Air France Internet Marketing

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Air France Internet Marketing: Optimizing Google, Yahoo!, MSN, and Kayak Sponsored Search Kellogg KEL319

CASE BACKGROUND
In 2007 Air France operated in the fiercely competitive business of international and domestic airline travel services. Catering to both business and leisure travelers, Air France turned to Internet marketing campaigns and search engine optimization to reach large customer segments in multiple countries including the United States. To be successful, Air France had to understand how to maximize the net revenue and the ROA of its Internet marketing campaigns by evaluating alternative strategies. The airlines hired Media Contacts to help it achieve this goal.

COMPANY PROFILE
Societe des lignes Latecoere / Aeropostale Lignes Aeriennes Farman Compagnie Franco Roumaine de Navigation Aerienne

Air Union

CIDNA

AIR FRANCE (1933) Set up its hub at the main airport of the lIe de France Region in Paris

COMPANY PROFILE
1946 2004
—  Merged with KLM – Netherlands —  Inaugural flight between Paris and New York City

à Created the SkyTeam global alliance à Concept of “One Group, Two Airlines” —  Implemented a two prong strategy : Rationalization & Flexibility - Rationalization : acquisition of modern aircraft with similar technical characteristics (i.e., "family effects") - Flexibility : to adjust aircraft delivery dates or change models within a given aircraft family.

COMPANY PROFILE
2004 cont.
—  Implemented "progressive operating lease” strategy : If the demand was low, the

company had to reduce capacity by eliminating unnecessary aircraft à a substantial part of Air France's fleet was on short- or medium-term lease. —  Carried the most scheduled international passengers, 225 destinations in 109 countries —  Employed 150,000 work forces

2007
—  Expanded its US cities served to 13 —  Total 185 destinations in 80 countries & total 383 aircraft

COMPANY PROFILE
2007 cont.
—  The hub, Paris – Charles de Gaulle had grown to be the one of the most

efficient in Europe, the largest number of connections within the shortest time span. —  Air France’s passenger increased 5% with 73.5 million carried (vs global economy grew by 4.9% & airline traffic increased 6.6%) resulting in Air France posting a 5.1% rise in unit revenue per available seat kilometer. —  Planning international growth strategy and looking to increase their share in the U.S. air travel market.

THE AIRLINE INDUSTRY
Operating Margin vs Air line Revenue Growth vs Global Economic Growth

20 15 10 5 0 -5 -10
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Operating Margin (%) Airline Revenue Growth %) Global Economic Growth (%)

Source : International Air Transport Association (IATA)

THE AIRLINE INDUSTRY
—  The airline industry had historically been plagued with low returns,

bankruptcies, and ever fluctuating demand. But in 2006 airline profitability finally improved, however the profit was still far from ideal industry profit levels. —  International travel had begun to emerge as the fastest growing market,

although two-thirds of air passenger journeys were domestic. —  From 2000 to 2006 the industry saw a 50% rise in the number of passengers

traveling on economy tickets, while travel on premium tickets remained stable.

THE AIRLINE INDUSTRY
COMPETITION :
American Airlines

Ryanair Airline

L' Avion Airline

Lufthansa

British Airways

United

THE AIRLINE INDUSTRY
Scheduled Passenger Revenue by Destination
Caribbean & Indian Ocean North America 16% 7% 14% 15% South America Asia Africa & Middle East Europe France Source : World Air Transport Statistics (WATS) in 2006

13% 28%

7%

THE AIRLINE INDUSTRY
Total Scheduled Passengers :

Year 2006 (in millions)
100 100 80 60 40 20 0 96 71 69 54 51 49

THE AIRLINE INDUSTRY
International Scheduled Travelers :

Year 2006 (in millions)
45 40 35 30 25 20 15 10 5 0 41 38 30 29 22 22 21...
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