Introduction
The company GriffJet has been operating successfully for two years. As a low-cost company operating in Europe, GriffJet has demonstrated considerable revenue growth and established a good reputation with its customers. However, over the past two years, the business landscape has undergone significant evolution. Low-cost carriers, such as GriffJet, are increasingly relying on ancillary revenues from unbundled flight products (Mumbower et al., 2022).
It is evident that we also need to implement some changes in GriffJet’s processes. However, one must approach change with caution, as product unbundling can alter the competitive scenario (Fiore & Zanzalari, 2023). As a Manager of Business Development, I was tasked with preparing a report on GriffJet’s current opportunities and challenges, as well as suggesting unbundled flight products that can increase revenue without compromising client loyalty. The report includes a SWOT analysis of the company, proposes unbundled products, and offers recommendations on how to introduce them to our clients without triggering adverse reactions.
SWOT Analysis of GriffJet
Strengths
The company’s significant strengths include affordable prices, modern planes and equipment, and its regional operations. Operating in Europe is a benefit as this region offers a vast and diverse market. People travel both for business and pleasure, with travel distances usually being short, and passenger demand is high.
The region is also lucrative due to numerous travel destinations and the Open Skies Agreement between the European Union (EU) members (Amankwah-Amoah, 2020). Affordable prices and modern aircraft make our airline a desirable choice for customers. Additionally, Europe has a strong focus on environmental and sustainable goals, which align with GriffJet’s vision.
Weaknesses
The weaknesses of our airline include high employee turnover, dependency on fuel costs, and limited service offerings. Employee turnover is high due to many young people trying flight attendant positions as the start of their career(Efthymiou et al., 2021). Over several years of working, they want to start a family, move to another country, or feel overwhelmed with experiences and want to settle down. Whatever the reason, the turnover rates are generally high in this business, which can only hurt GriffJet.
Dependency on fuel costs is another factor that we cannot regulate but have to accept. When fuel costs increase significantly, but we cannot justify the corresponding increase in flight costs, passengers are likely to become frustrated. Finally, limited service offerings constitute a weakness, as being a low-cost airline, we tend to cover only the basic needs.
Opportunities
The opportunities for GriffJet lie in improved customer and employee satisfaction, government assistance, and the share market. Government support was offered to airlines after the pandemic, allowing small but productive companies like GriffJet to return to successful operations (Abate et al., 2020). Meanwhile, now that COVID-19 is behind us, we can resume generating revenue from share sales. Ultimately, opportunities for enhancing customer and employee experiences lie in providing employees with more flexible schedules and offering customers additional services and perks.
Threats
Finally, threats to GriffJet’s success include limited market diversification, additional costs on services other than flying, and a preference for online meetings. While operating in Europe is a lucrative option, the company lacks diversification options, which can be a barrier to its development. Additionally, any changes in the European aviation market (such as the Russian-Ukrainian war) can hurt the company (Wang et al., 2023). Furthermore, with the coronavirus pandemic, people developed online conference options, and many of them continued to use these even after the pandemic, which can be detrimental to airlines like ours. Finally, unbundled flight products often leave passengers feeling disappointed and, in some cases, deceived, posing a significant threat to the business.
Suggested Unbundled Flight Products
Based on the SWOT analysis, GriffJet’s main weaknesses are its limited service offerings and its core opportunity for improved customer treatment. Its most significant threat is the cost of additional products. Each of these issues can be mitigated by thoughtfully introducing unbundled flight products. By explaining the reason for and benefits of ancillary costs, the company will be able to remain competitive while keeping its loyal customers (Zhang et al., 2021). The products that are most likely to help GriffJet deliver a financially sustainable and competitive offering are fees for changing or canceling a flight, baggage fees, and seat reservation fees.
Fees for Changing or Canceling a Flight
Companies across various industries have successfully employed the unbundling of products to boost revenue. In the aviation market, unbundling has been used to decrease competition and increase profits (Gabison, 2020). GriffJet could introduce fees for changing and canceling a flight as an additional service. Research indicates that unbundling such fees can bring positive outcomes for the company (Zhang et al., 2019).
According to Babić et al. (2019), the revenue increase that the top ten airlines managed to gain over ten years due to ancillary costs has been tremendous, rising from $2.1 billion in 2007 to $29.7 billion in 2017. One example for GriffJet to follow in this direction is Ryanair, which also operates in Europe and has recently increased its profitability due to unbundling services and products (Numanoğlu, 2020). Changing or canceling a flight occurs frequently due to various reasons, and GriffJet should consider unbundling this service to explore potential benefits.
First of all, by unbundling these fees, GriffJet will be able to advertise lower base fares for flights, which will make the company more competitively priced and will attract the clients who put the primary focus on the lowest upfront price. Secondly, GriffJet will be able to implement dynamic pricing for additional services. This means that if there is an increased demand for changing or canceling a flight, the company can raise this fee, thereby maximizing revenue by controlling passengers’ preferences and capturing their value (Ren et al., 2022).
Furthermore, this unbundled fee can increase the likelihood of passengers showing up for the flight, as they will know that, in the event they do not, they will incur an additional payment. Overall, this change could offer significant advantages for GriffJet; however, it is essential to strike a careful balance between unbundling fees and ensuring a positive customer experience.
