Chapter 3 & 4
Marketing
Environment
Airline Business
Marketing Strategies
17
AIRLINE MARKETING
Aviation Management
College
MARKETING ENVIRONMENT
1.The PESTE Analysis
AIRLINE MARKETING
Aviation Management
College
MARKETING ENVIRONMENT
1. The PESTE Analysis
-
Political
Economic
Social
Technological
Environmental
Legal
AIRLINE MARKETING
Aviation Management
College
MARKETING ENVIRONMENT
1. The PESTE Analysis
a) Political Factors
- Fear of Terrorism eg., Sept 11 2001
- Political Instability eg., Thailand,
AIRLINE MARKETING
Aviation Management
College
MARKETING ENVIRONMENT
1. The PESTE Analysis
a) Political Factors
- Deregulation; government policies,
etc
- Privatisation; national, local airlines
AIRLINE MARKETING
Aviation Management
College
MARKETING ENVIRONMENT
1. The PESTE Analysis
b) Economic Factors
- grow with the economy
- over invest during good times
- not able to control cost during
bad times eg., salary, etc
AIRLINE MARKETING
Aviation Management
College
MARKETING ENVIRONMENT
1. The PESTE Analysis
c) Social Factors
- Ageing population; n America, Europe
- Changing family structure: small
family, single parent,
AIRLINE MARKETING
Aviation Management
College
MARKETING ENVIRONMENT
1. The PESTE Analysis
c) Social Factors
- Fashion & taste in holidays; hobbies,
adventure, etc
- Female business traveler
AIRLINE MARKETING
Aviation Management
College
MARKETING ENVIRONMENT
1. The PESTE Analysis
d) Technological Factors
- Video conferencing; a threat
- Internet; a challenge
- Surface transport investment; competitor
AIRLINE MARKETING
Aviation Management
College
MARKETING ENVIRONMENT
1. The PESTE Analysis
e) Environmental
- Global warming; temperature & cost
Shortage of infrastructure; Atmospheric
& noise pollution
Tourism saturation; limited or over
exploitation
AIRLINE MARKETING
Aviation Management
College
AIRLINE MARKETING
Aviation Management
College
Airline Business
&
Marketing Strategies
1. Porter’s 5 Factors of Strategic Issues
2. Cost Leadership Strategy
3. Differentiation strategy
4. Focus Strategies
5. Common Mistakes
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
1. 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..
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
1. 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
-
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
1. 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,
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
1. 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
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
1. 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
Airline Business &
Marketing Strategies
Aviation Management
College
AIRLINE MARKETING
Airline Business &
Marketing Strategies
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
AIRLINE MARKETING
Airline Business &
Marketing Strategies
Aviation Management
College
2. Cost Leadership Strategy – Business Model
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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
AIRLINE MARKETING
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
COST LEADERSHIP in the AIRLINE INDUSTRY
Background
1. 1973 Southwest Airline, USA
2. 1990 Ryanair & Easyjet, Europe
3. Air Asia & Firefly
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
COST LEADERSHIP in the AIRLINE INDUSTRY
Reasons For Growth
1.
2.
3.
4.
5.
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
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
COST LEADERSHIP in the AIRLINE INDUSTRY
Fundamentals of Business Policy
1. Simplicity - using computers for business
communication & transaction
2. Integrated services – shipment, packages
3. Growing Express Market – small, urgent, fast
Airline Business &
Marketing Strategies
Aviation Management
College
AIRLINE MARKETING
COST LEADERSHIP in the AIRLINE INDUSTRY
Success Factors
1. Low Fleet Cost - Common fleet; A320, B737
2. Low Landing Fees - remote, unused, underutilized
airport
3. Short Turnarounds/High Aircraft Utilization 20/25mins vs. 50mins, no aerobridges, rush in..
4. Limited Cabin Service - F&B act as revenue
Airline Business &
Marketing Strategies
Aviation Management
College
AIRLINE MARKETING
COST LEADERSHIP in the AIRLINE INDUSTRY
Success Factors
5.
6.
7.
8.
Point-to-Point - own transfers & connection
Simple Fares – one fares vs. many on same route
Low Distribution Cost – eliminate agents
Non-refundable Tickets -
Airline Business &
Marketing Strategies
Aviation Management
College
3. Differentiation strategy
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Pricing; domestic, regional & inter
Service; full, half or non
Product; package, frills, convenience
Place; airport location, reservation
counters, internet
AIRLINE MARKETING
Airline Business &
Marketing Strategies
Aviation Management
College
4. Focus Strategies
- Concentrate on one activity only
- Become expert in the business,
- Able to withstand challenges
AIRLINE MARKETING
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
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
-
Airline Business &
Marketing Strategies
Aviation Management
College
5. Common Mistakes
a) Objectives - state own airlines
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Service vs. profit
Ego-drive (publicity vs. profit) - international
flights, global HQ/offices
Government interference, not paying bills
AIRLINE MARKETING
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
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
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
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
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
5. Common Mistakes
c) Competitive Response - cont
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•
•
•
•
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
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
5. Common Mistakes - cont
d) Control
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•
•
Excessive spending
Expensive cars & prestigious offices
Funding lifestyle of Directors & Sen. Managers
Airline Business &
Marketing Strategies
AIRLINE MARKETING
Aviation Management
College
5. Common Mistakes –
g) Over-optimism/Fall Back position
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•
•
Aviation industry a roller-coaster ride
Recessions, wars, terrorism, epidemics,
political, uncontrollable cost (fuel), etc
All can come at the same time as experienced
Airline Business &
Marketing Strategies
Aviation Management
College
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
AIRLINE MARKETING
• 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