Fluent Essays

Analyze the following case study from the Hunt Library: Hudson, S. & Hudson, L. (2017). Marketing in Action: Low Cost Airlines Take Off. (Links to an external site.) In M. Waters (Ed.), Marketing for tourism, hospitality & events: A global & digital approach. London, UK: SAGEThe case explains the growth in popularity of budget airlines and how low cost airlines are expanding their services to meet the needs of the global market. After reading the case study, address the following topics: Choose three airlines and compare/contrast the different pricing strategies they are following.What benefits do airline customers seek when they buy air travel tickets?What external and internal factors affect airline pricing decisions?RequirementsInclude the following requirements in your case study assignment:Title page with your name and assignment number and title.References using current APA (Links to an external site.) in-text citations.Written in essay format with at least three sections: an introduction, body (using subject headers, address the 3 topics), and wrap-up or summary. marketing_in_action_low_cost_airlines_take_off_case.pdf Unformatted Attachment Preview Marketing in Action: Low Cost Airlines Take Off Case Author: Simon Hudson & Louise Hudson Online Pub Date: January 02, 2018 | Original Pub. Date: 2017 Subject: Pricing, Competitive Strategy Level: Basic | Type: Indirect case | Length: 1350 words Copyright: © Simon Hudson and Louise Hudson 2017 Organization: Norwegian Air | Organization size: Large Region: Global | State: Industry: Air transport Originally Published in: Hudson, S. & Hudson, L. (2017). Marketing in action: Low cost airlines take off. In M. Waters (Ed.), Marketing for tourism, hospitality & events: A global & digital approach. (pp. 56-58). London, UK: SAGE Publications, Ltd. ISBN: 9781473926639. Publisher: SAGE Publications Ltd DOI: http://dx.doi.org/10.4135/9781526446466 | Online ISBN: 9781526446466 SAGE © Simon Hudson and Louise Hudson 2017 SAGE Business Cases © Simon Hudson and Louise Hudson 2017 This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes. 2020 SAGE Publications Ltd. All Rights Reserved. This content may only be distributed for use within Embry Riddle Aeronautical Univ. http://dx.doi.org/10.4135/9781526446466 Page 2 of 6 Marketing in Action: Low Cost Airlines Take Off SAGE © Simon Hudson and Louise Hudson 2017 SAGE Business Cases Abstract The case explains the growth in popularity of budget airlines and how low cost airlines such as Norwegian air are expanding their services into long haul flights across the globe rejecting the traditional model of budget airlines focusing on domestic and short haul flights. Case ‘No-frills’ is the latest buzzword for the airline industry around the world where cut-price companies such as Ryanair are taking it to the extreme. The Dublin-based airline, the second biggest international carrier in the world, is spearheading the move towards very basic, cheap continental travel with no complementary food and beverage services, very low luggage allowances, tight cabin space, high charges for excess baggage, and other surcharges for extras, such as wheelchair service. Also, cut-price flights often use smaller, secondary airports, sometimes situated far from city centres (Ryannair frequently uses Stansted instead of Heathrow). There are also compensation limitations if flights are delayed: passengers may not be eligible for food and accommodation since most cut-price airlines are not part of the EU’s Passenger Service Commitment. Figure 1 Low-cost airline Norwegian reaching 500,000 UK passengers on its ground-breaking low-cost long-haul flights to the US Page 3 of 6 Marketing in Action: Low Cost Airlines Take Off SAGE © Simon Hudson and Louise Hudson 2017 SAGE Business Cases Source: Norwegian.com Despite the disadvantages and potential discomforts of cheap travel, price is the bottom line and passengers are vying for seats sometimes offered as low as $25 for one-way European flights. This only covers the flight taxes and service charges so basically the seats are sold for free. There are about 60 low-price airlines within Europe, including Geneva-based Flybaboo. Many have recently failed in this volatile, cut-throat market – such as JetGreen, Duo, JetMagic, V Bird and Volareweb.com. Similar price-cutting has also been happening throughout India, Asia and the Middle East. SpiceJet, an Indian low-fare airline, competes with Kingfisher Airlines Ltd and Air Deccan for the lucrative domestic market. Within India, with its increasingly prosperous emerging middle class, there has been a shift from train travel to the quicker and more efficient air travel. Air travel demand continues to rise, with around 100 million people choosing air over travel by land, thanks to low fares and also improved in-flight amenities and service. This has been partly due to government deregulation but also to the fierce competition between airlines which has transformed the industry from its original reputation for poor service to an efficient and comfortable option. Low-cost air travel is mainly distributed via the Internet in India. SpiceJet sells about 70 per cent of its seats on the Internet and also reduces its overheads by utilizing its aircraft for a full 12 hours per day as well as aiming to fill up each flight with at least 80–90 per cent loads. In Southeast Asia, likewise, a fierce price war erupted in the budget airline market during the 2000s, in sharp contrast to its traditional high-price flights. To gain market share and capture public attention, low-cost carriers offered one-way tickets from Singapore to popular destinations such as Bangkok for less than US$1 each. The lowest price was 59 cents which Tiger Airways offered