Air Travel Case Study

Background study
Air travel has emerged as a crucial means of transportation for people and products ever since the Wright brothers invented the first successful airplane in 1903. The nature of the market for airline service has expanded drastically because of the globalization in the world’s economy and the rapid development in technology in today’s time. According to Shrestha (2014), the airline industry began to focus on customer loyalty rather than customer acquisition. For instance, majority of the airline companies tend to invest more in frequent flyer programs than advertising. Customer loyalty is about increasing the sales by satisfying and serving the customers endlessly so they will keep coming back (Thompson, 2004). However, the

Customer retention has a positive relationship with the company’s profit as loyal passengers are less price sensitivity and they require less effort to communicate. Also, it is easier to obtain purchase from old customers compared to new customers in most cases (Shrestha, 2014). According to J.D. Power Report, (2015), airline companies that provide satisfactory services to gain customer loyalty will lead to improvement of return on investment, through the repurchasing of airline services.

In 2011, Malaysia had the fourth largest air passenger traffic in the South and Southeast Asia region. Nonetheless, Malaysia stood first in terms of passenger traffic to population ratio among the emerging markets of Asia. Based on this data, it is clear that Malaysia has emerged as a major air transport hub in Asia, as many international passengers are using Malaysia as a base from which they travel in Asia (Malaysia Industry Research Aviation Industry, 2012).
The Malaysian aviation industry went through a period of high growth with international passenger traffic growing at a Compound Annual Growth Rate (CAGR) of approximately 10% over the last 10 years. International passenger traffic continued in its’ long term trend of recording a growth of 10.4% in 2011. In the same year, passenger traffic at domestic terminals also increased by 11% (Malaysia Industry Research

The increased competition from low-cost carriers has lured away passengers with their low price ticket as Malaysian Airlines (MAS) is on a slow road of recovery after the case of missing of flight MH370 and the crash of flight MH17 at the year of 2014. According to Bursa Malaysia’s financial statement in 2014, Malaysia Airline’s profit has decreased by 60% (RM496.7 million) as compared to previous year. The incident of MH307 and MH17 has affected its reputation and customers began to switch to other airlines. Although Malaysia Airline System maintained its leading position with a retail value share of 28% in 2015, it witnessed a slight decline in its value