Tuesday, February 21, 2012

Changes in marketing environment affects the airline industry

The classification of marketing environment distinguishes between PESTE Analysis which are politic, economic, social, technology and environment. Airlines business will affect when there are changes in PESTE. As early example, let’s look into what happens to Syria now. Before this in a year 2009, Syria tourism has accounted for 11 per cent of Syria's gross domestic product (GDP) and Syria is received 5.4 million visitors per year on average. A lot of interesting places can be visited in Syria such as Damascus City, Aleppo, Qala’ah Al-Husun and Homs. However, political uncertainty in Syria have caused many people are afraid to come to Syria. Even the death of civilians, children and women has also increased and showed that Syria is not safe to visit. The crisis has badly affected the Syrian Airline business, with many passengers in and out of Damascus reporting almost empty planes. Tourism has been the hardest hit of Syria's industries since the unrest began in March 2011. Syrian tourism minister, Lamia Aasi said tourism in May and June 2011 was down 60 per cent compared with the same period in 2010.

From the example above, it show political stability of the country is very important. Politic influenced the marketing strategy by showing other examples. Syrian Arab Airline has announced Asia plans to open new routes to India and China while dropping services to Europe for "commercial reasons". Other routes like Marseille and Milan will be suspended for economic feasibility considerations because they are not profitable. Vice versa, if a country’s position in political stable, they will attract more inbound passengers to the country and boost up the country economy. A good example is Malaysia. Although there were some riots happened, but it was not as bad as Middle East. It is proved by the increase in passenger movements at Malaysia Airports in the last eight years. The illustration one below shows the increase in passenger movements at Malaysia Airport Holding Berhad from 2003 to 2010.

On another side, political will also give impacts to the airline when government issued new rules and regulations. The latest situation that will relate is the new European Union (EU) carbon tax. Many countries opposed the EU carbon charges like China, India, Brazil and South Africa because it makes extra costs to the airlines. This caused airlines to raise ticket prices and a burden to passengers. China argues it is unreasonable to apply the levy to developing nations and wants the costs of reducing carbon to be passed on to aircraft manufacturers. In Singapore Air Show 2012, Singapore Airlines CEO, Goh Choon Phong said that ‘’we are objecting to the principle of how it is being applied, that it is applied to flights outside of Europe, to airspace outside Europe.’’ Furthermore, Cathay Pacific CEO of Hong Kong said that ‘’when people go it alone whether for good reasons or bad, troubles come and difficulties arise’’ Airlines opposed to the system say it would cost the industry 17.5 billion euros ($23.2 billion) over eight years.

Instead of airlines business making money, they also have social responsibilities to the public. For example, MASwings realises the importance of air transport to the community in Ba’kelalan, Sarawak and has always focused on providing safe, reliable and affordable services. As a Rural Air Service (ARS) operator, MASwings faced various operational constraints and resources including the limited number of Twin-Otter aircraft used for its operations into the Short Take Off and Landing (STOL) ports such as Ba’Kelalan, Bario, Long Akah, Long Banga, Long Seridan and Long Lellang. Although the RAS is not profitable to MASwings, but as a responsibility to the community, they still provides the operation to rural areas.

Moving to economic part, no industry has suffered greater economic damage from the terrorist’s attacks of 11 September 2001 than the US airline industry. The attacks caused many travellers to reduce or to avoid air travel. Illustration 2 shows decreasing in demand for passengers to travel during economic recession in US.

Sources: Journal of Economic and Business (2005)

On another part, infrastructure is one of the factors that influenced marketing environment. The needed of infrastructures in air transport simply because to accommodate growth in demand. When the government provided a large airport, the larger capacity passengers can inbound to the country. As for example, Survarnabhumi Airport, Thailand can accommodates 100 million passengers per annum while KLIA, Malaysia can only accommodates 40 million passengers per annum. Survarnabhumi Airport can provide services to 90 airlines while KLIA only can serve 58 airlines at this a point of time. Therefore, the larger infrastructure constructed the larger potential to cater the demand in air transport services.

