Traveling by air has become more convenient than ever before. The airline industry has reached
a critical point in time when critical decisions must be made. Many new airline companies have
swamped the market and it is the customer who decides whether the airline company will earn
profits or not; and finally whether it will survive or disappear from the skies. Relationship
towards the customer is considered to be one of the most important objectives for every airline in
order to optimize customer loyalty and revenues. Despite the latest trends in airline Marketing
and Management, one of the most powerful keys of success in every company is using the power
of relationships to achieve high performance. Shared goals, shared knowledge, and mutual
respect among the employees are necessary preconditions of success.
The purpose of this study is to present the essentials of Customer Relationship Management as
well as basic Airline Marketing and Managerial tools and strategies that are inevitable for
conducting successful airline business. At the same time the purpose of the study is to evaluate
the situation in the private Slovak airline company- Air Slovakia. The study will try to help the
company to realize the importance of customer satisfaction in the highly competitive air
transportation environment and apply a modern conceptions of Airline Marketing and Customer
Relationship Management into practice.
Problem Statement
Only those airlines which manage to estimate trends and risks in the airline business, and adapt
the activities to the needs of customers are becoming leaders in the industry. Successful airlines
accept that the principles of marketing provide a framework for all they do, and set out to apply
these principles as widely and as rigorously as possible
In the competitive travel industry, travel providers are undertaking initiatives centered on
identifying, developing and retaining high-value profitable customers, under the overall banner
of customer relationship management or CRM.
The overall strategic business objective of CRM is to build loyal profitable customer
relationships. Customer acquisition, development and retention are main points to consider. Now
a day’s airlines have used CRM primarily as a competitive “catch-up” rather than a means of
differentiation. Rushing to imitate the customer-oriented initiatives introduced by competitors
many airlines have done little to determine the value to the customer of those initiatives, or to the
business itself. Today, not only are frequent flyer programs a universal cost of doing business,
but even recent innovations such as kiosk check-in, flight-notification systems, e-ticketing,
virtual check-in and Web-based self-service have become commonplace. One of the primary
goals of CRM is to differentiate a company’s services to the customer through personalization,
yet in the airline industry, CRM—at least in the form in which it is practiced today –has become
a commodity, with many services indistinguishable from airline to airline.
EXISTING SYSTEM
CRM - principles, strategy, solutions, applications, systems and ideas for effective customer
relationship management but in the existing system there is no organization provided both
following set of conditions in the existing CRM.
PROPOSED SYSTEM
In the proposed system there comes a new thing, which makes the CRM Airlines Industry more
efficient and providing good service and quality.
Customer Relationship Management can have a major impact on an organization through:
shifting the focus from product to customer
streamlining the offer to what the customer requires, not want the organization can make
Highlighting competencies required for an effective CRM process
ü Effective turn-around-time
ü Provision for creating and managing folder hierarchy for managing clients and their
documents.
ü Comprehensive security with various permissions like Read Only, Write, Delete, Full
Control, Owner etc.
MODULE DESCRIPTION
The system “CRM for Airlines Industry“ consists of 4 modules.
1. Admin Users
2. Normal Users
3. Authentication
4. Reports
Admin users - Has full access to all the modules of this system. Responsible for the all
Customers and services of airlines industry. Prepares and submits also Daily Reports, petty cash
replenishment, and Tickets Report.
Normal users(Customers) – Has restricted access. i.e., Normal users have access to some of the
modules only i.e. user can see the Fare list of all Flights, timings and can purchase online.
Authentication Module: In this module the username and password verification will be done
automatically. And can change the password
Reports: All frequently used reports at the click of a button All reports can be previewed, printed,
exported to Excel/Word etc., or can be faxed or emailed
FEATURES TO BE IMPLEMENTED
· Session management
· Connection pooling
· Normalized database
· Design patterns
· Three-tier architecture
· Maintainability
· Exception handling
· Client-side validations
TOOLS/TECHNOLOGIES TO BE USED
· Web Presentation: HTML, CSS
· Client – side Scripting: JavaScript
· Programming Language: Java
· Web based Technologies: JNDI, Servlets, JSP
· Database Connectivity API: JDBC
· Build Tool: ANT
· Debug Tool: Log 4J
· Backend Database: Oracle/SQL Server/MY SQL/MS Access
· Operating System: Windows XP/2000/2003, LINUX, Solaris
· J2EE Web/Application Server: Tomcat/Web logic/Web sphere/JBoss/Glassfish
· IDEs: Eclipse with My Eclipse plugins/Net Beans/RAD
· Browser: IE/Mozilla
HARDWARE REQUIREMENTS
· Pentium processor -------- 233 MHZ or above
In the aviation industry, good customer experiences are of great significance. Customers are the
most important factor in this industry, because airlines depend on their customers – without
customers, airlines would not exist! Therefore, companies have to understand the people’s needs
and wants in order to deliver unique experiences. This can be done by making the customer feel
special with a more personalized experience or sending a follow up e-mail, for example.
Emirates, for instance, provides the so called ‘Knowledge-driven Inflight Service’, which makes
it possible for the airline crew to review previous trips customers have taken with the carrier
before. Thus, they know about the customer’s preferences and issues that might have occurred
during their previous travels (R. Kollau, 2012). Based on that, improvements can be made and
personalized service can be provided.
