Current Airline Industry Marketing Strategies

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Major airline companies need to revise their marketing strategy in the light of competition from low cost carriers. LCCs have now consumed the bulk of passengers formerly riding big carriers such as United Airlines. This paper will focus on current trends in marketing strategies in the airline industry. Current Airline Industry Marketing Strategies Air travel is perhaps one of the most convenient means of moving from one place to another. Aside from that, it also frees the traveler from the hassle of worrying about their gasoline and accomodation expenses.

Traveling from one state to another through land can be tiring especially if the trip will take several hours. Traveling by plane can be more convenient because it gives the traveler time to relax going to their destination. The Importance of the Airline Industry Air travel holds a significant place in the economic growth of a country. It brings about investment opportunities, strengthens its tourism sector, and plays a key role in the globalization efforts of a certain country(Kroo, 1999). During the last ten years, the airline industry has experienced a 7% annually growth.

Business and leisure trips have grown on a worldwide scope. In 1999, airline companies were able to service 1. 5 billion passengers. Traveling to uncharted and exotic places became possible with the accessibility of the Boeing 747. Leaders of developing countries have recognized the important contribution of tourism to their economic growth which influenced them to develop resorts in order to attract tourists from the rich Western European and North American countries(Kroo, 1999).

According to the International Air Tranpsort Association (IATA), foreign air travel grew an average of 6. % annually during the 90’s. From 2000 to 2010, IATA predicts growth of more than 5% per annum, which are identical to growth percentages during the previous ten years. Air travel in Europe and North America, which is already experiencing a highly-developed airline industry, will experience rapid growth at 4% to 6%. The growth areas will be the Asia-Pacific region where trade and investment as well as domestic growth is on the rise(Kroo, 1999). Deregularization of the industry has strengthened competition between small and big airline carriers.

In the European Union, carriers from a member nation is allowed to carry passengers within the jurisdiction of another member. The adoption of the ‘open skies’ policy by most countries have destroyed regulation of airline companies allowed to travel in a country(Kroo, 1999). With competition among the various countries becoming stiff, it is now up to each carrier to implement marketing strategies that will attract more customers(Kroo, 1999). Marketing Is The Name of the Game Prior to deregularization, airline carriers were not allowed to set their own fare rates.

Their pricing scheme would have to be approved by government agencies. This had two negative outcomes. First, airline companies had no means to reduce their costs by streamlining operations and enhancing their productivity. Second, because the fare rates were too extravagant, they were subjected to various limitations(Kroo, 1999). Yield Management When the industry was deregularized, however, airlines were allowed to implement their own pricing schemes. One of the first carriers to respond to deregularization is American Airlines, which instituted value pricing or yield management.

Under this scheme, overall profits were maximized by assigning perishable products in limited quantity, like certain seats on a particular flight. Depending on the price, some airlines have provided additional incentives such as freebies, limousine service, and others(Kroo, 1999). Low-Cost Carriers Another marketing strategy that has evolved as a result of deregulization is the implementation of low cost carriers (LCC). The advantage of these types of airplanes is that they provide passengers with non stop service within uncongested airports rather than through connecting flights.

This has brought about shorter turnaround and greater aircraft and crew utilization. Although incentives such as frequent traveler lounges are usually not in the offer of LCCS, they have a frequent-flyer program(Kroo, 1999). Innovative Pricing The success of low cost carriers prompted the traditional airlines to develop a pricing scheme that would match the fare cost offered by the LCCs. In response to the cheap air fare of the low-cost carriers, traditional carriers lowered reservation and travelling limitations or suspended on-board meal and beverage amenities in the Economy Class or by charging it to the passenger separately.

Other carriers adopted an airline-within-an-airline strategy, such as British Airways and Go! and Delta Airlines with Song. However, their efforts were futile because these schemes were not strategically coherent(Knorr & Zigova, nd). Decreasing their fares in order to match that of the LCCs would not yield any profit for them. Second, passengers have the notion that on-board services and amenities are packaged with the rates(Knorr & Zigova, nd). Mobile Customer Self-Service Passengers nowadays bring their mobile phones with them everytime they go to their business or leisure trips.

A new trend that airline providers can take advantage of in order to cater to the needs of their passengers is mobile communication service. This feature would allow them to make bookings, inquire about the status of their flights, select seats, or upgrade service conveniently without having to wait in long lines in the airline’s customer service desk(Mobile Aware, nd). Although marketing the service may be unrealistic or costly on the part of the provider, this could help them attract more passengers. Aside from that, this would reduce call center expenses which the airline company may incur.

In a study conducted by Gartner Measurement, call centers deflect 16% of calls to phone-based atomatic self-service technology. A standard Integrated Voice Response (IVR) would average about $0. 95 for every call made. Using IVR technology, an airline company can save up to 45% of their call deflection expenses(Mobile Aware, nd). Aircraft Alliances Due to the fact that passengers move fron one continent to another quite frequently, most of the leading ariline companies in the world have made attempts to offset regulations by establishing airline alliances.

