Airline marketing

Last minutes tickets, group tariffs, agency prices, low cost promotions are buzzwords in the intensively competitive airline industry. These are all connect to prices strategies which constrains and simultaneously impels air carriers to analyze and redefine commercial strategic decisions. The low-cost airline model versus legacy carrier model has spurred ongoing debate. With the current world economic crisis (especially in Europe), airlines need to redefine their marketing strategies so as to: (i) survive/compete and (ii) meet consumers’ demands, which are ever-more price-sensitive and questioning the value proposition of the airline carriers. Thus, it seems relevant to revive research on this subject and to unveil some of the elements associated with price discrimination strategies. This study analyzes price dispersion in the intra-European airline market, using a significant sample of the prices posted on the city pairs Lisbon – Paris and Madrid – London. The aims is to test some key factors that may influence price dispersion, which airlines can take into account when developing and evaluating their pricing strategies. Specifically, this work attempts to test the relation between price dispersion among airlines and their capability of price discriminating as a result of their market power and differentiating full service carriers from low cost carriers. The results revealed that neither the full service nor the low cost carriers show differences on price dispersion, when testing the interaction of these type of airlines with each of the market segmentation factors.

This book aims to answer a simple but intriguing question: How has Singapore Airlines (SIA) managed to make healthy profits year in year out, in an industry whose financial performance over the years has been dismal? SIA’s profitability on the other hand has been exceptional, superior in the long term to any competitor in its peer group. Our purpose in writing this book is to answer this question, based on our in-depth research on the airline industry and SIA, and derive some general lessons for managers in other industries.
We begin the book with an analysis of the airline industry and its key trends (Chapters 1 and 2), moving on to a broad outline of SIA’s strategic drivers of success (Chapter 3). We then focus on specific elements of SIA’s strategy and organisation, such as its core competency of cost-effective service excellence (Chapter 4), its innovation capabilities (Chapter 5), and its human resource management practices (Chapter 6). We end with some strategic lessons that we believe apply to any organisation that aims to achieve sustainable success in hyper-competitive markets (Chapters 7 and 8).
Chapter 1 analyses the airline industry as a whole, reviewing its historical development, important trends over time and key aspects of the industry economics. Issues discussed include the impact of government intervention; uncontrollable factors such as oil prices or political events; factors such as the perishability of seats, seasonality of demand and long time horizons in infrastructural decisions, injecting additional levels of complexity; airlines’ fixed and variable direct operating costs, and indirect operating costs; and lastly the chronically poor and volatile performance of the whole industry. Key trends in the industry such as the formation of alliances, the emergence of budget carriers and regional growth are addressed.
Chapter 2 outlines macro-environmental trends affecting the airline industry such as political, economic, social and technological elements, and then engages with the industry’s underlying structural dynamics such as the rivalry among competitors, threat of new entrants, power of suppliers and buyers and threat of substitutes. Lastly, strategic imperatives for airlines to succeed in this difficult environment are discussed, such as the need to utilise cutting-edge technology, the importance of cost-control, alliance management, avoiding the herd instinct and strategies to address commoditisation.
Chapter 3 proceeds to focus on SIA itself, addressing important strategic choices and resource deployment decisions at SIA, in order to get a broad understanding of the company’s superior performance. Factors discussed include SIA’s young fleet, low staff costs, global revenue base, push for efficiency, brand reputation, strategic consistency, response to crises, and alliance and acquisition strategies. In addition to having a significant stand-alone impact on SIA’s performance, these factors also interact with other factors, thus enhancing the magnitude of their impact. A key conclusion drawn from this analysis is that SIA’s superior performance is attributable to a complex array of strategic decisions which have been highly consistent over time. As we further discuss in Chapter 4, imitators would have to copy many of SIA’s strategic and organisational aspects to achieve similar levels of performance; this is always a more difficult task than copying single aspects.
Chapter 4 addresses what we believe is SIA’s core competence, cost-effective service excellence. It is relatively easy to deliver excellent service if one pours money into doing so. It is also relatively easy to achieve low costs if one does not aim to deliver excellent service. What is much harder to do is to deliver service excellence in an efficient manner, in other words implementing a strategy that integrates elements of differentiation and cost leadership. SIA is known for its service excellence, but what is less often appreciated is that its costs (seen as cents per available seat kilometre) are among the lowest in its peer group. How has SIA managed to achieve this? In common with other organisations with a reputation for excellent service, SIA displays characteristics such as top management commitment, customer-focused  staff and systems, and a customer-oriented culture. However, our research has uncovered further insights into the development and maintenance of a reputation for service excellence while controlling  cost – what we call the ‘five pillars’ of SIA’s activity system. These pillars are rigorous service design and development; total innovation (integrating continuous incremental improvements with discontinuous innovations); profit and cost consciousness ingrained in all employees; holistic staff development; and reaping of strategic synergies through related diversification and world-class infrastructure. These five pillars of SIA’s cost-effective service excellence are supported, operationalised and made real in everyday decisions and actions through a self-reinforcing activity system of virtuous circles, presented in the chapter. The core competence of cost-effective service excellence and the cultural values supporting it are thus more than just abstract ideas. They are ingrained into both the hearts and minds of employees as well as organisational processes. This may help to explain why SIA’s competitive advantage has been sustained for decades. While it is easy to copy single elements, it is much harder to reproduce an entire self-reinforcing activity system.
Chapter 5 continues the theme of service excellence with a focus on innovation. This chapter sheds light on SIA’s ability to be a serial innovator, introducing many firsts in the airline industry, and sustaining this innovative orientation over decades in the face of intense cost pressures, industry crises and the push towards commoditisation. We first present senior management’s perspective of the key challenges they face in delivering sustained and cost-effective service excellence. These challenges include, firstly, how to consistently satisfy the sky-high ...

