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Introduction
In many ways current marketing activity of airlines is following traditional and
well-tried methods which reflect decisions regarding the product/service
provision of routes, seat allocation and types, in-flight and ground-based
services, the price structure, distribution channels and promotional activity.
The marketing environment, however, is becoming more competitive, as the
international market is expanding and airlines are returning to profit after the
recession of the early 1990s (Betts, 1994). Many developments have been
technologically pushed: thus larger aircraft have increased capacity, leading to
reduced real fares and improved many aspects of the in-flight experience
(though the tendency to larger aircraft might now be ended (Skapinker, 1995a));
computer reservation systems have simplified flight booking; airport
infrastructure investment improved the pre- and post-flight aspects of travel;
computer systems to manage reservations and yields; and investment in air
traffic control systems and flight navigation systems improved the punctuality
of airlines.
The change from former conditions of relative monopoly and regulated
competition on some routes is challenging airlines to pay greater attention to
their customers and marketing effort is becoming more important. This is
alongside the efforts to reduce costs by new arrangements with employees
(e.g. Robinson (1994)), the outsourcing of non-core services (catering,
administration, ground handling, maintenance, etc.) and the rationalisation of
distribution channels. Cost reductions and improved efficiency are symptoms of
Journal of Marketing Practice:
Applied Marketing Science, Vol. 5
No. 5, 1999, pp. 134-150. MCB
University Press, 1355-2538 John C. Driver
structural change in the industry which has more obvious manifestation in the Developments in
expansion of networks as airlines form various kinds of alliance, including code airline marketing
sharing, and they specialise on particular routes or sectors, increasingly to practice
benefit from the hub and spoke organisation.
Airlines are complex organisations and the traditions and practices of
production orientation, which was fostered by the monopolistic practices of a
regulated industry, are not easily overcome, but good marketing, in its many 135
forms, is increasingly seen as the key to airlines competitive success.
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impressive. One estimate put this at some 15 million round trips with a $100m
per year brokerage in the USA buying/ selling air miles (Humphreys, 1991) and
another put it at 76 million free domestic trips in the USA due to 32 million
people enrolled in an average of 4.7 FFPs (Arnesen et al., 1997). Airlines with
FFPs (now over 70) gain potentially valuable direct market research from the
enrolments to their programmes and joining bonuses are offered frequently as
an incentive.
As a device for encouraging flights, and as a means for employees to receive
substantial fringe benefits from their employers, FFPs have been conspicuously
successful. However, airlines have to ensure free passengers are not at the
expense of ASMs for fare paying passengers and that the value given is
ultimately cost-effective. Under the increasingly competitive conditions airlines
are seeking to reduce their costs of FFPs, so apart from ticket restrictions on
certain flights/times or routes, the giving of other benefits accommodation,
entertainment, etc. is a way of ensuring against a direct diminution of airline
revenue. Moreover, the involvement of partners helps to defray the costs of the
incentives of both parties. Certainly as a competitive device in contested
markets, FFPs are a prerequisite for inclusion of an airline in the travellers
choice set and may even become a crucial determinant.
The wider implications of FFPs are not without significance. With the tying
of promotional flights to a particular carriers routes, FFPs are clearly more
attractive to travellers for airlines with large route networks. This may lead to
concern about an impediment to competition, the more so since the existence of
FFPs can be seen as a barrier to new entrants to the airline industry. To some
extent this may be ameliorated or increased where there are partnerships
between airlines through code sharing or other agreements for the
reciprocal use of air miles.
Moreover, the attractiveness of air miles as an incentive extends beyond the
airline industry. In the UK, air miles offer benefits of flights for non-flight
related products (though British Airways was a significant shareholder) and
credit/charge card companies have tied miles/points to cumulative expenditure
through their cards. For instance, American Express offers points for each
pound spent, with 10,000 qualifying for an economy return London-Dublin
flight on Virgin Freeway (American Express, 1995).
As air miles from these proliferating opportunities are consumed by the
relatively small up market, high income business segment, so travel agencies
commissions, for flights which might have been taken through them, are
JMP: reduced. Also they are denied a source of market research information from
AMS which they too could benefit. Ultimately if travel agents income is threatened
5,5 then the CRS services, which they operate, will require increased commissions
and the net benefit of FFPs to airlines will be reduced as changes in distribution
channels are required.
