The Largest Low Cost Airline of CEE - Article Example

Executive Summary Wizz Air is the largest low cost airline of CEE. Within 2 years of its operations, it has taken over the Polish and CEE air passenger market by 15%, and its market share is continuously increasing. The reasons for its success are two fold. Firstly, Wizz Air is using the Low-Cost Airline Model very judiciously to save operational costs. Secondly, it is using a targeted marketing strategy that is aimed at getting the customer segment that is used to travel by trains and buses to shift to airlines. This customer segment is apparently wary of low cost air travel – often not considering such carriers as safe or comfortable. It is projecting its investments in technology to provide safety and comfort for the low-cost traveler. Thus, it is differentiating the brand Wizz Air as an excellent quality, reliable, punctual and friendly airline. This differentiation is manifested in terms of its aircrafts technical quality and ambience, people, promotions, business processes, logos and all communications. With such a market strategy, Wizz Air hopes to maintain its leadership position and be seen as the best low cost airline. Organization Background Wizz Air started its operations in 2004 with a seed capital of 34 million Euros. Within six months it became one of the leading low-cost airlines for the Central and Eastern European region. Wizz Air had carried over 1.9 million passengers in 2005, thus showing a 300% growth. It has carried a over a record 3 million passengers within 2 years It operates through flights from Poland, Hungary, Bulgaria, Croatia, Slovenia and Romania, and from 5 bases in the CEE - Katowice, Warsaw, Gdansk in Poland, and Budapest in Hungary. It plans to open another base in Bucharest, and has a target to carry 4.5 million passengers in 2007. It flies to 50 European destinations on 56 routes. The airline has been acknowledged as the largest low-cost airline, and the second largest airline of Poland by the Polish Civil Aviation. It was also chosen as the Best Airline of Hungary within 5 months of operations in Hungary. CEO of Wizz Air, József Váradi, was awarded Brave Innovator’ by the Earnest&Young foundation. Wizz Air has a 15% market share of the Plolish airline market, with a 67% increase in its Polish passengers in 2006. It has a fleet of 9 Airbus 320, which are known for their operational efficiencies. (wizzair.com, 2007) The Industry The airline industry in CCE is experience a time of intense competition. There are a number of low-cost airlines that have entered the market, and the market is growing at a slow rate. This is the time in the industry cycle when the firms who are unable maintain their financial viability, are being shaken out of existence. This is evidence in the collapse of Air Polonia in CEE and the banckruptcy of 6 other low cost airlines in Europe. Several airlines which had started low cost flights, have also reverted back to their tradition and charter carrier operations. The industry trend therefore indicate that the though the market has good potential for growth, it is proving difficult for low cost carriers to remain viable. There is a need for agressive marketing and branding, so that the low cost airlines do not face a churn of passengers. Innovative thinking is desirable not only in the creation and delivery of the service, but also in its marketing. The remarkable success of Wizz Air is largely attributed to its low-cost business model and its efficeint use of its resorces. A larhe part of the success is however sue to the service marketing strategy that is executed under teh guidanc of its visionary CEO, József Váradi. Thus, on the one hand, Wizz Air is using excellent cost-cutting strategies so that it can translate some of the cost benefits onto the customers, and on the other hand, it is employing a good marketing mix to attract and retain customers. The Low Cost Business Model Of Wizz Air The Low-Cost Airline Busines Model was poineered by Pacific Southwest Airlines in 1949, and slowly it was successfully adopted by many European airlines including Ryanair and EasyJet. (Wikipedia, 2007). This business model operates basically on the principle of cost savings. This is done by having only one unified passenger class as opposed to the different classes that traditional airlines have, and operating only one type of airplane. Wizz Air too has only one passenger class and it operates through only A320 airplanes. The benefits from having a single carrier include low requirement of training for both the technicians and the housekeeping staff. Using the low cost business model, Wizz Air has a system of no seat reservations – thus encouraging passengers to board the planes quickly and thus reducing dependence on plane staff. It also uses simple pricing structure, with the fares increasing as the flight times near. This helps Wizz Air to evenly space its demand and to capitalize on late reservations. It uses cheaper secondary airports and in the process also cuts down on congestion and enables them to offer faster turnaround times of only 30 minutes. There flights are short (not longer than 2 hours), and they do not offer transit tickets. By providing only point-to-point tickets, they further reduce costs and time that is saved in terms of processing and employee time. The tickets for Wizz Air are largely sold online, and some through their call centers. This is a low cost way to process tickets and saves staff time and effort. Wizz Air carries forward its philosophy of cutting costs with offering customers to buy tax-free drinks and other products on board – but it does not provide any free drinks. Perhaps the most revolutionary aspect of the low cost business model of Wizz Air is that its staff can assume multiple roles. The employees wo man the check-in are also trained to operate as flight