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Abstract
This project is an examination of the marketing problems facing the airline industry in an environment of dramatic change combined with a period of extreme economic problems that are seriously impacting the entire industry on a global basis. The marketing problem is developing product that is acceptable to the client or passenger in the changing industry environment. It is clear that neither the industry environment nor the economic conditions are within the control of any airline. The question then becomes how to react and develop a service that will attract the maximum amount of the available traffic to the airline in question. The solution lies not in new features or amenities, conventional product differentiation, but in adjusting to the commodity nature of the industry that is developing, and within this situation devising ways of securing the largest proportion of the existing market possible while controlling costs.
1.0 Introduction: Selection of the airline industry as the project subject
According to the publications of the International Air Transport Association (IATA) in conjunction with the International Civil Aviation Organization (ICAO), the airline industry is in crisis as this is being written. It is estimated that the global airline industry will generate losses in the vicinity of US$11 billion in 2009, which is an improvement over the global industry loss of US$16 billion in 2008. Further improvement is forecast for 2010 with the loss shrinking to “only”US$3.8 billion. (IATA, 2009) This bit of secondary research seems to indicate that the industry desperately needs to seek a change in direction, and perhaps some new approaches to marketing. The IATA makes the comment that. “…widespread, but still relatively weak, economic growth. This is not expected to be strong enough to eliminate excess capacity nor to bring about much recovery in demand for premium seats; so yields will remain weak.” (IATA, 2009) This comment requires a bit of understanding of airline economics. The other comment in the IATA report is, “A key uncertainty for the future is whether this premium demand will return. But even if a large part of the fall in premium ticket demand is cyclical, average fares for all classes have also fallen sharply as excess capacity has intensified competitive pressures.
There are other indications that airline marketing and management will have to change dramatically in coming years if the industry is to remain viable. British Airways Heathrow Terminal 5 is a significant clue as to the future of airline economics. To the greatest extent possible people will be replace by alternatives such as computer. Terminal 5 is the embodiment of the automated airline terminal in terms of the current state of the art. The key to understanding the industry is to appreciate that the product, airline travel, is changing from a consumer service to a commodity. There are still airlines like Qatar Airlines that advertise on CNN a dessert of 749 perfect layers of pastry, “where one degree too high is too high and one minute too long is too long.” They are trying to convince the traveler to fly their airline for the dining pleasure as an example of how extraordinary their service is in every detail. There is a market for this type of air travel service and Ferrari and Rolls Royce still sell cars. This is not the heart of the auto industry. That is Toyota and Honda who also build a few luxury cars. The opposite extreme is Ryan Air that is thinking about charging for the use of the bathroom, (Smith, 2009) and charges the passenger a premium of up to US$60 if they do not arrive at the airport with their boarding pass. (Brown, 2009).
3.0 Research Methods
The secondary research and general reading about the industry and its problems suggested a very simple market research study for the project. To achieve this a simple questionnaire was devised that attempted to determine what influenced airline passengers to select one carrier over another. It is admittedly not scientific as it was conducted by telephone and e-mail with friends of the author. It comprised 25 interviews. This cannot be construed as a random sample or an ideal market research technique. The resources available for this project precluded a more elaborate study. A copy of the questionnaire is included as an appendix.
4.0 Research Finding
Eight of the subjects had flown Ryanair, effectively the “poster boy” for the viewpoint of this project for the future of airline travel. One of the 8 subjects was indifferent to the carrier. The others all expressed distaste but 6 of the 7 would be willing to use it again if it was the cheapest and most convenient, but almost universally expressed a preference for another carrier if there was a comparable choice. One called it “Air Cattle Car” and another made a comment about a holocaust trip to a resort hotel. This indicates that even among low cost carriers marketing and customer service cannot be entirely ignored.