In social factor, we have to learned countries characteristic to find business opportunities. Trends can be changed through changing tasted in holidays and also change in lifestyle. People will go on holiday if the economic is stable and financially incapacitated. Social and economic are interrelated to each other. A good example is Korean Tourism was booming because of Korean drama, Winter Sonata. Many tourists want to come to the Nami Island, the location where the Winter Sonata played. In additions, people would travels because of special interests like golfers, cyclists and medical. Golfers would be interested if they know the location of the golf courses is beautiful. They are going to play and money does not matter to them. Malaysia has organized Le Tour de Langkawi (LTDL) for several years. Therefore, I’m sure many cycling fans all around the world will come to Malaysia to support their pro cycling teams, continental teams and also country teams in LTDL.

Technology growth appears to be the driver in building a mutually satisfying air travel experience, from departure to arrival. The trend online buying allows passengers the freedom to do comparison and book a flight through the internet. For the airlines, it will reduce distribution costs. SITA’s 7th Airline IT Trends Survey found that more than 70% of airline tickets are now sold by the internet. It also found that more passengers will be using Web check-in and 60% of airlines will be using bar-coded boarding passes. In addition, new aircraft technology increased competitions between the airlines. On long-haul trips, Boeing’s 787 offered a wide windows as well as innovative seating for passengers, airframe materials, quitter engines, lower operating costs and fuel efficiencies for airlines. In low cost-carrier (LCC), JetBlue Airways was the frontrunner in installing video screens in every seatback and offering DirecTV services while AirTran is offering XM Satellite Radio. There is a growing demand especially on long-haul flights for the availability of communications technology.

Besides that, now airlines rely on eCommerce for many purposes. One primary benefit is it reduces the number of employees needed. Airlines save money through lower costs for reservations, sales offices, advertising, and agent fees and commissions. The cost savings are sufficient enough that they encourage customers to book flights online and penalize customers when they don't. Furthermore, airlines can save time when customers book their own flights. When fewer people tying up the phone lines, airlines can give better service to those who need help.

Online check-in also saves time by reducing the workload of the ticket agents. Another time-saver for both the airline and the customer is the use of e-tickets, printed at home or at an airport kiosk. Online booking makes it easier to offer additional services such as car rentals, hotel rooms, and vacation packages without resorting to high-pressure sales tactics. This is an opportunities for airline parallel with technology advancement. Airline ticket sites like Priceline, Travelocity and Expedia provide more opportunities for airlines to sell tickets. Airlines can offer discounted tickets based on availability. Last but not least, eCommerce is simplified management of rewards programs with online booking. Customers can enter their rewards information and track their miles and rewards online. Customers are also more likely to sign up for a rewards program online than if they have to fill in a paper form.

The environmental impact of aviation because of aircraft engines emit noise, particulates and gases which contribute to climate change. Aircraft engines release carbon dioxide (CO2) that contributing to climate change. CO2 released by most aircraft in flight through the burning fuel such as turbine aircraft and piston aircraft. Airlines have been alleged as responsible for carbon emission contributing to the global warming. Carbon emission tax has been imposing on all airlines arriving Europe that make further increasing cost.

Environment and technology are interrelated to each other. IATA has a vision for aviation industry to achieve carbon neutral growth in the medium term and to build a plane that produces no emissions within 50 years. Although complete solutions are not available today, but new materials and designs, alternative fuels, and solar power already exists. Airlines have improved fuel efficiency and CO2 performance by 14% over the past 10 years. They will continue to improve, by investing in new aircraft and enhancing operations. By technology, today's aircraft are 50% quieter than 10 years ago.

Alternative fuels particularly sustainable biofuels, have been identified as one of the key elements in helping achieve the goal to reduce CO2 emissions. Biofuels derived from sustainable oil crops such as jatropha, camelina and algae or from wood and waste biomass can reduce the overall carbon footprint by around 80% over their full lifecycle. Biofuels test flights carried out by seven airlines have proven biofuels work and can be mixed with existing jet fuel. The industry is now working on finalizing technical certification so biofuels can be used for passenger flights.

Finally, over exploitation of tourism spots in various countries affect the destination selling of the airline. In the early days, Penang Island favored by the tourists from abroad especially from Australia to sunbathe on the beautiful beach. After 10 to 15 years, a lot of development has been carried out and caused many parts of the island diminished. The original beauty of island has been lost as a result of human greed to pursue profit. Airline also affected by the over exploitation of tourism spots. People from abroad preferred to travel by air transport services for holidays. However, if the tourism spots no longer attractive, airline will face difficulties to selling the tickets to such places as travelers are no longer there.

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