With the possible transfer of net benefits from the fare paying public to
140 employees, either through a general increase in airline (marketing) costs and
thus prices per mile, or through the subsidisation of employees on required
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they have lacked the credibility of other American brands in the world market-
place and the natural association of national brands, and each was previously
mainly a domestic carrier, with Pan Am and TWA being foreign carriers (even
in the USA they are seen as essentially the same, with similar route structures,
fares and levels of service) (Underwood, 1997). American launched its first
image campaign outside the USA in January 1996, with a $30 million media
budget; Deltas $30 million sponsorship of the Olympic games in Atlanta in
1996 owed much to its global aspirations (Nelms, 1996b) and United has split its
domestic and global advertising accounts in part to transform its image as a
newcomer, when in fact it is the worlds largest airline.
Communication style is a complementary feature to corporate image and is
well exemplified in airline advertising. Contrasts may be seen in the rather
jokey, but attention grabbing and informative, approach of the Australian
airline Quantas with its print advertisement message Introducing a
breakthrough in aircraft design. Wings. every Business Class passenger now
gets their own wings. Theyre built into the headrests of our new seats In
1979, Quantas originated the idea of a dedicated Business Class. It was a
breakthrough in the way business passengers fly. Sixteen years later we are
making the idea take wing again. This contrasts with the somewhat defensive
and staid Delta Airlines advertisement in the UK press with text Delta airlines.
Youll love the way we fly. We believe our passengers love the way we do things
According to the US DoT, Delta last year received fewer complaints than any
other international carrier (and this from a nation that likes complaining a lot)
There is no big secret to our success. We have nice people to serve good food
in comfortable surroundings. Any airline could do it. Fortunately for us not too
many do. But dont take our word for it, fly with us. Last year we carried 87
million people. We cant guarantee they all loved the way we fly. Its just a
suspicion. This is somewhat ironic given reports that as a result of cost cutting
and staff reductions its reputation for customer service was threatened (Sidel,
1996).
The search for the relevant discriminating factor to influence brand choice
finds many means of expression. Two further examples are contained in a
single Lufthansa 1995 advertisement namely attributes of its FFP and flight
cuisine: How many reasons can there be for joining an airlines frequent flyer
programme? 10,000. Thats how many bonus miles well credit to your miles
and more account when you join. So with Lufthansas reputation for service
including award-winning cuisine there is something to look forward to. As for
JMP: other products and services, the airlines advertising accounts are increasingly
AMS open to competitive agencies in the quest for more effective advertising.
5,5
Communication and the Internet
The use of the Internet by airlines to communicate information is becoming
prevalent, from relatively slow beginnings in the middle years of the decade.
144 This relates both to hard information, in the form of schedules and the
availability of fare information, and to the softer areas of more general company
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information. Web presence is itself significant but the design of the site even
more important. From a consumer perspective it must be relevant and useful,
with easy navigation features so that the time spent on a visit is fruitful.
Moreover, the site should invite revisiting for there is a critical difference in the
initial motivation to visit and to contact again. In addition, incentives to register
an e-mail address, so that relevant communications can be transmitted at a later
date, is also desirable. Management strategies to encourage visitation include
the facility to pursue carefully selected other sites which should be constantly
updated. Clearly access to other forms of country and destination data are the
kind of links suitable for an airline, as are other travel related services such as
hotel listings, car rental information, currency conversion data, visa
requirements, etc. A useful non-commercial site to link to any specific airline is
http://w2.itn.net/airlines/
Web presence is increasingly seen as a way of communicating brand
personality, which should be consistent with other forms of corporate
communication. It should reflect the investment in brand development and
provide reinforcement of all other marketing activity. Yet the Web offers the
chance to communicate additional attributes and site style is extremely
important, if difficult to articulate and quantify. In principle, the site offers a
one-to-one relationship to the visitor and should have immediately
communicable positive features. This is more difficult to achieve with an
international audience. There is the issue of differing languages which
Lufthansa only partially solves with four non-identical Web sites for German,
Swiss, Dutch and UK offices (Rosen, 1996) and the tradeoffs that have to be
made in the balance between textual and graphic information which affects
download time and colours the consumers perception of the data.
