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Product strategy for airline companiea
Overview Of Airline Industry
Airline strategic management
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In April 1992, American Airlines launched "Value Pricing" -- a radical simplification of the complex pricing structure that had evolved over more than a decade following deregulation of the U.S. domestic airline industry. American expected that the new pricing structure would benefit consumers and restore profitability to both American and the industry as a whole. The critical issue raised is: Would American's bold initiative work?
issues encountered in exercising price leadership to switch industry practice from a complex structure of differential prices and promotions to a simplified, everyday-low-pricing structure.
American Airlines Marketing cases AMERICAN AIRLINES
1. Issues 2. American Airlines’ objectives 3. The airline industry 4. Market 5. Consumer needs 6. Brand image 7. Distribution system 8. Pricing 9. Marketing related strategies 10. Assumptions and risks
1- Issues The main issue of this case is the lack of profits of the airline industry, an industry that should be more than profitable due to the large amount of customers, the necessity of using airlines’ services and the high prices charged by most of these airlines. What we are going to deal with is, why is this happening? And how is American airlines dealing with this problem?. To be able to discuss how American airlines wants to regain profitability, we must identify and analyse different issues such as, the company’s background, the airline industry as a whole, the demand for air travel, the marketing strategies, the distribution systems, pricing policies etc.
2- American Airlines’ objectives American Airlines’ prime objective is to bring back value to air travel, through stimulating business travel, lowering prices etc. So in other words America...
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...its competitors. -Hubbing: With hubbing, flights from various origins on spokes of the network are channelled through an intermediate location, where they change planes and are re-routed to their final destination. This way the airline can serve more locations with fewer planes. -Frequent Flyer programmes: These programmes provide discounts or bonuses to frequent travellers. The value of the bonuses increase as the mileage flown increase, the bonuses can take various forms such as, fare reductions, upgrades to better classes or even free tickets.
10- Assumptions and risks In my opinion all of this strategies are brilliant, the only risk I see is in hubbing, customers sometimes don’t want spend additional time changing planes, there is the risk of missing connecting planes, luggage may get lost, etc. In the rest of the strategies I don’t see any risks what so ever.
The following value chain, which focuses on Spirit Airlines, is representative of most of the firms in the Ultra Low-Cost Airline industry. Spirit is the industry leader in many areas such as operational efficiencies/cost structure, aircraft fleet management, brand/network and growth. The firm, however, trails industry foes in areas such as customer service and operational reliability and recoverability. While most in this segment pursue the cost-leader competitive strategy, Spirit has demonstrated the most effective model to date – whether the model is the most sustainable remains to be seen.
The objective of this research report is to provide a thorough analysis of Alaska Airlines. In order to do this we chose to compare a similar company against them. The company in comparison is Spirit Airlines. Both companies compete in the same type of business through airline transportation. Many of their services include; security, safety, transportation of passengers as well as luggage, ensuring vehicle safety while in transit, concierge services, providing entertainment aboard plane, checking weather conditions prior to flight, and much more. All of the data gathered for this report was obtained from the company’s 10-k filings with the SEC.
It has stayed relevant to the market through its propelled philosophy of relationships to generate profits in the business. Since its establishment in Monroe, Louisiana the once tiny airline has stretched to greater heights serving in 6 continents. It has also established a distinguishable name among its competitors with a reputation of leading customer services. However, even as an established venture, the company needs to maximize its profits in order to stay in business and expand in to new territories beyond its conquered boundaries. A strategic analysis was carried out by our team to establish the company’s current situation. A SWOT analysis was performed to come up with three referenced, strategic alternatives. This alternatives are meant to act as a strategic guidance to the company in order to enhance growth. The strategic recommendation provided will improve and enable the business to cope with the competitors while the implementation of the strategy section will outline the way to go about achieving these alternatives in the business setting. Lastly, we put up a discussion on the evaluation procedures and necessary controls for the
Spirit makes our fares so low because they know that draws in the attention of the consumer. Once they have your attention you’re shocked at the price so you go for the deal, oblivious to the fact that you walked into their trap. Southwest’s symbol for shareholders is LUV while Spirit’s is SAVE. They are not the only companies to start to enter into these paths. Hotels, rental cars and cruises are all faced with the same choice to embrace the LUV or the thriftiness with SAVE (Elliot
As Frontier approached its 10th year of operation, Frontier officials realized an image shift was in order. The airline had established a reputation for friendly and reliable service, and reasonable airfares, mainly appealing to leisure travelers. But they reali...
