Passenger Airlines Trends and Economic Performance in Europe - Case Study Example

Passenger Airlines Trends and Economic Performance in Europe Institution Course Module Student’s Name Date Passenger Airlines Trends and Economic Performance in Europe Introduction The past decade has been tough on the airline industry. An increase in fuel prices and union disagreements has resulted in a destabilization of some of the major airlines, not just in Europe, but globally. Some airlines have also merged so as to increase efficiency in the delivery of services to clients. Merging has resulted in the better utilization of resources such as technology, labour and finances. Airline companies have also been on spending more on advertising; especially on digital platforms. The advertising has been geared towards reaching a higher number of young people who spend most of their time on their laptops, smartphones or computers at work. Such individuals are engaged in social media are on the lookout for new trends in different industries. Most young individuals also have good jobs and can be able to travel by air whether for work or leisure. Travelling by air is seen as being convenient since it is fast and safe. Airlines need to go the extra mile through better customer service if they want to remain competitive when benchmarked against their competitors. The customer care that is delivered to clients should be more personalized so as to engage those that the airlines would like to attract to use their services. Europe has many airlines which offer the advantage of choices for consumers. Clients who would like to fly and use Europe’s airlines can compare the available airline prices, discounts and other conditions such as luggage limit and make a choice (Besanko, Dranove and Shanley 2009). Airline Industry Main Business Data Trends Relevant According to the International Air transport Association (2015), stout revenue has continued to be elusive for airlines. In 2004, the airline industry had a profit of US $369 billion and $746 billion in 2014. The increased profits in the industry have been due to the entry of low-cost carriers. The airlines in Europe have however only been able to gain about 3% profit margins. The airlines charge a tidy sum for airfares, but still seem to struggle so as to break even. The airline industry is vulnerable to terrorism, disease outbreaks, extreme weather patterns and international wars that would result in travel advisories and a major reduction in the number of passengers. The manner in which major European airlines continue to such unexpected events will have a major impact on the growth of the industry. Airline companies in Europe have a long way to get to a point where they make profits despite the unexpected challenges that keep on cropping up. The area that would result in an improvement in performance of airlines in Europe would be a wholesale change in the attitude adopted by staff members (Burghouwt, 2012). The staff members that deal with clients would have to provide more personalized care for the clients to feel important and appreciated, so as to choose the changed airlines as opposed to their competitors in the industry who would not have adopted the changes. Economic principles underpinning performance assessment of airlines in Europe The key economic principles which underpin proposed performance assessment According to Cook (2010), flight delays have a “knock-on” effect on a whole airline network. Buffer and sack-time delays have a reactionary and secondary effect other operation of an airline network. Flight cancellations, refuelling and re-routing all have a negative effect on revenues generated by airline companies. Some of the areas that European airlines have maximized on so as to remain in business include an increase in the number of destinations that they fly to. The European airline market deregulated the industry and contributed to an inflow of new airline companies. New airline companies have been aggressive in their marketing and strategies to get as many clients as possible. However, some of the well-established airlines such as Rayani and Easyjet seem to have remained as top performers in the region. The time that the airlines have been in operation has effectively been used in travelling to new routes which smaller and new airlines might not have started operating. The established airlines have gained a reputation that they operate on the routes, and therefore have a solid base. Ryanair Airlines has established itself as a frequent flyer to many European destinations at pocket friendly prices. Sometimes the airline charges highly discounted prices for the different destinations, but the clients have to constantly check the company’s site so as to find out about the latest promotions and offers. Such a marketing strategy has worked favourably for Ryanair and contributed to its being chosen by many clients as their preferred airline. According to Moschandreas (2000), there are key economic principles that should be considered in the assessment of airline’s performance. European airlines could consider economies of scope as one of the principles to increase their performance. Airlines in the region could consider partnering with hotels to promote some of the destinations. Customers would get discounts for the flight and accommodation packages that they would choose. Such product and service pairing would serve to increase the number of clients that the passenger airlines would garner. An increase in the number of clients would in turn contribute to an increase in the amount of revenue generated by the airlines. The airlines and the hospitality outlets would have to agree on a theme and marketing message that they would want to leave the client with. The clients that would use such services would be like ‘ambassadors” that would contribute to the marketing of such collaboration services offered by the airlines and the hotels. PEST(EL) analysis Political The airline industry operates over multiple countries with different political principles. Most of the policies are framed in such a manner that they favour the clients over the airlines. The clients are favoured over the airlines because of the high safety standards that are expected to be fulfilled by the airlines. Failure to adhere to established safety regulations might result in the loss of lives of many passengers. The customers have the advantage that there are many European airlines that are in operation, and therefore they have a variety of airlines to choose from. The European airline industry enjoys the collaboration that exists after the integration of most of its members in the European Union. Most of the countries have removed the barriers that existed before to promote trade and political harmony between them (Khol, Larsen, Ross & Tiourine 2007). Economic The European airline industry has to grapple with a myriad of issues that affect the revenue that they generate. The 9/11 airline based attacks on the New York building contributed to a decrease in the number of individuals that would prefer air transport to other modes of travelling. The growth of terrorist organizations such as ISIS contributes to an increased fear among some of the potential clients in the industry. Fuel prices keep on fluctuating, especially with the increased instability in the Middle Eastern regions where most of the oil is sourced from (Cook 2010). The oil prices result in an increase in the expenses that are incurred by airlines. Airlines have to keep on revising their airfares, and sometimes absorbing the costs that are associated with an increase in fuel prices (Cook 2010). This negatively affects the revenue that is generated by the industry. The airline industry in Europe also has to deal with labour unions with employees striking or threatening to strike on numerous occasions. New airlines put low prices as a strategy to attract clients which affect other airlines that might be struggling to break even (Khol, Larsen, Ross & Tiourine 2007). Social Globalization has resulted in changes in the airline industry. There has been the emergence of a new breed of customers who demand a more personalized service. The clients are technology savvy, and are able to use it to their advantage. The clients use the service to ensure that they get the best service and deals, and let their friends and colleagues know about where to find it. Airline companies in the European market have had to ensure that they have a well-represented digital presence. The digital platform allows clients to make enquiries and give instant feedback on the services and commodities provided by the airlines (Burghouwt, 2012). Technology Different airlines such as Virgin Atlantic have ensured that they use the latest aircrafts that have been made available in the industry. The latest aircrafts ensure that an airline can save costs on spending such as fuel and maintenance. The extra funds can be spent on marketing or improvement of the facilities at the airport, or expansion. Airlines that are able to acquire the latest aircrafts would be able to compete effectively with other airline industry players, and therefore secure higher revenues. Technology ensures that the airline industry creates profiles that make it attractive to its clients and other necessary stakeholders. With the current generation of clients, technology has assisted most airline companies to remain relevant, and offer competitive offers when benchmarked against other airlines in the region. Implications of findings for the European passenger airline industry and society as a whole The society and the airline industry both depend on each other. The airline industry needs the society to operate effectively and profitably. On the other hand, the society needs airlines to deliver them safely and conveniently to their different destinations. According to Pricewaterhouse coopers (2015), the airline industry in Europe should embrace digital marketing wholeheartedly. The airlines employees should ensure that all their employees are well trained on how to use technology and the applications that would contribute to higher client numbers. Most of the current crop of consumers spends a lot of time on the digital platform. Therefore, airlines in the region should ensure that they have an attractive and a legitimate online profile. There are many flight enquiries and bookings that are made online. Airline companies that want to remain relevant and competitive should ensure that they have an online presence. However, the focus should not be made only on the online presence, but also on the physical front. Many clients would still want to make confirmations or ask enquires from a call centre. Therefore, the airlines would have to conduct regular trainings on the physical and digital customer care staff members to ensure that they have the right skills. The staff members who represent the customer care members of the airlines would have to be armed with the correct information about the flights, operations and policies of the organization. The airlines have a duty to ensure that they market themselves on social media, especially on Facebook and Twitter. Airlines have come up with innovative ways to ensure that they remain relevant to their clients. Recently, Virgin Atlantic came up with a marketing concept known as “Looking for Linda”. The promotion required the airline’s customers to correctly identify the destination that was shown from “Linda’s picture”. The promotion was being run on the company’s Facebook page, thereby allowing the company to avail more information on its operations (Virgin Atlantic, 2015). Most clients would go through the company’s Facebook page and find out other promotions or flight details that the company would be communicating with its clients. The clients who would win would be given free tickets to fly with Virgin Atlantic Airways. Such clients would in turn contribute to the marketing of the company, especially through tagging the company on their photos. The client’s friends and colleagues would want to know about more promotions and visit the page so as to know whether there were other promotions being conducted. The visiting of the page would raise the possibility and actual occurrence of a greater number of clients using Virgin Atlantic Airways services. KLM also introduced a concept where passengers could sit next to passengers that they share more common interests with, based on their social media profiles. Such a marketing promotion contributed to many individuals being interested in participating, especially outgoing extroverted individuals. Introverted individuals who feel that they have minimal opportunities of meeting individuals also wanted to take part in the promotion as a way of “getting out” and meeting fellow introverted individuals. Bibliography Besanko D, Dranove D, Shanley M 2009, Economies of Strategy. Massachusetts: Wiley. Burghouwt G 2012, Airline Network Development in Europe its Implications. England; Ashgate Publishing. Cook T 2010, Quantifying Airline Delay Costs: The Balance between strategic and tactical costs. Khol N, Larsen A, Ross A & Tiourine S 2007, “Airline Disruption management- Perspectives”, experience Air transport Management, 13, 149-162. Moschandreas, M 2000. Business economics. Ohio: Cengage brian. Pricewaterhouse Coopers, 2015, 2015 Aviation Trends. Retrieved 16th November 2015 from http://www.strategyand.pwc.com/perspectives/2015-aviation-trends Virgin Atlantic Airways, 2015, Finding Linda, retrieved 16th November 2015 from http://www.virgin.com/travel/win-virgin-atlantic-flights-linda Read More