Focusing on Ryanair, some people have complained about them and their customer service in the
past. However, real life examples show that they do provide personalized customer service;
when a woman claimed for a refund because her mother-in-law passed away, she received a
reply within hours with kind words and the acceptance of refunding her trip or when a passenger
was sick during the flight and directly received the attention and help of the cabin crew (Ryanair,
2015). This shows that the company puts effort in providing good customer service and shows
understanding for customer’s situations. Nevertheless, focusing on the company’s personal
contact hours, they offer service of 12 to 13 hours on workdays and personal live chats during
the day (Ryanair, 2015), whereas KLM for example, provides a 24/7 customer service (KLM
Royal Dutch Airlines, 2015).
Unfortunately, many times passengers have complaints about their journey, often already during
the booking process. For instance, hidden costs occur at the last moment or problems with
payment methods arise. People get frustrated and search for a different flight. In this case,
companies can use the path analysis, which allows them to analyze the path customers take
through the internet. Google, Expedia, advertisement on social media or directly via the website
are some examples of different paths. Thus, airlines can recognize where problems occur and
based on that, change certain tools to create a good and easy path through all different channels,
as this leads to the purchase of products.
Moreover, airlines maintain points of interactions, for example at the booking process, the check-
in, the boarding and the inflight experience itself. Companies should use the richer data to aim to
exceed their expectations (Clayton & Hilz, 2015). For instance, some passengers might have
seating preferences, while others are more concerned about food and beverages during the flight,
because certain health issues might exist.
Once a relationship with a person exists, companies aim to seek loyal, repeated customers. To
find out how they perform and how willing they are to continue the relationship, the retention
analysis is a beneficial tool to apply. It is used to keep up with customers and to follow their path
to prevent them from dropping off the customer lifetime pyramid. This kind of marketing
activity is considered to be the most responsive one, as by knowing what the customers’ needs
are increases loyalty. Flight upgrades and club memberships might be a good service to
accommodate customers, such as KLM’s Flying Blue. With this offer, customers earn miles and
enjoy exclusive benefits every time they book a flight with KLM, Air France or other partners
(KLM Royal Dutch Airlines, 2015). Emirates on the other hand, provides special offers to
business and first class customers, for example a complimentary Chauffer-drive service to the
airport and to the final destination. Also families receive special services such as special
entertainment for children during the inflight and the provision of complimentary strollers at
Dubai airport (Emirates, 2015).
Nevertheless, some customers are likely to discontinue using the product or service an airline
offers. To identify those customers and to find solutions to bring them back, the Churn analysis
is used (StatSoft, 2015). In this case, the companies have to examine the causes and based on that
make improvements.
To conclude, good and satisfying service always has to be provided throughout all channels in
the airline industry, especially because customers are most valuable for the companies. There is
always a risk to lose customers, but by following their paths and by using rich data to meet the
customer’s expectations, this risk can be lowered, and therefore, it will be beneficial for both
parties, the customers and the company’s financial aims.
Last but not least there is a question of cabin comfort. This factor doesn’t play a big role on
short-haul flights but especially on long-haul flights. Comfortable seats within Business and
Economy Classes play important roles, as well as the material of which the seats are made.
Preferably, leather seats don’t only look well; they are also very practical from the
maintenance point of view. Initial costs are higher, but return on this investment is profitable
in the end. Leather seats are easier for cleaning and the life-expectancy is very high compare
to the textile seats.
Number of lavatories is crucial for the comfort of passengers. This is a question of a certain
type of an aircraft the company is using for its flights.
Entertainment system on a high level can be valued by the passengers on long-haul flights.
High leveled entertainment system means TV screens which work, audio system must work
perfectly and the selection of movies and audio channels has to follow up the latest trends.
Modern airline companies rebuild their aircrafts constantly so their passengers have individual
TV screens even in the Economy Class. Although this innovation is quite expensive and many
air carriers can’t afford it, individual TV screens in the Business Class should be a
commonplace.
Relationship Marketing Strategy. The Business Travel market requires a special strategy of an
air carrier towards a business traveler. Business travelers travel a lot and they are able to
compare services on board of different airline companies. The Business travelers are also very
attractive for airlines because once they get used to a particular company, they can be loyal
during the whole lifetime or career which can last over twenty years and this can return in the
high revenues. (Shaw, S. 2004) Therefore it is very important for an air carrier to hold a
special database of its top customers who should be treated in a special way. The database
should be a core of the Relationship Marketing strategy developed to build up the loyalty of
the customer and to reward the customer at the same time.
2 The Marketing Environment
Marketing policies of an airline company must evidently reflect the structure of its market.
Marketing theory provides a standard model for identifying the company’s marketing
environment. There are five categories in this model: Political, Economic, Social,
Technological and Environmental. In this study the stress will be put on the Political Factors
only. From all the political factors the study will focus on the Political fear called terrorism
and how it threatens the airline industry.
On the other hand the study will have a look on the Open Skies Treaty that has brought a
deregulation into the airline industry within Europe. Both elements have influenced the airline
industry, and airline companies must adopt a posture on them.
Terrorism- one of the biggest threats for the airline industry. The airline industry is quite
vulnerable, meaning that many air carriers are identified with a particular nation that can be a
target of some terrorist group. (Shaw, S. 2004) It is obvious that a decline of the demand for
air traveling after September 11 is over. Nowadays people travel as much as never before
(according to the statistics of carried passengers) and it means that they are less afraid to fly.