Since its first grand opening in 1971, Southwest Airlines has shown steady growth, and now carries more passengers than any other low-cost carrier in the world (Wharton, 2010). To expand the business operations, Southwest Airlines took over AirTran in 2010 as a strategy to gain more market share for the Southeast region and international flights. However, the acquisition of AirTran brought upcoming challenges both internally and externally for Southwest Airlines. In this case analysis, the objectives are to focus on the change process post the merger with AirTran, and to evaluate alternatives to address the impacts of the merger. II.
Spirit addresses “price” by attempting to get the lowest possible fair for their potential customers. They have instituted their “unbundling” strategy that essentially removes all the conveniences that other airlines afford. Fees for checked bags, fees for flight changes, and no complementary in-flight beverages are just a few of the cost-trimming techniques employed. This strategy allows Spirit to come up with impossibly low fares. It also conforms to customers who just want to get from point A to point B without paying extra for services they don’t use. This strategy, coupled with an in-your-face “promotion” ploy, has made Spirit Airlines “the most profitable airline in the U.S.” (Nicas, 2012).
The Airline Industry is a fascinating market. It has been one of the few industries to reach astounding milestones. For example, over 200 airlines have gone out of business since deregulation occurred in 1978. Currently, more than 50% of the airlines in the industry are operating under Chapter 11 regulations. Since 9/11, four of the six large carriers have filed for and are currently under bankruptcy court protection. Since 9/11 the industry has lost over $30 billion dollars, and this loss continues to increase. Despite the fact that the airline industry is in a state of despair, JetBlue has become the golden example, a glimpse of what the industry could be.
Southwest Airlines strategy of focusing on short haul passenger and providing rates as low as one third of their competitors, they have seen tremendous growth in the last decade. Market share for top city pairs on Southwest's schedule has reached 80% to 85%. Maintaining the largest fleet of 737's in the world and utilizing point-to-point versus the hub-and-spoke method of connection philosophy allowed Southwest to provide their service to more people at a lower cost. By putting the employee first, Southwest has found the key to success in the airline business. A happy worker is a more productive one as well as a better service provider. Southwest will continue to reserve their growth in the future by entering select markets only after careful market research.
"Problems" in the airline industry have not risen due to too much competition within the industry. To the contrary, Washington regulators should turn the industry loose in any more ways that it can. Lowering restrictions to enter the market place, emphasizing private ownership of aviation matters, and encouraging open and free competition within the scope of anti-trust law should be the goals of the Clinton Administration. Instead of heading towards re-regulation, Washington should get out of the airline business for good.
When a business aims to be as successful as possible in selling its products and services, it must examine in detail whether or not the products will be attractive and necessary; if the price is optimal; if the product is being distributed in the best locations; and finally, how interest and awareness can be created for the products. In order for a business to target all of these elements to the right people at the right time, it must employ the right type of marketing mix: Product, Price, Place and Promotion. In a dysfunctional time for the airline industry, most airlines, especially major carriers, are adapting the concept of "doing less with more." One low-cost carrier, JetBlue, is changing the domestic aviation landscape in this regard and is defying the odds. Here is a company that has examined each marketing mix elements carefully, has adapted them to its customer’s needs, and is succeeding because of this approach.
Before to select the proper alternative, three alternatives were analysed and evaluated under four decisions criteria: customer experience, cost, growth rate / market penetration and ease to implementation (See Exhibit 2: Factor Analysis). Between all the alternatives, it was suggested that Southwest Airlines enters to New York City by bidding the slots and gates at the LGA (See Exhibit 3: Alternatives Analysis). This alternative sustains the challenge of changing the customer experience which means adding more flights from and to the East; furthermore, entering to new markets will reinforce “the power of the network” through LGA. At the same time, this decision will allow signing more code-sharing agreements with other airlines flying to international destinations and offer new products and services to LUV customers as loyalty rewards, in-flight internet, onboard duty-free purchases, etc.; as a result of this, it will increase passenger’s insights and experiences by flying with Southwest Airlines. Nevertheless, there is potential risk by selecting this alternative, in the recent years the energy prices has had a huge increase affecting costs, fares and even capacity needed, however Southwest Airlines has been able to hedge fuel for decad...
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
When an airline does not have a sustainable competitive advantage, it does not have any properties of differences from there competitor and turns to a dangerous price war. The sustainable ...
The perennial crisis in the airline industry: Deregulation and innovation. Order No. 3351230, Claremont Graduate University). ProQuest Dissertations and Theses,, 662-n/a. Retrieved from http://search.proquest.com/docview/304861508?accountid=8364.