Texas Air, Inc.
I. Main Problem
* Pricing Strategy
* Late departures
* Poor service and safety
* To defend its price leadership over its competitors in the airline industry. * To amend its pricing strategy to avoid massive losses.
* To shun being the lowest rank out of fourteen major airline in its evaluation on time arrival. * To improve service and safety of the Texas Air Inc.
III. SWOT analysis
* Price leadership
* Largest airline system
* High number of established, high frequency discount rates Weaknesses
* Poor service and safety
* Ultra low-fares
* Growth and expansion
* Passengers complaints
IV. Alternative Course s of Actions (ACAs)
Texas Air Inc. will now be increasing its price by 30%. Expect high quality service would be given to its consumers. ACA2.
Set aside pricing philosophy Peanut and MaxSaver fares.
We decided to adapt ACA1 because this can be better strategic move for the Texas Air Inc. In this strategy, they can avoid passenger’s complaints such as late departures, canceled flights and dirty planes. We believe that they can give their passengers a high quality services. VI. Marketing Strategy
Early in 1987, Texas Air bought Eastern Airlines and the financially troubled People Express. Texas merged Continental, New York Air, and People Express into one full-service, low-fare airline under Continental banner, making the continental the third largest airline in the United States. They believe in giving its customers what they want; that is, the best possible service at the best possible price. The airline is committed to this low-price, high-value service, and follows a cost-conscious, consumer-oriented philosophy to maintain this service. Texas Air maintains price leadership.
Even before the deregulation of the airline industry, which analysts say lowered air fares by 20 to 30%, the original Texas Airways was a pioneer in cutting costs and setting low fares. They always maintained cost-conscious philosophy. Two years before the deregulation, it introduces Peanut Fares were discounted 50% off regular fares. MaxSaver fares were discounted 80% off the full-coach fares. Analysts are wondering how long Texas Air can continue to offer its low fares and stay in the business. Texas Air can’t keep its fare low forever.
Industry and Competitors’ Analysis:
Percentage of flights arriving within 15 minutes of scheduled time. Rank | Airline | Percentage |
1 | Pacific Southwest | 90.6% |
2 | America West | 88.7% |
3 | Southwest | 88.5% |
4 | American | 80.8% |
5 | Pan American | 80.1% |
6 | Alaska | 76.9% |
7 | Piedmont | 75.0% |
8 | USAir | 74.8% |
9 | Delta | 73.6% |
10 | United | 73.2% |
11 | Eastern | 70.6% |
12 | TWA | 69.4% |
13 | Continental | 67.7% |
14 | Northwest | 61.7% |
Comparison of discount and coach fares of seven major airlines. (1988 Discount fares for round trips)
| New YorkToLos Angeles | Chicago ToDallas | Los AngelesToHonolulu| DallasToAtlanta| Continental | $198 | $188 | $298 | $178 |
Eastern | 198 | --- | --- | 178 |
American | 198 | 188 | 298 | 178 |
Northwest | 198 | 198 | 298 | 178 |
United | 198 | 198 | 298 | 178 |
TWA | 198 | 198 | 298 | 178 |
Delta | 198 | 198 | 298 | 178 |
1988 Coach fares for round trips
| New YorkToLos Angeles | Chicago ToDallas | Los AngelesToHonolulu| DallasToAtlanta| Continental | $900 | $650 | $1048 | $590 |
Eastern | 900 | 620 | --- | 640 |
American | 1120 | 620 | 854 | 640 |
Northwest | 900 | 620 | 854 | 590 |
United | 1120 | 620 | 854 | 590 |
TWA | 1120 | 620 | 720 | 640 |
Delta | 1120 | 620 | 854 | 640 |