However, airline companies must do their best to prevent themselves from the possibility of
an attack.
Deregulation and “Open Skies Treaty”. During the history of the airline industry
governments have often interfered in the decision making of air carriers. Governments have
controlled where airlines can fly and aspects of their product planning and pricing policies.
They have had a role in regulating airline safety standards, and airlines’ route entry, capacity
and frequency decisions. (Dobson, A.P.1995) Recently, there is a new substantial regulatory
reform that has given the airlines the challenge and the opportunity of responding to an
economic environment which has more freedom. (Williams, G. 2002) Deregulation through
the “Open Skies” Treaty means that an airline company registered in any European country
can operate between any two other European countries. Successful airlines should organize a
thorough and progressing review of their marketing environment, and take new directions in
preparing their marketing policies.
3 Airline Business and Marketing Strategies.
Once the airline company understands the needs of its customer and the marketing
environment, the next necessity is to choose the most suitable strategy for the business.
There are several strategies in the airline industry and each of them can be particularly
successful. According to Stephen Shaw there are several types of airline business strategies
which will be introduced in this study.
Marketing Strategies in the airline industry can be defined as a Positioning, which is a tool for
getting a competitive advantage. The company must decide what type of segments in the
market it intends to enter and what type of position it wants to hold in the market. Positioning
of a product in the market presents a way how consumers sense the product’s attributes
comparing them to other similar products.
Positioning is storing the information about advantages of the brand and its differences in the
costumer’s minds. For example, in the automobile industry, Toyota cars represent reliability,
Mercedes and Cadillac represent luxury segment, Porsche and BMW are considering as sports
cars and Volvo is a synonym of safety.(Kotler, Armstrong. 2004) The same differentiation is
known in the airline industry. Southwest Airlines, Ryanair or SkyEurope Airlines are
considered as companies which offer inexpensive fares without any frills on board. Emirates
on the other site represent traveling on the highest level and Qantas Australia is well known
for its safety- the company has never had a fatal accident.
According to M. Porter in his Competitive Strategy, there are several strategies which
the airlines can achieve success from – Cost Leadership Strategy, Differentiation Strategy and
Focusing Strategy. There is also fourth position called Lost-in-the-middle according to Porter.
The study will briefly go through these strategies and try to find the most suitable strategy for
Air Slovakia.
A Cost Leadership Strategy in the Airline Industry
The concept of Cost Leadership strategies is not new in the airline industry. It has it’s
deep roots in 1973 when Southwest Airlines, the pioneer among the low cost carriers, was
established. Southwest Airlines is one of the most successful airlines in the world and it is an
airline company with a profit for 35 consecutive years. (Information obtained from
Southwest’s web site) The airline became profitable in 1975 and has stayed profitable ever
since that time, which is remarkable comparing to other airline companies fighting with
financial problems. Fortune magazine called Southwest Airlines “the most successful airline
in history” and the same magazine placed Southwest on the list of the “100 Best Companies
to Work for in America”. (Gittell, J.H. 2002)
This study will focus on Southwest Airlines later on when talking about using relationships to
achieve high performance. Then, in the middle of 1990s, the Low Cost Model has spread
rapidly to the whole world. There are several Low Cost air carriers operating in Europe, the
largest ones are Ryanair, easyJet, and SkyEurope Airlines. There are many low cost
companies around the globe and they have endeavored that air travel is now accessible to
many people. One of the most fundamental requirements for a successful low cost air carrier
is achieving and sustaining simplicity in business process. (Shaw, S. 2005) There are several
basic features of this strategy:
Low Fleet Costs. Most of the low cost air carriers are pursuing a “fleet-commonality” policy,
which means that the company operates only one type of aircraft. This was originally an idea
of Southwest Airlines. Sole type of an aircraft means lower maintenance costs, lower costs
regarding training of the crew and cabin crew and in the end the better purchasing prices for
the airplanes. For example, when Ryanair after September 11 placed orders for over hundred
Boeings 737-800, Boeing Company rewarded Ryanair by very good prices. (Ryanair web
site) Every important low cost carrier operates only one type of aircraft. Southwest, Ryanair,
easyJet, SkyEurope Airlines have in their fleets Boeings 737s, Jetblue Airways, for example,
operate with Airbus A319.
Short Turnarounds / High Aircraft Utilization. An aircraft earns money only when it is in the
air. This means that when the company wants to earns more money, its airplanes has got to be
in the air as much as possible. Low cost airlines have always scheduled turnarounds of 20-25
minutes, compare to 50 minutes or more which is regularly used in the airline industry. The
airplane cleaning is the reason for which the airplane spends a long time at the airport. Flight
attendants working for low cost carriers are obliged to do cleaning themselves. Thus the plane
is promptly ready to board passengers for the way back. This, of course, can be used only
when the passengers are not served food or meals with possible big amount of waste that
could smudge the plane too much. Low cost carriers often use stairs instead of air bridges.
Although the passengers are therefore unprotected in wet or cold whether, the process of
passengers’ enplaning and deplaning is quicker, because stairs allow to use both front and rear
aircraft exits. What might seem controversial is that some carriers do not use seating by the
computer and they announce free seating. It has a positive effect because passengers want to
get the best seats so they are in the gate on time.
