Task Three: Budget Airlines
Who and what are budget airlines
- Micro environment
- Macro environment
Sources of information
Marketing mix – price
Budget Airline Definition
Budget airlines don’t have free meals and entertainment •
Budget airlines don’t issue tickets
Budget airlines have only one class – budget class
Budget airlines use secondary airports to cut the cost
Budget airlines sell directly to the public – no sale commissions •
Budget airlines promote journey ‘legs’ separately
Budget airlines don’t reward frequent travellers with air miles
The concept of budget airlines was developed in 1971 by Rollin King and Herb Keller. They set up a ticketless airline, the Southwest Airlines, which offered the lowest possible prices. (1)
Looking at the definition of budget airlines above it may not be clear why the low cost carriers (LCC) are such a great success. It is because they met customer’s requirements by offering affordable fares and frequent flights from regional airports.
Market leaders between budget airlines are:
Other growing low cost carriers:
In 1986 a little known airline started service between Ireland and the UK. By copying American Southwest Airlines, in 1995 the small airline –Ryanair - was carrying around 2.4 million passengers per year. 1995 was also the first year for easyJet operating from Luton to Glasgow and Edinburgh with two leased Boeing 737s. In 2006 these two airlines, carried together over 30 million passengers on more than 200 routes from over 100 airports (Appendix 1).
The revenue generated by UK airlines is estimated to have reached £16.74bn in 2006, compared with £15,36bn in 2005. The number of passengers carried by the UK airlines increased by 2.5% to 127.4 million in 2006. (2)
Marketing Environment consist all factors affecting the organisation and its market.
Microenvironment - influences organisations directly. Micro may suggest small, but this can be misleading. Micro describes the relationship between companies and driving forces that control this relationship.
Macroenvironment - includes all factors that can influence an organisation, but are out of their direct control. The company does not influence any laws, although it is accepted that they could lobby. It is continuously changing and the company needs to be flexible to adapt to these changes.
It is very important that an organisation considers its environment before beginning the marketing process.
Key microenvironmental issues likely to occur in next 3 years:
The organisation survives on the basis of meeting the needs, wants and providing benefits for their customers.
Increase in raw material prices will have a knock on affect on the marketing mix strategy of an organisation. A strong supplier relationship is one way of ensuring competitive and quality products for the organisation.
Positive or negative media attention on an organisation can in some cases make or brake an organisation. Consumer programs on TV like BBC’s Watchdog with a wide audience can have a very powerful and positive impact, forcing organisation to change its tactics.
Customers are flying more than they ever have. LCCs are now the major operators on some routes offering affordable ticket prices. According to the Civil Aviation Authority (CAA) survey in 2006 the number of travellers using the UK regional airports continued to grow and it is expected to increase even more in the coming years (Appendix 2).
Stability of fuel prices and airport duties are crucial for budget airlines and...
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