While the alliance depends on the size and extent of integration, it usually involves sharing of code between the carriers concerned. For example, a passenger from one carrier may request for a seat in the partner airline. Likewise, the customer can have an opportunity to earn frquent flyer points on their host company when they book a flight with a carrier belonging to the alliance(Zuckerman, 2002). According to a report published by the US Department of Transportation in October 2000, the implementation of airline alliances paved the way for more passengers and reduced fares.

Because of this new scheme, it became possible for airline carriers to experiment with new routes and provide more services on current routes(Zuckerman, 2002). Airlane alliances started in the 1990s when Washington and big domestic carriers called for liberalization of bilateral agreements which limited international landing rights(Zuckerman, 2002). Airline Kiosks One of the major advantages that low cost carriers have over big companies like United and Northwest Airlines are its self-service kiosks.

It works like a normal reservation counter in a sense that it issues boarding passes, baggage claim tags, and processes credit card transactions. One customer service personnel can man the kiosk. It has terminals with Internet connection for customers to look for carriers offering cheap tickets(Maynard, 2004). At the same time, low cost carriers lets passengers make changes to their flights and reservations without or at a minimal cost as compared to exorbitant fees charged by major companies for modifying flight details(Maynard, 2004). A Need To Modify Their Marketing Strategies

With the way things are going, it seems that there is a need for major airline companies to change their marketing strategy if they want to stay in the business. At the moment, it seems that passengers prefer the cheap low cost carriers over the amenities that the major carriers used to provide ten years ago(Maynard, 2004). During the past ten years, many people would have booked a ticket in a United Airlines flight. For these companies, the name of the game becomes “survival of the fittest. ” Due to its extravagant fares and flight delays, passengers have now shifted to Southwest Airlines.

Top airlane companies are currently experiencing loss of profit. Since 2000, losses have been placed at $30 billion and another $5 billion is being predicted to go down the drain again(Maynard, 2004). On the other hand, despite being just a regional carrier, Southwest, according to the US Department of Transportation, has now emerged as the top airline company in the United States as far as number of passengers being transported is concerned. The company has taken the lead in offering cheap air fares and three of the top ten carriers in the industry have already closed shop(Maynard, 2004).

Major airline companies need to revise their marketing strategy in the light of competition from low cost carriers. LCCs have now consumed the bulk of passengers formerly riding big carriers such as United Airlines. This paper will focus on current trends in marketing strategies in the airline industry. Current Airline Industry Marketing Strategies Air travel is perhaps one of the most convenient means of moving from one place to another. Aside from that, it also frees the traveler from the hassle of worrying about their gasoline and accomodation expenses.

Traveling from one state to another through land can be tiring especially if the trip will take several hours. Traveling by plane can be more convenient because it gives the traveler time to relax going to their destination. The Importance of the Airline Industry Air travel holds a significant place in the economic growth of a country. It brings about investment opportunities, strengthens its tourism sector, and plays a key role in the globalization efforts of a certain country(Kroo, 1999). During the last ten years, the airline industry has experienced a 7% annually growth.

Business and leisure trips have grown on a worldwide scope. In 1999, airline companies were able to service 1. 5 billion passengers. Traveling to uncharted and exotic places became possible with the accessibility of the Boeing 747. Leaders of developing countries have recognized the important contribution of tourism to their economic growth which influenced them to develop resorts in order to attract tourists from the rich Western European and North American countries(Kroo, 1999). According to the International Air Tranpsort Association (IATA), foreign air travel grew an average of 6. % annually during the 90’s. From 2000 to 2010, IATA predicts growth of more than 5% per annum, which are identical to growth percentages during the previous ten years. Air travel in Europe and North America, which is already experiencing a highly-developed airline industry, will experience rapid growth at 4% to 6%. The growth areas will be the Asia-Pacific region where trade and investment as well as domestic growth is on the rise(Kroo, 1999). Deregularization of the industry has strengthened competition between small and big airline carriers.

In the European Union, carriers from a member nation is allowed to carry passengers within the jurisdiction of another member. The adoption of the ‘open skies’ policy by most countries have destroyed regulation of airline companies allowed to travel in a country(Kroo, 1999). With competition among the various countries becoming stiff, it is now up to each carrier to implement marketing strategies that will attract more customers(Kroo, 1999). Marketing Is The Name of the Game Prior to deregularization, airline carriers were not allowed to set their own fare rates.