stewards. This multiple operability of staff is of immense importance to the cost-cutting efforts of the airline – it saves recruitment and orientation costs that could be incurred by hiring more staff and giving them training in only specific specialized tasks. Marketing of Services Due to the typical nature of service, the marketing of services is to be carried out differently from the marketing of products. The traditional mix of marketing – product, price, place, promotion – is to be reinforced with three additional elements, viz. People (the staff, crew), Physical Evidence (the tangible equipment, logs and symbols, personnel, communication materials), and Process (procedure, mechanisms and flow of activities by which services are consumed (Booms and Bitner, 1981). This is because the nature of the servie is such that it is intangible, inseparable, variable and perishable. (Kotler, 2000). Since the sevices are not tangible like goods, it becomes difficult for a potential customer to judge a service before he has actually consumed it. Thus, while making their choice decisions, buyers try to look of signs or evidence on which they can base their assumption of the quality of service they can hope to get. This why the physical evidence – like the equipment used, the communication materials used, the symbols employed, the prices that are being prtomoted, the place and the people that are involved in the service dispension – plays an importnat role. The above physical aspects can be used to tangibalize the service, and hence should be managed effectively. The services cannot separated from the service provider – they are produced and consumed simultaneously. In fact, both the customer and the service provider have to interact in order for a service to be consumed. As such, the importance of the personnel involved in the creation of the service increases manifolds. Special emphasis needs to be place on the training of the staff, and there need to be enough personnel to meet the demand at any given time. Services are also variable – as they neverthelsee depend upon the people who are dispensing them, and individuals vary in their methods and responses. Thus, in service organizations, it becomes crucial that standards of operating procedures are maintained and strictly followed. Right from the onset, special care needs to be taken to recruit people with the right mindset and attitude. This needs to be followed up by taking continuous feedback from the customers and using further standardization, or customization of processes. The unique nature of the services makes them perishable. Since the services cannot be stored like goods, they pose a challenge to the service provider when there is low demand. It is often difficult to match demand to the service, and added steps need to be taken so that demand can be generated or shifted towards times when there is fear of low demand. (Sasser, 1976) Using differential pricing during off-pek an dpeak hours, service providers shif the demand from peak to offipeak times. They can also create non-peak demands by offering their services at those hours, and combat peak-time demands by creating complementary/alternative services that the waiting customers can make use of. Another device to manage demand is to use the reservation system to spread out the customers evenely across a period of time. Organizations need also to hire part-time employees during peak-times and even encourage consumers to assist themselves. During pek times, the service providers can also resort to the performance of the most essential parts of the service. Finally, they can also increase capacity by sharing equipment and personnel on a need basis with other service providers. Marketing Mix of Wizz Air Wizz Air is a low cost airline that started low cost as a differentiation straegy vis a vis the traditional carriers. However, the indutry has seen an intensification of comppetition within th elow-cost airlines, and hence Wizz Air has to use a judious mix of service marketing tools to offer a differentiated and desirable service. Product – Low cost, single class air travel. Wizz Air provides cheap air travel that is comfortable, reliable and safe. The targe customers of the Airline are therefor the middle class travellers who might be travelling first time only due to the affordability of low-cost airlines. The product (service) has to be such that people who have used trains and busses find airplanes equally affordable, but they do not see low-cost flying as unsafe. In CCE, there being a perception that only rich can fly, it is difficult to convice people that an airline that offers low prices could be reliable, as safe and comfortable. Thus, the service needs to manifest in a good and comfortable experience for the passenger so that their earier hestitations are done away with. Another section of travelers that Wizz Air serves are the business travelers who desire flexibility of air travel to suit their business needs. (cnn.com, 2005). Wizz Air offers them the choice to modify tickets three hours prior to the flight and to book tickets just 40 minutes before the flight is due. Wizz Air’s service therfore incorporaes both reliability, comfort, and execellent experience for its customers. With the added advantage of flexibility, Wizz Air differentiates its service from other airlines. Price – The prices vary across different destinations and also with time between same destinations. This means that Wizz Air customers who book early on have to pay as much as $10-15 less than those who book near the date of departure. The pricing is extremely useful for both Wizz Air and its customers. It helps Wizz Air to even out ist demand over a period of time (a challenge that is specifically faced by the perishable nature of the services). On the other hand, it helps the price conscious customers in saving money