Brand personality is an elusive entity, but where there is an association with
a well-known and credible personality, brand associations are enhanced. This,
of course, is the reason for so much celebrity advertising for other products. For
the airline industry an appropriate example is Richard Bransons Virgin
Airlines, where the generic features of his diverse brands, customer service,
quality, warmth, honesty and youth (Bird, 1997), translate and complement the
airlines image. Consistent with this was the personal statement Welcome to
Virgin Atlantic on the Web. Since taking off in 1984, Virgin Atlantic has been
different from other airlines. Weve led the way with customer service, new
technology and innovation so, its great to be the first UK airline to publish
information on the Internet (July 1995). Notice that the claim reinforces the Developments in
image of technological and marketing innovation. airline marketing
Communication is only relevant if it leads eventually to some expression of practice
consumer behaviour in brand selection or in terms of purchase. The Internet
has the unique ability to marry these two aspects and to make action possible
on the receipt of information. The business traveller, in particular, is
increasingly empowered to arrange travel through use of the Internet. From a 145
lap/desktop PC airline schedules are becoming more accessible and although
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Code sharing
All aircraft flights are designated by codes which signify the operator by two
letters, though with the proliferation of carriers three characters are beginning
to be used and the flight, by number (IATA, 1994). Code sharing, in one form,
is the use of a single code for different operators on an inter-line journey. The
inter-line connections are necessary when airlines are not of sufficient size to
provide online connections of sufficient frequency and extent. Thus BA is
proposing a code sharing arrangement with Iberia to achieve greater
penetration in Latin American markets (Elliot, 1997). Code sharing clearly
requires close co-ordination of the participant airlines at least for the routes
concerned; a relationship which preserves independence for operations
elsewhere and is more limited than formal mergers and other structural
arrangements for an extensive discussion of airline alliances see (Burton and
Hanlon, 1994). Essentially code sharing has been portrayed as a marketing
device, as a consumer oriented initiative.
Certainly, if a complex route involving changes of aircraft and carriers can be
designated by a single code there is an apparent simplicity to the journey at the
time of booking. In practice the characteristics of the flight may be little
changed from a non-code sharing inter-line flight on the same route though
baggage may be checked through to the final destination. The advantages,
however, are more for the airlines concerned than the passengers, though the
code sharing does contribute to the continued existence of connections as the
airlines assume mutual interests. Indeed code sharing can be the initial step for
changes in the ownership structure of the airlines, typically where (if allowed) Developments in
smaller airlines are absorbed into larger ones. airline marketing
Code sharing, however, has some explicit disadvantages from a marketing practice
perspective where customers discover by experience the true nature of the
flight, especially if there are differences in the standards of service provided by
the co-operating airlines. This may be most conspicuous where a presumed jet
flight route with higher levels of comfort, lower noise, vibration, etc. 147
partially comprises stages with turbo-prop aircraft. This mismatch can
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Conclusions
As airlines have had to become more competitive, they have striven to reduce
costs, primarily through the reduction of staff and the outsourcing of non-core
activities. Their prime competitive advantage is the network and scheduled
flights, and consideration of these is the key criterion of consumer choice.
Network rationalisation and expansion have been a dominant strategy and this
has widened the basis of competition as airlines, dominant in some areas, seek
to penetrate or expand in new ones. To facilitate this marketing competition has
been concentrated on corporate branding both to attract customers and to
JMP: establish strong distribution. Branding has tended to permeate marketing
AMS oriented airlines and has served as a focus for staffing initiatives as services
5,5 ancillary to the core product of transportation act as discriminators between
airlines. Travel is an experience good (though consumer perceptions prior to
experience are important) and satisfactory service or better is likely to be
rewarded with renewed patronage. Thus, all features of the travel experience
148 need to be coordinated and offer efficiency and value for money. Any negativity
in the travellers experience will prompt more active consideration of
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alternatives.
Marketing competition centres on the communication of precisely what
services are offered, though given the complexity of pertinent information the
consumer must be attracted and prepared to invest time and effort in more
detailed consideration. This task has traditionally been eased by the specialist
services of travel agencies or airline direct sales outlets. However, part of the
airlines moves to reduce costs has threatened the structure that is based on
computer reservation systems and complementary systems. There is increasing
evidence that the development of interactive Web sites can fill this gap and
electronic systems of ticketing, billing, emplaning, are all tied to this
development.
Traditional marketing devices will have to adapt to this new environment.
Corporate advertising will help establish presence and promotional offers
provide consumer incentives to consider particular airlines. The longer-term
future of FFPs looks more uncertain as are the best strategies to retain the
business traveller. Some airlines are investing in premium services at high
prices where they believe status, exclusivity and exceptional levels of service
are demanded. Others are abandoning such services at least on some routes.
The mass market is expanding and this increases the scope for niche
marketing, which is so evident in the operations of budget airlines, supersonic
flights and the charter sector. Code sharing, however, is currently tending to
blur the underlying consumer preferences for distinctive services which will
ultimately lead to further changes in industry structure as cost levels,
economies of scale and scope and effective marketing shape the new order.
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