Their pricing scheme would have to be approved by government agencies. This had two negative outcomes. First, airline companies had no means to reduce their costs by streamlining operations and enhancing their productivity. Second, because the fare rates were too extravagant, they were subjected to various limitations(Kroo, 1999). Yield Management When the industry was deregularized, however, airlines were allowed to implement their own pricing schemes. One of the first carriers to respond to deregularization is American Airlines, which instituted value pricing or yield management.

Under this scheme, overall profits were maximized by assigning perishable products in limited quantity, like certain seats on a particular flight. Depending on the price, some airlines have provided additional incentives such as freebies, limousine service, and others(Kroo, 1999). Low-Cost Carriers Another marketing strategy that has evolved as a result of deregulization is the implementation of low cost carriers (LCC). The advantage of these types of airplanes is that they provide passengers with non stop service within uncongested airports rather than through connecting flights.

This has brought about shorter turnaround and greater aircraft and crew utilization. Although incentives such as frequent traveler lounges are usually not in the offer of LCCS, they have a frequent-flyer program(Kroo, 1999). Innovative Pricing The success of low cost carriers prompted the traditional airlines to develop a pricing scheme that would match the fare cost offered by the LCCs. In response to the cheap air fare of the low-cost carriers, traditional carriers lowered reservation and travelling limitations or suspended on-board meal and beverage amenities in the Economy Class or by charging it to the passenger separately.

Other carriers adopted an airline-within-an-airline strategy, such as British Airways and Go! and Delta Airlines with Song. However, their efforts were futile because these schemes were not strategically coherent(Knorr & Zigova, nd). Decreasing their fares in order to match that of the LCCs would not yield any profit for them. Second, passengers have the notion that on-board services and amenities are packaged with the rates(Knorr & Zigova, nd). Mobile Customer Self-Service Passengers nowadays bring their mobile phones with them everytime they go to their business or leisure trips.

A new trend that airline providers can take advantage of in order to cater to the needs of their passengers is mobile communication service. This feature would allow them to make bookings, inquire about the status of their flights, select seats, or upgrade service conveniently without having to wait in long lines in the airline’s customer service desk(Mobile Aware, nd). Although marketing the service may be unrealistic or costly on the part of the provider, this could help them attract more passengers. Aside from that, this would reduce call center expenses which the airline company may incur.

In a study conducted by Gartner Measurement, call centers deflect 16% of calls to phone-based atomatic self-service technology. A standard Integrated Voice Response (IVR) would average about $0. 95 for every call made. Using IVR technology, an airline company can save up to 45% of their call deflection expenses(Mobile Aware, nd). Aircraft Alliances Due to the fact that passengers move fron one continent to another quite frequently, most of the leading ariline companies in the world have made attempts to offset regulations by establishing airline alliances.

While the alliance depends on the size and extent of integration, it usually involves sharing of code between the carriers concerned. For example, a passenger from one carrier may request for a seat in the partner airline. Likewise, the customer can have an opportunity to earn frquent flyer points on their host company when they book a flight with a carrier belonging to the alliance(Zuckerman, 2002). According to a report published by the US Department of Transportation in October 2000, the implementation of airline alliances paved the way for more passengers and reduced fares.

Because of this new scheme, it became possible for airline carriers to experiment with new routes and provide more services on current routes(Zuckerman, 2002). Airlane alliances started in the 1990s when Washington and big domestic carriers called for liberalization of bilateral agreements which limited international landing rights(Zuckerman, 2002). Airline Kiosks One of the major advantages that low cost carriers have over big companies like United and Northwest Airlines are its self-service kiosks.

It works like a normal reservation counter in a sense that it issues boarding passes, baggage claim tags, and processes credit card transactions. One customer service personnel can man the kiosk. It has terminals with Internet connection for customers to look for carriers offering cheap tickets(Maynard, 2004). At the same time, low cost carriers lets passengers make changes to their flights and reservations without or at a minimal cost as compared to exorbitant fees charged by major companies for modifying flight details(Maynard, 2004). A Need To Modify Their Marketing Strategies

With the way things are going, it seems that there is a need for major airline companies to change their marketing strategy if they want to stay in the business. At the moment, it seems that passengers prefer the cheap low cost carriers over the amenities that the major carriers used to provide ten years ago(Maynard, 2004). During the past ten years, many people would have booked a ticket in a United Airlines flight. For these companies, the name of the game becomes “survival of the fittest. ” Due to its extravagant fares and flight delays, passengers have now shifted to Southwest Airlines.

Top airlane companies are currently experiencing loss of profit. Since 2000, losses have been placed at $30 billion and another $5 billion is being predicted to go down the drain again(Maynard, 2004). On the other hand, despite being just a regional carrier, Southwest, according to the US Department of Transportation, has now emerged as the top airline company in the United States as far as number of passengers being transported is concerned. The company has taken the lead in offering cheap air fares and three of the top ten carriers in the industry have already closed shop(Maynard, 2004).

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