Markets for Air Transport Services

Businesses in which airline participates:

Transportation: airline satisfies in an optimum

way the social need of transportation. It
competes with surface and other mode of
transportation
Communication:
it
assists
people
to
communicate as travel allows opportunities for
face-to-face meeting. Revolutionary videoconferencing & others electronics aids are the
detrimental factors for air travel. Companies
are investing in providing computers with
above facilities to their employees to
communicate discouraging air travel

Markets for Air Transport Services

Leisure:
airline
involves
in
intensely
competitive leisure industry disposable
income & time of customers.
Logistics: it is rarely possible for airlines to sell
successfully against surface transport on the
basis of price. Surface rates ate only a fraction
of the air-based equivalent. It succeeds in
logistics concepts based on fast transport, low
inventories, high value products & minimizing
warehousing
Information: it competes in businesses
associated with movement of information
Selling services: it is successful in selling its
skills- engineering, handling & data processing
management

Who is the Customer

"Consumers" are those people who actually
travel. They are easy to identify and analyze.
They may not be decision-makers.
In Marketing such decision-makers are defined
are "Customers".
There are at least four customer decisions which
must be analyzed:

Will a trip be made at all?

"Customers" for the airlines might be firms CEO or
CFO.

What mode of transport will be selected?

Considering merits of different mode of transports,
usually corporate policy is formulated for selecting
the suitable mode of transport. In leisure trip,
influential member of the family will take decision.

Who is the Customer

For air trip, what classes of service will be

purchased?
All most all firms have a corporate policy whereby
very senior executives are allowed to travel in First
class, mid level in Business class and junior in
Economy class. Policy is reviewed in recession and
crises

Which airlines will be selected?

In the post, business traveler did have choice in
selecting airlines. Corporate discounts offered by
airlines have forced to narrow down the choice. In
leisure travel, Tour Operators are the decision
makers. Passengers have little to say.

It is crucial for airlines to identity "Customers" for an

effective marketing policy.

"Apparent" and "True" needs

The difference between the claim and the
truth is known in marketing as the difference
between "Apparent" and True" needs
Example: Business travellers might figure out
prominently for services such as flight
frequency, punctuality and roomy cabin. But
true needs of greed might be confined to
maximize personal benefits available to them
through Frequent Flyer Program using
employers money
"True needs" are at the heart of successful
marketing

"Customers" in the Business Air travel market

Correctly identifying and targeting "Customers"
rather than "Consumers" is a cornerstone of
successful marketing in the airline industry.
The "true needs" of the customers should be
taken into consideration in order to ensure
accurate targeting. Followings are the probable
customers in air travel market
Secretary to Senior Executive:
Busy executives might trust their secretaries to
select airlines and make booking. He/she will
choose suitable airline considering the choices
and requirements - departure airport, flight
timing. Airlines targets secretaries with offers of
corporate entertainment and discounted travel in
return for loyalty.

"Customers" in the Business Air travel market

Travel Agent-Busy executives regard the travel agent

as an expert to obtain their advice to explore

alternatives. Travel agents motivates by the greed of
higher commission provided by airlines.

Travel clerks actually make bookings and issue

tickets, offer of incentives free travel on so-called
educational or familiarization visits arranged by
airlines

Corporate travel Managers in large corporation

organize travel plan for executives

Many airlines today follow the policy of giving

incentive to everyone, whether or not the person in
question is actually able to influence the amount of
business obtained. Thus, today almost all airlines offer
individual incentives through Frequent Flyer Program.

The "Customer" in the leisure Air Travel Market

Children can have an important influence on travel
buying decision made by parents. Video game
availability in airlines in flights entertainment (IFE)
system and preference choices of destination Disney resort.
Some societies are matriarchal, where women are
dominant in family. Others are patriarchal, where
men dominate. In UK, Women are extremely
influential in holiday planning.
Travel Agents - Leisure travellers turn to travel
agents for advice on making of booking and visa
application as they are relatively in experience.
Tour operators usually selects airlines of a group
along with others relevant aspects of travel. They
coordinate "consolidators" - dealers of discounted
air tickets - to organize tour.

"Customer" in the Air Freight Market

Air freight forwarders - More than 90% of the air
freight is provided by forwarders. Forwarders do
gather together a large number of small packages
from individual shippers and present them to an
airline as a large consignment. In return airlines
charges much lower rate per kilo. All airlines regard
managers of forwarder as "Customer"
Clerks who work for freight forwarder do take
decision in selecting routing and carriers for moving
emergency shipments late at night without
disturbing Senior Managers.
Integrators - FedEx, UPS and DHL - provide good
support in retail market of non-expert users.

