MARKETING THE INDUSTRY SEGMENTS

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MARKETING THE INDUSTRY SEGMENTS

• 4.05 Explain the air transportation industry.

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Airline Deregulation Act of 1978

• Prior to 1978, the Civil Aeronautics Board was
  responsible for air fares, routes, and schedules.
• In 1978, responsibility for airline travel was
  transferred to the FAA and the DOT.
• The Deregulation Act allowed for free-market
  competition. Airlines could then adjust their
  fare structure and rates.
• Deregulation forced noncompetitive airlines out
  of the market and increased demand for regional
  carriers as full-service carriers moved to hub
  and spoke systems. More discount fares also
  became available.

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Air Carriers

• Full service/mega carriers
• Regional carriers
• Supplemental carriers

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Full service/mega carriers

• Fly both domestic and international routes
• Provide full service to customers

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Regional carriers Airlines that fly scheduled
flights from smaller cities into larger cities

• Lower priced
• Smaller aircraft
• Shorter routes

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Supplemental carriers Planes hired by an
individual or company to fly nonscheduled flights
for a specific purpose fly to locations where
scheduled flights do not
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Classes of Service Aboard Flights

• First class
• Business class
• Coach class

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First Class

• Highest rate ticket
• Located at front of plane
• Wider, more comfortable seats
• Extra leg room between rows
• Special electronic entertainment centers on new
  planes

• Reclining seats on international carriers
• First to board and first to exit
• Multiple course meals served on china
• Free movies and beverages

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Business Class

• A step down from first class in rate and service
• More seat/leg room than coach, but not as
  luxurious as first class
• Free beverages
• Larger total area than
  first class

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Coach Class

• Most economical ticket
• Usually located in the rear of the plane
• Narrow seats located closer together
• Limited overhead storage space
• Basic flight attendant service
• Food service limited to beverages and snacks
• Only level of service available on many smaller
  aircraft

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Types of Flights

• Nonstop A flight from the origin to the
  destination with no stops
• Direct A flight from the origin to the
  destination with one or more stops passengers
  usually do not change planes
• Connecting Flights from the origin to the
  destination with one or more stops and passengers
  have to change planes

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Yield management The course of action an
airline takes to meet a break-even point and earn
a profit

• Airline product is perishable.
• If space on a flight is not sold prior to
  take-off, that revenue is lost forever.
• Fares are structured to sell as many seats as
  possible and create a profit for the company.

Yield The amount of profit generated per seat
per mile on an airplane Total passenger
revenue/Total number of passenger miles flown
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Discount fares

• Airlines restrict the number of seats that are
  discounted.
• Fares may not be refundable.
• No changes are allowed.
• Some require a minimum stay at the destination.
• Blackout periods are times when a discounted fare
  is not available (peak periods and holidays).
• Some discounts are based on demographic
  segmentation.

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Air Travel Patterns

• Hub and spoke system
• Slots
• Spokes

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Hub and spoke system

• Air space is restricted and carriers are not
  permitted to fly wherever they wish.
• Airlines concentrate their ventures at airports
  near or in major cities.
• Air carriers have maintenance repair facilities
  and administrative facilities located at their
  hub.
• Deltas hub is Atlanta United Airlines hub is
  Chicago.

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Slots Spaces leased at an airport by a carrier
so they can conduct business there

• Carriers can lose slots if they do not use them
  enough.
• Periodically, new slots and vacated slots are
  assigned to carriers through a lottery system.
• Carriers hold many slots at their hubs.
• Many top airports are primarily served by the
  single carrier that dominates the slots at their
  hub.

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Spokes Flights from smaller cities that fly
into the hub to help passengers make connections

• Regional carriers are responsible for many of the
  spokes in this system.
• Regional carriers make frequent trips in and out
  of smaller centers to the hubs which are
  unprofitable for mega carriers.
• Problems can occur when flights are delayed from
  the smaller airports and passengers do not arrive
  at the hub in a timely manner.
• Inclement weather, lost or delayed luggage,
  missed connections, or long waits between flights
  are all problems that can occur.

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Frequent Flyer Programs

• Established by airlines to reward passengers for
  the number of miles they fly and to encourage
  brand loyalty
• Once customer is enrolled in program, a computer
  tracks the number of flight miles.
• Accumulated miles can be traded for upgrades or
  free flights.
• Restrictions, including blackout dates and
  controls on the number of upgrades on each
  flight, apply to the redemption of miles.
• Expiration dates may also apply to the
  accumulated mileage.

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Airline Executive Club

• Passengers may join for a fee.
• Airlines lease club space at the airport, and
  only members are allowed to use the facilities
  and services.
• Amenities vary, but may include
• Meeting room space
• Free newspapers
• Check-in service for passengers without baggage
• Video screens to check flight status
• Beverage service

American Airlines Admirals Club, Deltas Crown
Club Air Canadas Mapleleaf Lounge
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Ticketing procedures

• Paper ticket
• Airport counters
• Travel agencies
• Ticket offices

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Ticketing procedures (cont.)

• E-ticket or electronic ticket An electronically
  generated airline ticket representing permission
  to fly without the use of a paper ticket.
  Passengers confirm their reservations with a
  credit card and receive a confirmation number
  rather than a paper ticket.
• Internet
• Over the phone
• Ticketing machines

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Marketing strategies used in the airline industry

• Frequent Flyer Programs
• Internet
• Print advertising
• E-mail
• Publicity