Dalam beberapa tahun terakhir zona kawasan ASEAN sektor penerbangan di zona kawasan ASEAN  berkebang dengan pesat, termasuk dengan kemunculan maskapai-maskapai baru dengan konsep Low Cost Carriers (LCC). LCC ini sendiri merupakan konsep penerbangan bertarif murah dengan cara melakukan efisiensi besar-besaran di semua aspek. Di Asia Tenggara, Lion air dan AirAsia merupakan salah satu maskapai berjadwal terbesar yang sama-sama mengusung konsep LCC ini. Karena berada pada zona kawasan dan mengusung konsep yang sama maka kompetisi diantara mereka tentulah akan sangat terasa. Untuk itu diperlukannya strategi-strategi khusus yang harus dilakukan agar mampu memenangkan persaingan. Pada tulisan ini akan dibahas kompetisi antara Lion Air dan AirAsia  dari berbagai aspek, dengan menggunakan metode Porter’s model analysis dan juga akan diberikan rekomendasi kepada Lion Air agar mampu memenangi persaingan.

Keywords : Strategi, Kompetisi, Lion Air, Air Asia, LCC, Porter’s Model Analysis

Evaluation of airlines based on service quality criteria can help to improve the processes of airlines, and also can give guidance to travel agencies to provide better choices for passengers and tourists. In this study, a hybrid simulation-based assignment approach is proposed to deal with multi-criteria decision-making problems with a group of decision-makers. A probability distribution is used to model decision-makers’ opinions and constructing a stochastic decision matrix. Then some efficient multi-criteria decision-making methods are utilized for evaluating alternatives in a simulation process. The proposed approach is applied to a problem of evaluation of five airlines with respect to opinions of 58 experts on 28 criteria. The results show the efficiency of the proposed to handle decision-making problems with a large number of experts. Moreover, the evaluation results are more reliable than the other decision-making approaches because of simulating decision-makers’ opinions, using multiple methods and evaluating based on aggregative results.

The role of social media has changed from information delivery to distribution channels. Budget airlines have used their Facebook pages to delivery promotional materials connect new customers, invite user engagement, and information distribution. One of the main purposes of wall posts is to invite user involvement. The results in this study indicated users interested on commenting wall posts which were “fresh”, that means posts published within two days. In order to increase user engagement, airlines should keep publishing new wall posts so as to encourage users to “like” or “share” these information with their network. The company responses were not significant, only five, 14 and 17 responses were found for Air Asia, Easy Jet and Jet Blue respectively. The outcome of the study questions the role and suitability of social media tools for marketing purpose in the airline business especially in relation to other segments within tourism industry.

This research examines the extent to which proactivity in handling flight overbooking reduces negative electronic word-of-mouth (NeWOM) and the required costs of compensation, thus increasing firm profitability. It answers recent calls to use a multimethod approach (i.e., we include archival data, qualitative interviews, seven experiments, and a Monte Carlo simulation for a total of ten studies), and to adapt recovery to specific contexts (i.e., airlines) and heterogeneous customers (i.e., voluntary/involuntary bumping or offloading). The preliminary studies indicate that overbooking and offloading are pervasive and that a proactive approach is both feasible and desirable. The experiments show that, compared to the default reactive approach (informing passengers at the gate), a proactive approach (informing them before they leave for the airport) substantially reduces NeWOM and the sought compensation. Further, a very reactive approach (informing them in the plane) significantly increases NeWOM and the sought compensation, especially when offloading occurs involuntarily. We also unveil the mechanism explaining the effects of proactivity on NeWOM, through the serial mediation of justice and betrayal. Finally, the results of a Monte Carlo simulation show that offering reduced compensation through a proactive approach allows more aggressive overbooking, higher capacity utilization and increased net revenue of up to 1.3%.