Limited On-board service. Meals and drinks that are served on board represent a substantial
part of airlines’ budget. Many companies have approached to a saving-mode, when for
example meals are distributed free of charge only when the flight is longer than 100 minutes.
Some of them only sell the meals for high prices. This step can be unpopular among
passengers, but on the other hand, when the price of the ticket is agreeable they do not mind
giving up their meals. They can purchase it anyway and this helps the airlines to transform the
passengers’ service from a cost item into a revenue.
Point-to-Point Only. One of the main signs of low cost carriers is that they provide its services
from point A to point B without any connections.
Simple Fares. Pricing policy of traditional airlines is often complicated and unclear. The
greater pricing complexity of traditional airlines has often resulted into fifty or more fares on
a particular route. Each fare had different conditions and it was all very confusing. Pricing
policy of low cost carriers is very simple, offering only one price per particular flight. Of
course, the lowest prices can be obtained only by booking well in advance, because as the
departure days near the price increases.
Air Slovakia follows up the model of simple fares. Although some fares might vary from time
to time, the list of all prices can be found on the company’s website. Companies’ web sites
represent the cornerstone of a distribution.
Low Distribution Costs. The accurate distribution channel can save a company a lot of money.
The distribution channel were provided by travel agents which used to charge high fees for
making reservations. Airlines were quite vulnerable to the pricing practices of Global
Distribution Systems which used to charge approximately $4, 5 per reservation. (Shaw, S.
2005) Low cost carriers couldn’t afford to pay such amount of money to travel agents. For
example, $4.5 on a Business Class return fare of $3000 is irrelevant. On the other site, $4.5 on
a $50 fare is certainly not. The answer and the solution to this situation were brought by the
Internet. The pioneer in this regard was the British low cost carrier easyJet which started to
use its own web site for selling the tickets. The idea was soon followed by the other low cost
carriers as well as by the other regular airline companies. Selling the tickets through the
Internet not only saves the money to the company, it also saves the money to the passengers.
It is also very comfortable. It only requires having well arranged and transparent web site with
the company’s own reservation system.
Non-Refundable Tickets. Most regular airlines in the past have had the policy which enables
passengers to return their money in the case of canceling their reservation. Of course, this was
relating to more expensive tickets; however, business travelers whose plans change from
minute to minute and whose schedule cannot be predicted in advance have used this
possibility very often. It has resulted into common and repeated no-show problem. (No show
means that passengers for a particular reason do not come to check-in. Therefore airlines
almost always overbook their seating capacity on certain flights which can be a serious
problem In the case that there are more passengers with valid ticket for a particular flight, the
airline company has to take care of accommodation, and most of all arrange a next flight for
them. Low cost airlines have a policy which doesn’t allow any refunds.
These are several features of Low Cost Airlines which try to break through the airline
industry. Obviously, the low cost strategy features are accepted only by those passengers who
are willing to give up some frills on short-haul flights. This fact can signify the possibility to
combine some basic features from each marketing strategy. The combination of several
factors from each strategy might create a successful and profitable airline company favored by
passengers.
B “Differentiation” in the Airline Industry.
Unlike the low cost carriers, the airline companies which have found the
“differentiation” strategy the most suitable try to follow up the idea of value-for-money.
Those companies that want to be successful through the “differentiation” strategy have to be
innovative and have to follow up the idea of FMA, which means “First Mover Advantage”.
(Shaw, S. 2004) Airlines from the Middle East such as Emirates (Dubai), Etihad Airways
(Abu Dhabi), Qatar Airways (Doha) or Singapore Airlines in Asia, Qantas in Australia and
few others try to be innovative in such areas as cabin comfort, in-flight service or in-flight
entertainment. The concept of First Mover Advantage can be visible in the purchase orders for
Airbus A 380 – the largest double-decker airplane in the world which can offer either larger
seating capacity or more room for luxury facilities which will make the flight an extraordinary
experience. Etihad Airways doesn’t have the cabin separated into classes, rather into zones
which are called Coral Zone (Economy Class), Pearl Zone (Business Class) and Diamond
Zone for the First Class. (Etihad web site, 2007) Emirates Airlines in their Airbus A340s in
it’s First Class offers separate compartments where the passengers can enjoy an absolute
privacy and the highest level of luxury.
Even the walls in the airplanes have special lighting- during the night there are stars on the
walls and as the airplane arrives in the destination in the morning the passenger listens to
birds singing. (Emirates.com, 2007) Qantas- Australian Airlines has a reputation of very
secure company which has never experienced a fatal accident. The very important factor
regarding a passengers’ satisfaction is the customer-contact staff, hence flight attendants. If
the cabin crew members are ill-disciplined, poorly motivated or incompetent, it will have a
very deep impact on the reputation of the company and finally in the profits. Generally, the
companies using the “differentiation” marketing strategy are those which want to be
remembered by the passengers in a best possible way.
C “Focus” Strategies.
Airlines with a “Focus” marketing strategy provide the costumer either a value for money or
lower costs.
