com/phoenix.zhtml?c=111021&p=irol-sec ~ citg April 2, 2006.4
11. Standard & Poor’s Industry Survey’s: Airlines, March 28, 2002. Cited from The Center for
Hospitality Research at Cornell University case study. Can Continental Airlines Continue to
Work Hard, Fly Right & Fund the Future.
12. Standard & Poor’s Industry Survey’s: Airlines, May 19, 2005.
13. Standard & Poor’s Stock Report, April 1, 2006. Continental Airlines. The McGraw-Hill
Companies.
14. United Arilines, March 31, 2006. 2005 Annual Report. [on-line]
http://ir.united.com/phoenix.zhtml?c=83680&p=irol-sec ~ citg April 2, 2006.5
4.
Same site used for 2002 Annual Report
5.
Same site used for 2003 Annual Report