MARKETING THE INDUSTRY SEGMENTS

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

2. 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.

3. Air Carriers • Full service/mega carriers • Regional carriers • Supplemental carriers

4. Full service/mega carriers • Fly both domestic and international routes • Provide full service to customers

5. Regional carriers: Airlines that fly scheduled flights from smaller cities into larger cities • Lower priced • Smaller aircraft • Shorter routes

6. 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

7. Classes of Service Aboard Flights • First class • Business class • Coach class

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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.

14. Air Travel Patterns • Hub and spoke system • Slots • Spokes

15. 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.

16. 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.

17. 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.

18. 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.

19. 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

20. Ticketing procedures • Paper ticket • Airport counters • Travel agencies • Ticket offices

21. 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

22. Marketing strategies used in the airline industry • Frequent Flyer Programs • Internet • Print advertising • E-mail • Publicity