on the price of the ticket, and hence, they may be attracted to book tickets early on. The pricing regulations of Wizz Air are therefore a successful contributor to its overal marketing effects. Place – Since Wizz Air is providing a service, the place of consumption of that service is at the aircraft. Thus, the physical ambience of the aircraft, its interiors and seats, all assist in promoting Wizz Air. However, even before the passengers board the planes, they can use the internet and Wizz Air’s online booking site to browse the avaialble options and fares. Thus, the website too acts as a point of contact, and Wiz Air takes care to keep it regularly updated and backed by good technology. The call center is another place where the customer comes in contact with the organization, and Wizz Air manages its customer complaints and bookings in a useful and friendly manner. Promotion – Wizz Air carries out aggressive price promotions, with best offers, free flight offers, and seasonal low fares. It uses internet, newspaper and TV advertising to promote its offers. In addition to the emphasis on price, its promotion efforts include messages that convey its excellence of operations, punctuality, reliability. The promotion strategy is therefore geared towards not only selling the low –cost capacity, but for building a distinct brand. People – Wizz Air currently employs around 400 people from a diverse background. The inseparability attribute of the service makes it mandatory that the peopel who are delivering the service are well trained, helpful and friendly. At Wizz Air, attention is paid to the grooming and presentation of the staff along with developing their professional skills. This is because in service delivery, the customers are affected by both the technical ability and functional quality of the staff. (Kotler and Bloom, 1984). In an effort to project a more friendly image, most of the employees speak in Polish and make the travellers feel at home. Wizz Air strives to deal with the variable nature of service delivery - by promoting a strict code of professional and ethical conduct for all its employees. To fully utilize the human resources, and thus to make the best use of the perishable service, Wizz Air trains its staff in mutiple tasking so that they can look after roles like check-in and stewards as the need occurs. Physical Evidence – Wizz Air uses various physical things to add tangeability to its services and to depict its service quality. Firstly, it use the A320 aircraft, that is known for being a technologically sound and safe plane. It uses the services of reputable companies such as Lufthansa Technik and SAS Technical Services for its fleet’s maintenence, and thus gives out the signal that Wizz Air cares for its customers safety and likes to maintains standards. This way, it also projects itslf as a reliable flier. Wizz Air uses the services of secondary airports that are free of congestion – this again reinforces their projection of being a reliable and ontime airline. Being a low cost carrier, Wizz Air faces a challenge to project itself as a technically safe and financially stable airline. As the intangible nature of the service makes it impossible for the potential customers to evaluate the quality of service they may expect, it becomes important for Wizz Air to manage its pysical evidence to portray an image of quality. By using the latest aircrafts that are maintained by experts in the industry, it projects the fact that its safe to travel with Wizz Air. By using low cost airports, Wizz Air communicates that its committed to providing low costs and as an added benefit, time savings as well. The physical environment within the aircraft – friendly and efficient staff and crew, plush leather chairs, bright logos – all convey the financially sound and healthy state of the company. All the aircrafts have one class passenger seats are made in comfortable leather so that the pasengers feel that they are getting good value for their money. The staff an dthe crew are all professional and friendly – again, providing physical evidence to the companies reliability and quality of service. Wiz Air’s company logos in bright color, further communicate the brand identy of the organization. Process All the business processes of Wizz Air are geared towards creating service that is low-cost but high quality. With the emphasis on excellence of operations it uses high tech aircrafts and maintenenece services, and uses a network of low-cost secondary airports that do not have a traffic problem – thus incorporating punctuality and reliability. It uses multi-cultured teams of crew and staff that are dedicated to serving customers in a motivated manner. By using a low cost airline model (one passenger class, no seat researcvations, direct booking, no transit travel etc.), Wizz Air is able to create better value for its customers. This it does by investing in technology to make aircraft travel more safe an dreliable, Wizz Air has used the interiors of its planes to create an ambience of comfort and plenty, wich is reinforced by the friendly staff. References 1. wizzair.com 2007. http://wizzair.com/about_us/company_information accessed on 29th March 2007 2. Wikipedia. 2007. http://en.wikipedia.org/wiki/Wizzair accessed on 29th March 2007 3. Booms, B. H. and M. J. Bitner. 1981 Marketing of Services. Ed: Donnelly. J. and W. R. George. American Marketing Association: Chicago 4. Kotler, 2000. Marketing Management. Prentice Hall oh India Pvt. Ltd.: India 5. Sasser, W. E. 1976. Match Supply and Demand in Service Industries’. Harvard Business Review. Nov-Dec 1976.pp. 133-40. 6. cnn.com. 2005. Wizz Air Offering New Biz Fare. http://www.cnn.com/2005/TRAVEL/01/12/bt.wizz.business.travel/index.html accessed on 29th March 2007 7. Kotler, P. and P. N. Bloom, 1984. Marketing Professional Services. Prentice Hall: NJ Read More