Empty Seat Budget
PREPARED ESPECIALLY FOR:
Recent Headlines
“MARKETS IN TURMOIL”
“AIRLINES CUT ROUTES, WORKERS LAID-OFF”
“ U . S . TO TA K E O V E R A I G ”
“LEHMAN FILES FOR BANKRUPTCY , MERRILL
SOLD”
“ A I R L I N E F E E S H E R E TO S TAY ”
Insights from Past Downturns…
Don’t Touch that Ad Budget
 The Impact of heavy Ad spend cuts on Premium
brand share
 “The clear findings was that those with the highest ad spend at the begining of
any period were most likely to increase their share during the period.”
 A study of the three economic downturns over the past 30 years shows that
those brands who maintained advertising continually performed better than
those who cut ad spend in terms of market share.
 2002 ARF Study
Don’t touch that Ad Budget
 Advertising in a down economy clearly creates a competitive advantage.
 - It relays a more positive message about the company’s commitment to its products and services.
 - More importantly, it also keeps those companies top-of-mind when purchase decisions are made.
 Profit Impact of Marketing Strategy (PIMS)
 Profits of companies were higher both during and following recessionary periods.


- Research based on 1,000 global companies from 1973 – 1999
- 2 years before and 2 years after recession
Recession Study
Jif Peanut Butter and Kraft Salad Dressing increased their advertising and experienced
sales growth of 57% and 70% respectively
Coors light and Bud Light increased advertising and saw sales jump 15% and 16%
respectively. Miller cut budgets and saw a 4% drop.
Among fast food chains, Pizza Hut sales rose 61% and Taco Bell’s 40% thanks to strong
advertising support, reducing McDonald’s sales by some 28% as they slowed advertising.
MarketSense concluded the study: “The best strategy for coping with a recession is
balanced exploitation of ad spending for long-term consumer motivation, plus promotion for
short term sales boost.”
 McGraw Hill Research’s Laboratory of Advertising Performance analyzed the
performance of 600+ firms: those firms which maintained or increased their
advertising expenditures “averaged significantly higher sales growth” during and for
the three years following the recession compared to those which eliminated or
decreased advertising.

McGraw Hill Laboratory of Advertising Performance 1985
 American Business Media Study: “Sales and profits can be maintained and
increased in recession years and (in the years) immediately following by those who
are willing to maintain an aggressive marketing posture, while others adopt the
philosophy of cutting back on promotional efforts when sales appear to be harder to
get.”

American Business Media 1974 - 1975
Advertising studies Pre-Recession & Post Recession
 Buchen Advertising Inc. tracked a ‘large number’ of business to business
companies: sales and profits dropped off, “almost without exception”, at companies
which cut back on advertising. Post recession, those companies continued to “lag
behind” companies which maintained their advertising budgets.

Buchen Advertising Inc. 1949, 54’, 58’ , 61’
 Harvard Business Review report of 200 companies: largest sales increases reported
by companies that advertised the most during the recessionary year.

Harvard Business Review 1923
 Ad Cutbacks Backfired for Bankruptcy Victims
Mervyn’s, Bennigan’s, Sharper Image all cut ad budgets deep!
 New York Aug 2008 - In the really tough times, It’s almost
instinctual for a company to dial back on marketing, but there’s a
growing body of evidence… and bankruptcy filings… to suggest that
cutting ad dollars can be the ultimate false economy.
 Advertising levels 12 months prior to bankruptcy
 -25%
 -75%
 -82%
Airlines are stinging

Passenger Load Factors:
“Load factors tell the story. They fell in the four largest carrier regions showing the
growing impact of the US economic slowdown on the airline industry,” said Bisignani.
European PLF recorded the largest single drop of 1.6 percentage points to 71.7%. Asian
carriers saw their PLF fall by 0.1 percentage points to 75.2% while North American
airlines experienced a 0.5 percentage point drop to 74.0%. The Middle East saw a 0.9
percentage point fall to 72.6%, balanced against a 20.3% growth in passenger traffic
supported by the oil business. This is strong growth even taking into consideration the
leap year impact.
The exceptions were Africa, where a contraction in supply boosted the PLF by 2.1
percentage points to 67.4% and Latin America where strong economic growth and travel
demand boosted load factors by 0.9 percentage points to 73.0%.
Giovanni Bisignani is the Director General of the
International Air Transport Association.
IATA.org March 31, 2008
Conclusion…
 We all can agree on the facts:

U.S. economy is, at best, unstable. Consumers are changing spending
habits.

Passenger Load Factors are down… and so are the number of airlines.

Fuel remains costly and is prohibitive to growth.

The opportunity to grab additional market share with maintained or
increased advertising is NOW!

When times are good, you should advertise. When times are bad, you
must advertise.
But there’s nothing left for an ad budget!
conserve your cash…

Reserves must be kept to meet obligations:
Payroll / Pensions
 Maintenance
 Lease payments
 Infrastructure
 Taxes
 Security
 Fuel

Create a media budget using empty seats.
 Every time a flight departs with an empty seat, an asset withers
on the vine, and is written off as a loss to the company.
 The expense to fly a plane from point A to point B will remain
relatively the same regardless of what the passenger load factor
is.
 When adding higher-class fares such as First or Business, the
case for leveraging an empty seat makes even more sense. The
average ticket cost increases and in turn the trade value
increases. When utilizing all service classes, it is easy to see how
an ad budget is created with just a handful of seats per week.
Calculating your budget
Imagine creating a budget using just 2 seats each flight…
Class of
Service
Average
Fare
Seats Per
Flight
Flights
per day
Business
$5,000
2
5
Flights Per Flights
Month
Per year
150
18,000
Ad budget created per month
Ad budget created per year
$5,000 x 2 x 150 = $1,500,000.00
1,500,000 x 12 = $18,000,000.00
$18,000,000.00
Annual Advertising Budget!
Calculating your budget
 In this example we are using just a fraction of the
average load factor of roughly 75%. Load factors on
flights serving new destinations tend to be even
higher initally.
* With the consolidation of airlines and the reduction of daily
flights, Load Factors have risen substantially, however this
illustrates how even a few empty seats can afford a healthy
media budget.
It’s your airline, stay in control
 It’s not all or nothing, start with 1% or 2% of your budget and monitor the success.
 We work with all media vendors and in all markets serving the U.S. and the U.K.
 We make sure that reporting is ARC compliant and you receive a weekly accounting report as
well as a master control report.
 We ensure that Reservations, inventory management, fulfillment and revenue accounting can be
handled professionally in-house
 We can provide stronger service when working with you directly, however, we can work with
you're agency.
 Lastly, we provide the best media at the best price. If you receive product that is outside
perimeters you set, it is a waste of your time and valuable budget.
Thank You!
Rob Fogarty, Director of Sales
21198 Beavercreek Rd. Bldg. B
Oregon City, OR 97045
800-858-8973