“Value Added” Focusing. Airlines which wants to add a value for their passenger has to
provide an unique service that no other rival company can provide. During 2002, German
Airlines Lufthansa arranged a contract with Swiss corporate jet operator Privatair about
corporate jet services on three routes between Germany and USA with an airplane consisting
solely of 48 Business Class seats. The service should be operated by Lufthansa, and is sold
through Lufthansa marketing system. The services are operated by special corporate
narrowbodied
aircrafts, mostly Boeing 737 or Airbus A319. (Shaw, S. 2004) This project is
obviously focused on Business travelers willing to pay money for the value they are given by
the airline. Another example of “Value Added” focusing would be the Concorde flights which
were operated by British Airways and Air France. Although the Concorde was an economic
disaster due to extremely high operating costs; from the passengers’ point of view it was very
successful project. People loved Concorde not only because it could manage to fly from Paris
to New York for less than three and a half hours. Flying by Concorde was a matter of status
and prestige. Despite the high maintenance costs Concorde was a part of the Value Added
strategy until the very first fatal accident of Air France flight from Paris to New York on 25th
July 2000. It crashed 60 seconds after take off after suffering tire blow out which caused a
rapture of fuel tank. All 109 people on board plus 4 in a local hotel on the ground were killed.
(www.concordesst.com; 2007)
Airlines like Air Mauritius or Air Seychelles can gain from what we can call “geographical”
focusing. These airlines are small and they will stay small but their advantage is that they
know the particular country or region where they are based better than anyone else.
Someone on holiday choosing them might feel that their vacation was beginning sooner that
would be the case on Air France or Austrian Airlines where the flight to their holiday
destination would be like any other flight. Particularly Air Mauritius, which was established
in 1967, has now in it’s fleet two newest Airbuses A340-300E, five Airbuses A340-300, two
A319 and other small airplanes as well as helicopters. The company flies to several
destinations in Europe, Africa, Asia and Australia. (airmauritius.com; 2007) The brand new
modern airplanes, three-class service and specific meals, and beverages as well as warmth of
the cabin crew can make the company successful.
“Low Cost” Focusing. The companies which, in the eyes of customers, are known as “charter
airlines” are good examples of low cost carrier choosing focusing strategy. These airlines
used to fly for the tour operators only. These tour agencies used to sell the airplane tickets
together with accommodation and other elements in special packages. Nowadays the situation
has changed and these airlines sell blocks of the seats to tour operators whose primary
concern is the low seat-mile costs. They are using large aircrafts because the capacity is more
important than a frequency, especially on flights the exotic vacation destinations. The
situation facing Europe’s charter airlines is a very challenging today. Many people nowadays
do not require rigid package holidays. The charter airlines like TUI, My Travel or Hapag-
Lloyd have responded to this trend and almost all of them have now set up web sites to enable
at least a proportion of their capacity to be retailed direct to the public. (Shaw, S. 2004)
D Lost-in-the-Middle.
There is one more concept in the aviation industry according to Porter’s Competitive
Advantage model – the firm which is “Lost-in-the-Middle”. (Shaw, S. 2004) These companies
don’t fit to any of the boxes. Their costs are too high for the Low Cost strategy and there is
too little about them which make them distinctive from competitors. They cannot either gain
benefits from the Focusing Strategy because their activities are too broadly-based. (Porter, M.
1980) There are many airlines which are Lost-in-the-Middle in today’s aviation industry.
Italian national air carrier Alitalia or United Airlines from USA are good examples. Both
companies have been recently going through difficult period and their future is unclear.
The companies have to realize the importance of accurate marketing strategy and those which
want to be successful have to design and implement such a strategy in order to survive and
win over the competition.
4 Product Analysis in Airline Marketing.
Once the airline company has chosen it’s strategy the next step is to transform the
basic elements into the product design process. First of all, it has to be clear what the
“Product” within the airline industry means and that it is intangible. The stress will be put on
two areas: Fleet and Schedules-Related Product Features, and Controlling Product Quality.
Fleet and Schedules-Related Product Features.
In this section the frame of reference will focus on the airlines’ point of view – to sell
interesting product which the company will be able to manage financially, because attractive
product are often very expensive to produce.
Cabin Configuration and Classes of Service.
Airline companies which look for the lowest operational costs will place into the cabin
as many seats as safety standards allow. Thus maximizing the number of seats on board tends
to the highest profit. However, maximizing the number of seats on board also means that the
comfort of the passengers will deteriorate. When, for example, Boeing 757 is used by
leisureoriented
airlines, even 235 seats can be placed on board. Air carriers which want to
concentrate also to Business-Travel market can’t afford to operate a single class aircrafts.
Some airline companies offer three class service on board of their planes. First Class in longhauls
flights nowadays is considered to have seats that can be fold down into a horizontal bed.
Emirates in its First Class offers separate compartments which are called suites. The
horizontal bed is at least 198cm long; therefore First Class seats need a lot of space. The trend
in the industry today is to fold down the seats into a bed in Business Class as well. However,
many air carriers have abandoned the First Class on board and focus on enhanced Business
Class. Delta Air Lines, KLM or Air Canada are examples. There are still airlines which still
offer First Class, like Lufthansa or British Airways. All European carriers gave up the First
Class on their short-haul flights and offer only two class service. The airplanes operating
short-haul flights often do not have special Business Class Seats; however they sell the
product as the Business Class. This problem can be solved by flexible cabin dividers which
can divide the cabin into two parts. Anyway, the seating comfort is the same as in Economy
Class. The price, however, is often five-times higher comparing to Economy Class.. Some
airlines therefore don’t fill the seat in the middle thus the passengers have higher comfort.
