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MARKETING THE INDUSTRY SEGMENTS. 4.05 Explain the air transportation industry. 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.

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marketing the industry segments

MARKETING THE INDUSTRY SEGMENTS

4.05 Explain the air transportation industry.

slide2

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.
slide3

Air Carriers

  • Full service/mega carriers
  • Regional carriers
  • Supplemental carriers
slide4

Full service/mega carriers

  • Fly both domestic and international routes
  • Provide full service to customers
slide5

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

  • Lower priced
  • Smaller aircraft
  • Shorter routes
slide6

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

slide7

Classes of Service Aboard Flights

  • First class
  • Business class
  • Coach class
slide8

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
slide9

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
slide10

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
slide11

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
slide12

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

slide13

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.
slide14

Air Travel Patterns

  • Hub and spoke system
  • Slots
  • Spokes
slide15

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.
  • Delta’s hub is Atlanta; United Airline’s hub is Chicago.
slide16

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.
slide17

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.
slide18

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.
slide19

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 Admiral’s Club, Delta’s Crown Club

Air Canada’s Mapleleaf Lounge

slide20

Ticketing procedures

  • Paper ticket
    • Airport counters
    • Travel agencies
    • Ticket offices
slide21

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
slide22

Marketing strategies used in the airline industry

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