Baggage Fees
Next to purchasing the opportunity to travel by plane, the possibility to carry baggage is the second most important thing for passengers. For European airlines, baggage policy is a crucial part of management and revenue (Kožušník, 2022). Research indicates that passengers traveling for leisure are more willing to pay baggage fees than those traveling on business (Chiambaretto, 2021; Klislinar & Widjaja, 2020).
One of the main benefits of unbundling baggage fees is offering passengers several options, ranging from no baggage (only hand baggage) to additional/excessive baggage, each with its own separate price. By doing so, GriffJet will be able to offer its clients a flexible range of options, from which each individual can choose the one that best suits their needs. With the opportunity to choose a fare that aligns with passengers’ budgets and needs, the company will increase its range of travelers and generate more revenue.
In addition to fees for changing or canceling a flight, baggage fees can be implemented within a dynamic pricing system, allowing for price increases to accommodate higher demand. Additionally, by adopting a baggage-only policy, GriffJet will encourage the use of carry-on baggage, resulting in faster boarding times and reduced turnaround times. Another considerable benefit of unbundling baggage fees for the company is the reduction in overall aircraft weight, resulting in lower fuel consumption and associated cost savings. Ultimately, unbundling baggage fees can lead to diversified revenue, a competitive advantage, and enhanced patient satisfaction.
Seat Reservation Fees
The third suggested option is for GriffJet to unbundle its seat reservation fees. The European Union has been attempting to liberalize the air transportation industry for three decades (McEvoy & Efthymiou, 2023). Separating seat reservation fees from the ticket price is one viable option to achieve this goal. Additionally, this change will increase GriffJet’s profit in several ways.
Firstly, additional revenue is generated in this case, since passengers who want to have specific seating arrangements are typically willing to pay for them. Secondly, by unbundling seat reservation fees, GriffJet will be able to customize fare structures and implement dynamic pricing. Next, this innovation is expected to be favored by families and friends who travel together and want an opportunity to share adjacent seats.
By letting passengers choose their seats for an additional fee, the company will save on seat assignment management and increase operational efficiency. At the same time, the service will be welcomed by passengers who do not have any seat preferences and will appreciate not having to pay for this option as part of the ticket price (Klislinar & Widjaja, 2020). Customer satisfaction and revenue diversification are also likely to increase with unbundled seat reservation fees. Thus, GriffJet’s competitive advantage will increase as it will be able to advertise lower base fares.
Conclusions
The suggested options for GriffJet’s unbundling strategies are not exhaustive, but they are the most relevant ones and, hence, best suited for a start. Considering research findings and the experiences of other airlines, including our main competitor, Ryanair, it is evident that GriffJet will not be able to maintain its profit rate without adopting an ancillary revenue policy, and may even risk losing it. By unbundling fees for changing or canceling flights, baggage, and seat reservations, the company will make passengers more satisfied and their experiences more positive. However, it is necessary to remember that positive outcomes will only become possible if GriffJet maintains a healthy balance between unbundling fees and meeting consumers’ needs. The next section provides recommendations for GriffJet to follow in introducing its unbundling policies smoothly.
Recommendations
Building Brand Awareness and Creating Incremental Revenues
The first proposal for the company is to build its brand awareness and create incremental revenues while unbundling fees. Zhang et al. (2019) note that the advantage of airline bundling is so evident that unbundling is often met with resistance. While it may be challenging for GriffJet to persuade its customers of the benefits of unbundling, we can achieve this through transparent pricing, direct communication strategies, loyalty programs, personalized marketing, value-added services, and social media engagement.
By emphasizing the value proposition of our airline, we will highlight the flexibility and choice that clients gain by paying only for the additional services they need. Offering loyalty programs will help GriffJet to increase passengers’ dedication to the airline. For instance, we could offer an opportunity to combine base fares with popular ancillary services for loyal customers. GriffJet can also benefit from increased social media engagement, which will enable us to address customers’ questions and concerns.
Introducing Dynamic Packaging
The second recommendation is to introduce dynamic packaging as an effective method of increasing revenues and remaining customer-friendly. Dynamic packaging is a successful strategy enabling airlines to create user-friendly booking platforms and offer comprehensive ancillary services (Song & Lee, 2020). GriffJet can utilize dynamic packaging to offer personalized recommendations and facilitate efficient communication with customers. Dynamic packaging allows passengers to select and customize their travel package, encompassing transportation, accommodation, and additional options beyond the flight itself. By implementing this approach, GriffJet will increase passengers’ acceptance of unbundling fees while improving their travel experience.
Collecting Feedback and Performing Data Analytics
Finally, GriffJet should collect feedback and analyze the data to increase customers’ acceptance of unbundling fees. According to Tian et al. (2021), analyzing travel data can promote an understanding of the dynamics of the aviation market, which can help GriffJet to provide more customized and efficient services. Specifically, data analytics can help identify passenger preferences, optimize prices, and communicate the value proposition. Moreover, data analytics will enable us to tailor ancillary services to customers’ preferences and needs. As a result, GriffJet will increase both its revenue and customer satisfaction, as well as acceptance of change.
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