IV. Results
Air Slovakia is relatively a newcomer in the airline market although it has been
operating for already fourteen years. Since its establishment, Air Slovakia has always been a
private company, operating without any financial help from the Government. Starting with
Boeing 727 and two Boeing 737s, in 2003 the company hired two Boeing 757-200s which are
still the largest airplanes in Slovak air market, enabling to carry up to 200 passengers to
destinations distant more than 7000 km without stops. However, the company has been
recently going through very difficult period during which both of the airplanes were not able
of flying, even due to technical problems as well as legal reasons. The future of the company
had been unclear until October 2006 when Mr. Sidhu, entrepreneur from the UK, bought Air
Slovakia. The new owner has commercial plans to pull the company round. The financial and
technical problems of the company are just a result of incorrect managerial procedures within
the company.
It is about a time for Air Slovakia to develop its own marketing plan and define the mission,
vision, and the goals the company wants to achieve in the future. Following up the latest
trends in the Airline Marketing and Management is inevitable for Air Slovakia in order to
recover from the crisis it had undergone recently, and maintain its position in a highly
competitive airline market. According to the guideline from the Review of Literature section,
the results of the company are following:
1 The Customer – market size, demographics, customer requirements
and attitudes.
Business versus Leisure Air Travel Market
Taking into consideration the extent of Air Slovakia’s flights, it is obvious that the
majority of the passengers belong to the Leisure Air Travel Market. Even though there is a
demand for Business Class tickets on the company’s flights, passengers flying in the Business
Class are rather more solvent than businesspersons. Most of the passengers are price conscious,
especially those flying to and from India. Businesspersons usually cannot afford
the necessary stop in Bratislava on the way to and from India, especially when comparing the
product to the competition-Air India operates the Delhi-Amritsar-Birmingham-Toronto
service . Business travelers, of course, would prefer the flight without stop, which Air India
can offer, even though the price is higher. However, price-conscious travelers prefer lower
price of the ticket to the non-stop flight.
33
Factors for choosing the Airline Company
Except of flights to India and its connecting flights to European destinations such as
Birmingham, Cologne, and Bergamo, there are only three regular flights operated by Air
Slovakia from Bratislava: Larnaca in Cyprus, Tel Aviv in Israel and Kuwait City in Kuwait.
Most of the flights are not operated every day, for example Kuwait City is flown once per
week, and direct flights from Bratislava are certainly a competitive advantage. Slovak
passengers flying to Israel or Kuwait, as well as those from Israel and Kuwait flying to
Bratislava, appreciate that they don’t have to fly to Vienna or Prague. It is more comfortable
for them to fly directly to Bratislava; therefore it is good reason to choose Air Slovakia for
their flight. The most important criteria for choosing the particular airline according to the
Corporate Travel Survey carried out annually by IATA – International Air Transport
Association are:
- Frequency and Timings
- Frequent Flyer Benefits
- Punctuality
- In-Flight Service
In-Flight Service:
A separate Business Class cabin
The Business Class in Air Slovakia’s Boeing 757s is not separated from the Economy
by any curtain or partition, which is quite unusual on long-haul flights. The Business Class is
in the front compartment of the airplane, but the compartment is shared with the Economy
Class, ratio 14 Business and 21 Economy seats. The seats are not leathered and the chairs
certainly need re-upholstering. The Business Class seats don’t have individual TV screens so
the Business passengers don’t have any advantages compare to Economy Class passengers.
What is even worse that the entertainment system doesn’t work, neither in Business or
Economy Class. The pitch between seats is insufficient. Regarding meals, Business Class is
served the same amount of meals as the Economy, only the portion is little bit bigger. There
are only two choices of the meals- Vegetarian and Non-Vegetarian. The meals are served on
plastic trays, beverages are poured into plastic cups and the cutlery is plastic as well. The
passengers are served alcoholic drinks; however an offer of fine wines is missing. The width
of the seat which is not even leathered and the own lavatory that is provided for passengers
are the only differences between the Business Class and the Economy Class.
Of course, there is one flight attendant for 14 passengers, which is nice, but generally, the Air
Slovakia Business Class is far behind the average.
Cabin comfort
Cabin comfort matters very much and when it fails to satisfy the customer, they will
not purchase the product again. There are three main problems about the cabin comfort of Air
Slovakia’s airplanes.
The most important matter is that the number of lavatories is quite insufficient. There are only
two lavatories for 177 passengers in Economy Class. Seven-hours-long flight is too long for
such a small number of lavatories.
The second problem is that the seats are made of cloth, not leather. Leathered seats may have
higher initial costs; however, return on the investment is indisputable. These seats are easy to
maintain, they are comfortable and they look very well which contributes to an overall
pleasant feeling of the passengers.
The third problem deals with the entertainment system.
Entertainment system
The reality in Air Slovakia is that the entertainment system doesn’t work and if it
would the company wouldn’t have an interest to buy movies and audio selections that would
be following the latest trends. It is inevitable for an airline company to entertain the traveler
on a long-haul flight even by magazines or by fine movies. A high-level entertainment system
would certainly please all passengers.
2 The Marketing Environment
Marketing policies of Air Slovakia reflect the structure of its market. From all the
factors of marketing environment, Air Slovakia is particularly influenced by two of them:
terrorism and opening of the European airspace.
Terrorism is one of the biggest threats for the airline industry.