for one-way tickets to three different Thai desPage 4 of 6 Marketing in Action: Low Cost Airlines Take Off SAGE © Simon Hudson and Louise Hudson 2017 SAGE Business Cases tinations. In retaliation, Thai Air Asia offered a 29-cent ticket to Bangkok, delighting consumers who would normally pay around US$250 return for Singapore to Bangkok flights. Finally, in the Middle East, the region’s air transportation sector is becoming increasingly segmented, as new start-up airlines emerge to challenge the incumbent Middle Eastern carrier Emirates, for a share of the global aviation pie. Low-cost carriers, like Air Arabia and Jazeera Airways, launched in 2003 and 2005 respectively, were prompted by the success of low-cost pioneers in North America and Europe, as well as the opportunity to offer a wide choice of prices and options on intraregional flights compared to legacy rivals. Three Middle East airlines – Emirates, Qatar Airways and Etihad Airways – are even challenging American domestic airlines for market share. In 2014, they increased their number of US flights by 47 per cent across 11 US cities. As well as offering ‘old-fashioned service’ with hot towels, flying nannies, onboard showers and first-class bars, these Gulf competitors are taking over the lion’s share of Airbus and Boeing orders, putting most of the industry’s long-haul international growth in their hands. Rivals complain that the government-owned Gulf airlines have huge financial advantages that create an uneven playing field. In more recent years, discount airlines have started to bring lower prices to longer-distance services. The largest discount airline in the Philippines, Cebu Pacific Air, for example, is planning to invest around $4 billion by 2021 in Airbus passenger jets in order to meet the growing demand for cheaper flights from Filipino expats living all over the world. In an article in the Nikkei Asian Review, the airline’s plans to expand its medium-haul operations, including flights to Japan, were outlined: ‘Recently, Cebu Pacific announced it will start operating four flights per week to Australia and three to Kuwait, possibly in September. The prices will be about 30 per cent lower than those of competing services.’ This trend among budget carriers to shift their focus from domestic flights to international services is being driven by deteriorating earnings in the short haul market, the article maintained: ‘The companies’ traditional strategies for sales and profit growth are starting to lose effectiveness amid ever-intensifying competition.’ Norwegian Air is a good example of a low-cost carrier that has expanded aggressively across the world, and as a result of the new low fares they brought into the US, domestic carriers have lowered their prices to compete. A Norwegian Air ticket from San Francisco to Copenhagen with a layover in London can often be cheaper than a sole ticket from San Francisco to London. Norwegian gets away with charging rock-bottom prices by taking advantage of low operating costs and charging passengers via an à la carte model. Passengers who book air passage on the airline get just that; baggage, seats and food all cost extra. Conversely, a legacy airline such as American, Delta or United usually provides all of that bundled together with their international fare. In April 2016, Norwegian reached 500,000 UK passengers on its low-cost long-haul flights to the US (see picture above). Norwegian first launched the flights from Gatwick Airport in July 2014. As of May 2015, Norwegian was offering low-cost flights to seven US destinations from the UK – New York, Los Angeles, Boston, San Francisco Oakland, Orlando, Fort Lauderdale and Puerto Rico – with fares from £135 one way. According to Grant Martin from Forbes, for travellers, the spread of the international low-cost carrier is only good news. ‘Frugal travelers now have an ultra low-cost approach to crossing the Atlantic without the comforts or ancillary fees associated with legacy carriers. But the rest of the consumer base also profits by the competitive fares that the legacies are forced to publish. In the end, everyone gets across the ocean for a few dollars less.’ Discussion Questions 1. Pick three of the airlines profiled in this chapter and discuss the different pricing strategies they are following. 2. What are the key factors that influence the price of a flight ticket? 3. Do some background research – are the Middle East airlines – Emirates, Qatar Airways and Etihad Airways – still challenging American domestic airlines for market share? Page 5 of 6 Marketing in Action: Low Cost Airlines Take Off SAGE © Simon Hudson and Louise Hudson 2017 SAGE Business Cases References Bagri, N. T. (2014). ‘A peacock replaces a worn airport in Mumbai’, New York Times, Business, 15 January: B5. Martin, G. (2014). ‘International low-cost airlines drive transatlantic fares into the ground’, Forbes, 30 October. www.forbes.com/sites/grantmartin/2014/10/30/international-low-cost-airline-drive-transatlantic-fares-into-theground/#4b4d83f77033 (accessed 7 December 2016). Matthews, C. (2013). ‘Heathrow chief has high hopes for growth’, Financial Times, National News, 12 August: 3. McCartney, S. (2014). ‘Now landing: Touch challengers’, Wall Street Journal, Personal Journal, November 6: D1. Park, K. (2006). ‘Flying high on low costs’, The Hindu Business Line, 12 March: 11. Srivastava, T. (2016). ‘Fare war heats up summer skies, Air India offers tickets at Rs. 1,499’, Hindustan Times, 22 May. www.hindustantimes.com/business/fare-war-heats-up-summer-skies-air-india-offers-ticketsat-rs-1-499/story-9jnGCerzp2afmoYD7gFr5M.html http://dx.doi.org/10.4135/9781526446466 Page 6 of 6 Marketing in Action: Low Cost Airlines Take Off ... Purchase answer to see full attachment