Market Segmentation- Air pax market

If an airline was to carry out market research into
requirement of its customers, the outcome would
not be a uniform set of results. The process of
trade-off
customer
requirements
against
production economics is done through Market
Segmentation.
A market segment is a group of Customers who have
sufficient in common that they form a viable basis for a
product/ price/ promotion combination

Under-segmentation- grouped into segments

which are too large with high degree of difference
Over-segmentation- is a situation where too
many segments are isolated give insufficient
indicators for policy development

Segmentation variable in Air pax market

Journey purpose : Fundamental segmentation in air
pax market. Needs further division between business
and leisure travel
In business travel, a useful distinction is between
Corporate and Independent business travel

Corporate travellers- ticket price is paid by

company. Placing importance on high product
standards
Independent business travellers- prices of an air
ticket is coming out of their own pocket.
Requirements identical to corporate travellers.
Often prepared to sacrifice product frills

Segmentation variable in Air pax market

In Leisure travel, two segments can be isolated:

Holiday- Someone travelling by air on holiday, have

to pay of their meals & accommodation at
destination. Size of the market is restricted by
those who have relatively higher disposable
incomes.

Visit-friend-and-relatives (VFR)- travellers under

this segment gets meals and accommodation freeof-charge. Relatively lower disposable income.
Recently migrated population have strong ethnic
link to origin
Two other categories are completely outside of the above:

Pilgrims visiting Islams holiest places in Saudi Arabia.

Population travel abroad for better medical facilities

Segmentation variable in Air pax market

Length of Journey:
There are fundamental difference between the requirements of:
Short haul routes flight time of 45 minutes should be regarded
as short haul route. Airport experience is important one, while inflight aspects- seating comfort & food assume rather less
significant
Long haul routes flight time of 01-10 hours should be regarded
as long haul route. Better In-flight aspects- seating comfort &
food- are expected
Country/culture of origin of the travellers: Global branding and
seamless service concept in aviation come into conflict with marked
difference in customer requirements which occur between different
culture.
Business travellers in north-west Europe or north America
middle aged, soberly dressed & carrying only a small amount of
baggage
Business travellers in third world countries largely consists of
traders who fly to a destination where customer goods are
available cheaply

Customer Requirements-Business Travel Market

1. Frequency and Timings:

An airline offering a high frequency will have crucial

advantage. Frequency ensures that business travellers
can fly out for a meeting shortly before it is due to
begin and return very soon after it has been
completed.
A high frequency of flights will be of no value if all the
flights are concentrated at the weekend or during midday periods. Flights will need to be concentrated in the
early morning and evening periods.
2. Punctuality:
Flight
delays
meaning
inconvenience,
missed
appointments and perhaps, the loss of customers. No
airline can hope to obtain a large share in business
travel market if it does maintain a poor punctuality

Customer Requirements-Business Travel Market

3. Airport Location and Access:
One short-haul routes, passengers will prefer service from a
local, easily accessible airport, rather than from a more
distant hub. This rule may apply even if the service from
the local airport is with a "No Frills" airline.

4. Seat Accessibility/Ticket Flexibility:

"Seat Accessibility" refers to probability of a passenger
being able to book a seat on a flight shortly before it is due
to depart.
A sudden crisis requires one to travel on a "next flight out"
basis. In other situations, a flight may be booked well in
advance, but at the last minute a change of plan means
that the booking must be cancelled and a new one made on
an earlier or later flight. Ticket flexibility is that many
business travellers expect the right to no-show for a flight,
and then to be re-booked on a later one, without any
penalty being charged.

Customer Requirements-Business Travel Market

5. Frequent Flyer Benefits:
Almost all airline operate their own Frequent Flyer
Program, or are partners in another carrier's program.
FFP benefits build market loyalty.
6. Airport Service:
On a short flight, business travellers demand the
opportunity to check-in very late for a flight, by using
a separate check-in desk to guard against the
possibility of being delayed by a long line of less
time-sensitive travellers. Expedited security and
passport checks, and that a lounge should be available
in which they can relax prior to a flight and make any
last-minute phone calls or send emails also expect a
premium baggage service.

Customer Requirements-Business Travel Market

7. In-Flight Service:
In-flight experience, seating comfort in terms of seat
pitch and seat width will be significant.
A working environment away from crying children
etc., where important documents, say, can be read
before a business meeting.
Meals and drinks are expected to be served at the
appropriate time of day.
Independent business traveller, as ticket cost is
coming out of their own pocket, they are ready to
trade off cheaper tickets against product frills such as
standards of seating comfort, free drinks and in-flight
meals.

Customer Requirements-Business Travel Market

On long-haul routes:
it is difficult or impossible for an airline operating a
stopping service to compete for high-yielding traffic
with one which flies a route non-stop.
Punctuality assumes even greater importance for the
connecting passenger.
In-flight Services- seat comfort, meal & drinks at
appropriate timing & In-Flight Entertainment (IFE)
system is considered a critical factor
Flight frequency & timing remain significant with
different meaning- double daily flights preferablemorning & evening
Passengers incline to airline with attractive FFP
Airport service, seat accessibility and ticket flexibility
may, correspondingly, be of rather less importance for
long haul passengers.