Air Slovakia has implemented new ways of security improvements on board. All flight
attendants have undergone a special training about aviation safety organized by PYRA
Agency in Bratislava. Each cabin crew member is trained how to defuse explosives and they
have been also trained how to deal with the problematic passengers who could be terrorists.
The training is taken each year and besides the theoretical knowledge also trains the flight
attendants practically. The new policy of security checklists was introduced as well.
It means that before each flight, every flight attendant performs an inspection of a particular
part of cabin. The inspection is focused on searching for dangerous and suspicious items. The
security checklist is performed after the flight again. Vigilance of each member of the crew is
essential and the company tries to do their best to prevent from any incident which could have
fatal consequences.
Deregulation and “Open Skies Treaty”.
Deregulation through the “Open Skies” Treaty means that an airline company
registered in any European country can operate within any two other European countries. For
example, before “Open Skies” came into force, Air Slovakia could fly only from Slovak
airports to any European airport. However, after the treaty has come into force Air Slovakia is
free to operate a service between London Stansted and Larnaca in Cyprus, for example. The
treaty has enabled European air carriers to have unlimited opportunities for business. Ryanair,
easyJet or SkyEurope Airlines can operate like they do only thanks to the treaty. Air Slovakia
often operates on behalf of tour operators and airlines from abroad, for example Dutch Bird,
Britannia Airways, Airjet and others. This is an exceptional opportunity for cheap advertising
because many passengers carried by Air Slovakia instead of their home-based air carrier
would have never experienced Air Slovakia if their airlines had not asked Air Slovakia for
flying for them. Thus a passenger from Amsterdam, for example, who has never heard of Air
Slovakia before, spends several hours on board of Air Slovakia’s aircraft. It is, on the other
hand, also the opportunity to hurt or damage the reputation when the service on board doesn’t
correspond to the standards of air carriers abroad. Passengers from Western Europe are quite
sensitive about cleanness of the aircraft, about the age of the aircraft, its equipment,
furnishings, entertainment system, and last but not least the friendliness and professionalism
of the cabin crew.
3 Airline Business and Marketing Strategies.
Once the airline company understands the needs of its customer and the marketing
environment the next necessity is to choose the most suitable strategy for the business.
Several strategies in the airline industry were already mentioned. Air Slovakia is a small
company and it would certainly manage to combine several factors from each strategy in
order to satisfy the customer and increase the profit.
A Cost Leadership Strategy in the Airline Industry.
One of the most fundamental requirements for successful low cost air carrier is
achieving and sustaining simplicity in business process. (Shaw, S. 2005) There are several
basic features of this strategy:
Low Fleet Costs.
Air Slovakia operates one Boeing 737-200 and two Boeings 757-200. The airline
company that operates short-hauls and long-hauls flights can only hardly rely on one type of
aircraft only. Therefore this feature of the strategy cannot be used for Air Slovakia.
Short Turnarounds / High Aircraft Utilization.
For Air Slovakia it would be impossible to use these rapid turnarounds on long-haul
flights to India, Kuwait or Israel. However, there are certainly some routes, like the Collogne,
Bergamo or Birmingham, for example, where the rapid 25-minutes-long turnaround wouldn’t
be a problem with a smaller airplane. Boarding of Indian passengers is also lengthy; there are
always problems with too much hand-luggage and with old and invalid passengers who fly
with Air Slovakia very often. Short turnarounds are impossible to achieve when long-haul
flights are operated.
Limited On-board service.
Air Slovakia could charge passengers relatively high fees for their meals on the shorthauls
flights. Even on the flights to India or Kuwait, the company could charge for items like
headphones for entertainment system or a duty-free sale. The company spends incredible
amount of money for the meals packaging which are not recyclable. This leads to very high
costs.
Point-to-Point Only.
Except of flights to India Air Slovakia operates all flights point-to-point. Flights from
Birmingham, Bergamo or Cologne to Amritsar have a stop in Bratislava. When arriving from
the first destination in Bratislava, all passengers are requested to disembark to the transit hall
at the airport. Then, when the crew is changed and the plane is cleaned and ready for the next
flight, the passengers continue in their journey. Passengers using service of Air Slovakia on
its other flights have to be aware of the point-to-point flights.
B “Differentiation” in the Airline Industry.
Air Slovakia unfortunately has no sign of differentiation; there is not anything that
would distinguish it from other average airlines. Taking into consideration the Boeings 757-
200 which are the largest airplanes operated by Slovak air carrier, allowing a Slovak company
to carry Slovak passengers direct from Bratislava to any exotic destination, range of aircrafts
is the only sign of difference from the rivals in Slovak air market. This is, however, pitiably
too little. There are several areas where the differentiation could take place in Air Slovakia.
C “Focus” Strategies.
Air Slovakia is currently focusing on flights to India or flights for Indian communities in
European cities. However, this type of focusing doesn’t offer anything special to
customers, not even the Indian ones. Taking into consideration that the passengers get Hindu
meals and when the entertainment system works, they can watch Indian movies there is
nothing else that would be different from other rivals. To top it all, one of the main rival, Air
India, flies the same route with bigger and more comfortable Boeing 777 which provides
more lavatories and fine entertainment system, Hindu speaking crew and no annoying stop in
Bratislava. However, the pricing policy of Air Slovakia is on their site. The price for ticket is
lower than the one of Air India or British Airways.
