By most accounts, the modern airline industry is quickly approaching market maturity, despite rapid growth in particular locations and sectors. With razor-thin profit margins and the emergence of low-cost carriers (LCCs), airlines have been required to adopt a variety of marketing and cost-cutting strategies to avoid bankruptcy or undesired mergers. Improvements in customer relations and the integration of advanced digital technologies, along with strategic reductions in expenses, offer the potential to keep an airline profitable in a competitive and challenging market.
Much to Learn From LCCs
Larger legacy airlines have adopted some of the strategies employed by LCCs to reduce their expenses and remain competitive. Although they have retained the hub-and-spokes model of connector to provide a broader range of coverage for most locations, legacy carriers have increasingly adopted a hybrid business model that places more emphasis on shorter, point-to-point flights that increase their overall passenger volume. While LCCs maintain newer, more fuel-efficient fleets of a single type of aircraft to reduce maintenance and training expenses, legacy airlines are generally unable to out-compete LCCs in this area and must rely on other approaches to remain profitable.
Improvements in Marketing Techniques Increase Profit
Analytical tools that capture data obtained while customers search for and book tickets, or check in and board, along with surveys or other marketing tools that provide relevant data regarding a customer’s in-flight experience, help airlines gain important knowledge about the preferences of each individual. This knowledge allows for more focused, targeted offerings to the customer’s preferred destinations and increases the likelihood of direct sales for greater revenue, since bookings made through online travel sites are less profitable for the carrier. Customized marketing also increases ancillary revenue, particularly when tickets are unbundled and carriers provide options for upgrades, such as advanced boarding or preferential fast-tracking through the security line.
Digitization Reduces Maintenance Expenses
Technology isn’t used exclusively in the marketing department; greater performance and a reduction in downtime can be achieved with the use of monitoring devices that detect the need for repairs while the aircraft is in motion. When the plane lands, parts and technicians can be ready and waiting, increasing the percentage of on-time arrivals and departures, along with the number of satisfied customers. Maintenance expenses are also reduced, as small, proactive repairs often prevent larger, more expensive issues while retaining optimal performance of the aircraft.
Learn Which Expenses to Cut Without Damaging Airline Reputation
Learning which business expenses to cut and which ones are important to overall customer value is an art form, learned through years of experience and/or relevant education. If you’re interested in learning more, or gaining these important skills, consider an online MBA degree from the University of Maryland.
Sources
http://marketrealist.com/2014/07/low-cost-carriers-competitive-advantage-challenged-by-fuel-costs/
http://www.strategyand.pwc.com/perspectives/2015-aviation-trends
https://www.coursehero.com/file/p226njo/The-commercial-airline-industry-is-a-mature-market-punctuated-by-its-fierce/
http://money.cnn.com/infographic/news/companies/airline-merger/