Introduction
This paper presents a comprehensive analysis of the passenger airline industry. The first part of the analysis will identify the key external factors that affect the industry. In the second part, the main market segments in the industry will be identified and analyzed. Specifically, the segmentation, targeting, and positioning strategies used by airlines in each segment will be analyzed. The last part of the paper will contrast the target market and positioning strategies of JetBlue and Southwest Airlines.
Key External Factors
The passenger airline industry is affected by the following factors. First, social factors such as education, tastes/ preferences, and attitudes affect the industry. Customers tend to choose airlines based on the characteristics of their services, which include on-board amenities, safety, entertainment, and ground services (Wen & Yeh, 2010). A high service quality enables airlines to meet their customers’ tastes and preferences. This leads to high performance by improving customer satisfaction and loyalty.
Second, economic factors such as income per capita and inflation affect the industry. The affluent usually require luxury flights that include benefits such as meals, in-flight entertainment, and comfort because they are willing and able to pay for them. The middle-income earners, on the other hand, are interested in high quality services that are affordable. Thus, airlines have to design their products based on their customers’ ability to pay. During economic downturn, airlines are forced to offer discounts to attract customers due to low demand (Najda, 2008). Moreover, inflation rate affects airlines’ profits by determining the costs of key supplies such as fuel.
Third, technology determines the quality of the services offered in the industry. Airlines that have access to advanced information and communication technologies are able to attract customers by offering personalised entertainment services (Rothman & Jasper). Similarly, airlines that utilize e-commerce to provide services such as flight booking have a competitive advantage in the industry. For example, e-ticketing is convenient to customers and eliminates the costs associated with partnering with travel agents to distribute air tickets. Advancement in aeronautical engineering has also resulted into the production of large aircrafts that are more profitable to operate due to their fuel efficiency and high passenger capacity.
Finally, the industry is affected by legal factors such as regulation and licensing. Airlines in the US are required to acquire a fitness certificate, as well as, an operating certificate in order to provide their services (Structure of the airline industry, n.d). This involves complying with a set of regulations concerning the management of the airlines, safety of aircrafts, and training of the flight crewmembers. The regulations promote sustainability in the industry by ensuring effective management of airlines and the security of passengers. However, complying with the regulations leads to high operating costs. For instance, regular training of the flight crew can be expensive.
Major Market Segments
Psychographic segmentation is the main strategy for identifying target markets and customers in the passenger airline industry. It involves identifying customers based on their lifestyles, social class, interests, and attitudes. The rationale of using this strategy is that it enables airlines to develop products and set prices that meet the expectations of their customers. The main segments in the industry include business travelers, personal/ leisure travelers, and seasonal travelers (Najda, 2008).
In the business travelers segment, the target market includes individuals who require speed, reliability, and convenience during their flights so that they can meet their business needs. Most companies in the business travelers market segment position themselves as on-time airlines to demonstrate their ability to provide the reliability and convenience that customers need. Additionally, some companies position themselves as premium airlines that are able to offer tailor-made services such as access to the internet and office facilities during flights to satisfy business travelers’ needs.
In the personal/ leisure travelers segment, customers are identified based on their lifestyle, social class, and income. The target market in this segment includes families and individuals who are interested in high quality services and convenience. This market often consists of the affluent and the middle class who can afford high quality services. The firms that target the affluent position themselves as luxury airlines that provide high quality meals, comfortable/ flexible seats, and a variety of entrainment solutions (Najda, 2008). This strategy enables airlines to create the premium image that the affluent prefer to identify with. Companies that target the middle class usually position themselves as premium airlines that provide excellent services at low prices to serve customers who appreciate affordable prices.
The seasonal travelers segment consists of customers who travel only occasionally due to diverse reasons such as going for a vacation or seeking medical attention abroad. The target market in this segment includes people whose main concerns are travelling costs, reliability, and destination. Thus, some companies are positioned as no-frills airlines so that they can serve the price-conscious customers (Smith, 2011). However, some companies are positioned as low-cost carriers that are able to offer additional benefits such as meals so that they can increase their customer base.
JetBlue vs. Southwest Airline
JetBlue’s target market includes customers who are travelling for leisure and business purposes. The company targets people who are interested in top-notch travelling experience, but are not ready to pay premium prices. However, the target market does not include customers who are ultra price-sensitive. The company uses this strategy in order to serve customers whose needs cannot be satisfied by the legacy airlines and the discount airlines. JetBlue is positioned as a low-cost airline that also provides the first-class services offered by legacy carriers (Najda, 2008). In order to implement this positioning strategy, the company focuses on improving the quality of its services. For example, it provides broadband internet services, leather seats, personalized entertainment facilities, and meals.
Southwest Airlines’ target market, on the other hand, includes middle-class families, young adults, and small business owners who have a limited travel budget (Smith, 2011). Thus, the company is positioned as a low-cost and low-frills airline that provides frequent flights to several destinations in the US. In order to implement this strategy, the company focuses on maintaining low operating costs. For instance, it provides only one-class service that does not include meals, seat assignment, and connections between airlines (Smith, 2011). However, the company improves the attractiveness of its low-frills services by ensuring convenience and simplicity in pricing.
Conclusion
The main factors that affect the passenger airline industry include technological, social, economic, and legal factors. These factors determine airlines’ ability to meet customers’ needs in various market segments in a profitable manner. The main market segments include business travelers, personal/ leisure travelers, and seasonal travelers. Generally, airlines should adopt positioning strategies that allow them to take advantage of the opportunities presented by the external factors.
References
Structure of the airline industry. (n.d). Web.
Najda, C. (2008). Low-cost carriers and low fares: Competition and concentration in the US airline industry. Stanford, CA: Stanford University. Web.
Rothman, A., & Jasper, C. (2011). The unbeatable heaviness of business class. Business Week. Web.
Smith, T. (2011). 40 years of profitable service: A case study on Southwest Airlines and target pricing. Wiglaf Journal, 2(1), 1-10. Web.
Wen, C., & Yeh, W. (2010). Positioning of international air passenger carriers using multidimensional scaling and corresponding analysis. Transport Journal, 49(1), 7-23. Web.