4 Product Analysis in Airline Marketing.
The best punctuality can be obtained only when the company operates new aircraft of
proven technology. (Shaw, S. 2005) Air Slovakia owns one Boeing 737-200. The version
“200” is the oldest version of the 737 series and from 2007 the major European airports will
not allow them to land. The airplane is very old. The aircraft doesn’t look well from the
outside, not even from inside. The interior is quite dingy and there have been events when
passengers refused to fly in that aircraft and they rather gave up their flight-tickets. The new
owner of the company, Mr. Sidhu, has plans for purchasing two younger 737-300s and
replaces the old 200 with them. These plans should be realized as soon as possible in order to
prevent difficulties resulting from the age of the aircraft. The other Air Slovakia’s planes, the
Boeing 757s, are both in their 21st year of operation. The very high age resulted in the summer
2006 Season to constant breakdowns which had put one of the aircrafts out of service for
several months. At the time of writing, both airplanes were able to fly, however the company
cannot expect anything else than periodic breakdowns unless the planes are changed for
newer ones.
Controlling Product Quality.
Air Slovakia as well as other airlines uses a special form called a “Report from the
flight” where cabin crew informs the management of the company about certain problem that
occurred on board during the flight. Thus the cabin crew is insured and protected against
passenger’s complaint in case that the staff is not responsible for the emerged problem.
However, these forms should serve primarily as a tool of detecting and eliminating the
particular problem. Therefore there is a need to constantly deal with these information and try
for instant remedy. Controlling Product Quality has a meaning only in the case the company
is ready to take an action to remedy the problem, otherwise it is useless.
5 Relationship Marketing.
Taking into consideration size and focus of the company, Air Slovakia is not prepared
for its own Frequent Flyer Program. It is a small company dealing with many problems,
preparing for potential growth. The FFP would be impossible to attain.
The company should concentrate rather on building the advocate relationship and complaints
dealing. Relationship towards the customers is not the one and only type of relationship.
Relationships that really matter a lot are those among the employees within the company. Air
Slovakia is a small air carrier and the employees usually know each other. However, the
management of the company doesn’t know its customer-contact staff and the cabin attendants
and members of the customer-contact staff don’t know the people from the management
either. Only one meeting of the cabin crew with the new owner took place in October 2006.
Otherwise, people from the management are not used to meet their employees on a regular
base. On the contrary, Herb Kelleher, the ex-CEO of Southwest Airlines knew most of his
employees by name. For the information, Southwest has around 32,000 employees, Air
Slovakia over 60.
Shared goals, shared knowledge, and mutual respect should also be a part of organizational
culture of Air Slovakia. As long as Air Slovakia is s small company and employees know
each other, the level of mutual respect is very high. Well organized outline for achieving the
shared goals and knowledge should be made up and presented to every employee of the
company.
More or less problems to deal with, Air Slovakia has been on market for more than 14 years.
It is a small company and the competition is very tough, however, the company has a chance
to succeed and to survive. Something needs to be done in order to differentiate the company
in the eyes of customers. Something needs to be done in order to build the “Advocate”
relationship with the customers. The company indispensably needs to define its marketing
strategy and follow up the latest trends in the airline industry when it wants to survive in the
future.
Their pieces of knowledge are important indicators of areas which need an improvement.
Questionnaires and in-flight surveys are also very helpful to know the passenger’s opinion
about the quality of the service. The Complaint Handling Department should be established to
process the complaints and based on it build an “Advocate” relationships with those travelers
who have experienced a service failure.
One of the most important marketing areas which needs to be considered is the power of the
Internet. As long as Air Slovakia operates in the Global Environment, the Internet is
inevitable. Thus Air Slovakia can sell its products and services through and at the same time
promote and advertise itself on international level by the easiest, cheapest, and most
convenient way.
In order to achieve high performance, following Southwest Airlines’ example, Air Slovakia
should use the power of relationships. First of all, the style of managing the company and the
employees should follow the model of “Leadership by Example”. The superordinates in
higher functions should build up a relationship with the rest of the employees. The leading
persons in the company should know each employee personally in order to create a
relationship based on trust and natural respect. An open door policy should be commonplace,
especially when taking into consideration the small size of the company.
Employees of Air Slovakia should be treated well and they should have a true interest in the
company, in the customer, in the civil aviation. They should consider Air Slovakia to be their
own firm. This can be achieved even by a careful selection of new employees and by the
managerial style of the company’s management. When the company treats employees right,
they treat the outside world right, thus the customer is satisfied and buys the product again,
which means that the company is successful and everybody is happy.
The reference to the overall process of flight operations is inevitable for the employees in
order to smooth running of the company. It is called shared knowledge and it means that the
employees should have links between their own jobs and jobs performed by their colleagues
in other functions.
The airline industry has a wide scale of positions and this leads to the fact that some positions
are respected and some are downgraded. Arrogance and inferiority are inadmissible in the
company. Respect for the competence of all employees and positions are essential to the
coordination of work process.
Effective coordination requires frequent, timely, problem-solving communication carried out
through relationships of shared goals, shared knowledge, and mutual respect. Relational
coordination would enable Air Slovakia shorter turnaround times, greater employee
productivity, fewer customer complaints, fewer lost bags, and fewer flight delays.
VI. Bibliography
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