The Business Travel MarketDemographics and Psychographics

"Demographics" is used to describe the physical and
tangible characteristics of the members of the segment.
Business traveller are:
- male and middle-aged - early forties.
- relatively wealthy individuals. They naturally expect the
airline that they choose to reflect this.
-the average number of air trips made per year is more
than ten.
"Psychographics" is the term used to describe the intangible
attitudes, preferences and, perhaps, prejudices of the
members of the segment. Business travellers tend to
-have strong opinions, and are often communicate these
opinions loudly and frequently.
-require extensive international air travel as exciting. After
a few years attitudes can change dramatically because of
repeated doses of jet lag and acute difficulties in
maintaining social and personal relationships.

The Leisure Segment of Demand

-Business travel tends to be concentrated in the
middle-aged 35-55 age group. Leisure travel, on the
other hand, encompasses all ages.
-Children are important in leisure travel, whilst young
adults, benefiting from reasonable incomes and few
commitments, usually have an especially high
propensity to fly.
-Today, rising disposable incomes and even more the
falls in the real cost of air travel have broadened the
base of the leisure market enormously
-Price sensitive-dominant requirement for a cheap air
fare
-leisure air travel is undertaken in a family group.

The Leisure Segment of Demand

-do not generally require frequent, on-demand
service. This allow airlines to use relatively large
aircraft & gain the benefits of the lower seat-kilometer
costs
-willingness to sacrifice product features which can be
traded off against the availability of cheaper fares.
Some product features will clearly not sacrifice i.e.
safety
-reasonable standards of punctuality performance are
essential
-Also willing to sacrifice seating comfort, airport
service and catering. Passengers will accept lower
standards in both seat pitch and seat width. In the
area of airport standards, leisure passengers will often
accept longer minimum check-in times.

Air Passenger vs Air Freight market

Directional balance: Almost all passengers who fly out

on a route will also return on it. A directional balance
is hardly found in freight
Passenger are homogenous in the sense that they
each
occupy
a
seat.
Freight
is
extremely
heterogeneous weighing less than a kilo up to
consignment of 30,000 kilo or more
Handling and stowage conditions that different
commodity require. Fragile items need special
handling, high value items need special security &
perishable items need refrigeration
Almost all passengers who travel long distance do so
using air transport. In air freight market, airline faces
intense competition from other mode of transports.
Air freighter often found 10 times more expensive
that surface transport

Segmentation Variables-Air Freight Market

Market segmentation is as important in the air freight
market as it is on the passenger side of the business.
Only if markets are properly segmented can airlines
find a basis for their product, price and promotional
policies.
First segment of air freight demand is that consisting
of Emergency traffic. Emergency situations occur
when goods have to be moved by the fastest possible
mode of transport with the costs of achieving a fast
transit
a
secondary
consideration.
Emergency
situations may be divided into two types- Operating
emergency and Marketing emergency

Segmentation Variables-Air Freight Market

An Operating Emergency occurs when a firm has to
rectify an operational problem. For example, an oil
company may find that one of its rigs has to cease
production because of a breakdown. Every hour of lost
production time will then have a substantial cost
associated with it a cost which can be minimized if air
freight is used to ship the spare parts which are
needed to enable production to resume.

The second type of emergency situation is termed the

Marketing Emergency. Such a situation occurs when a
supplier is in danger of missing a deadline or one of its
customers has expressed dissatisfaction with service
levels. Then air freight is the obvious choice, though
the justification will be based on the maintenance of
customer loyalty rather than cost reduction.

Segmentation Variables-Air Freight Market

The second major segment is Routine-Perishable in
nature-Routine as opposed to Emergency, and
Perishable because the goods in question only remain
saleable for a limited period of time. Perishability
occurs for two reasons.
Physical Perishability describes situations where goods
physically deteriorate. Cut flowers and soft fruits are
good examples of this. A more profitable option might
be to send the flower to distant markets where they
will have scarcity value. Then, though, air freight will
have to be used in order to ensure that the goods
reach the market in a saleable condition.

Segmentation Variables-Air Freight Market

Economic Perishability is the second type. It occurs
not when goods are prone to deteriorate physically,
but when the Life Cycle within which they remain
saleable is a short one.
Newspapers have been such a commodity. Other
examples include fashion clothing, children's toys, and
pop music CDs.
These goods can be sold in large quantities and at
good prices if they reach the market when demand for
them is still rising rapidly.
Air freight often provides the only realistic way of
ensuring that this happens, at least in long-haul
markets.