Skyways International Airlines had registered a net loss over the past three years. This prompted the company’s chief marketing executive, Eric Hale, to act on a program that would reverse the situation. This move by Skyways was intended to bring about expansion through increasing international flights to the South Pacific routes as Australia, New Zealand and also domestically within the United States.
Although the South Pacific route operated on a net loss, the management of Skyways was hesitant in terminating its operations along this route. Their argument was supported by current substantial cash flow from the South Pacific which was much needed for sustaining the company’s business position.
This was the driving force behind realization of the airliners’ marginal costs. Growth prospects especially from New Zealand and Australia due to Olympic Games scheduled for 2000 in Sydney was, according to Hale, an opportunity for making profits.
Competition was however, seen from other airline service providers plying same South Pacific routes. Among key players in the industry were United Airlines, Qantas and the third competitor was Air New Zealand. These competitors relatively found market favour due to their superior machinery and travelling programs.
Having both direct and indirect flights to the South Pacific cities of Sydney, Auckland and other feeder cities within the region was a major boost for them. There was more comfort for passengers using the Boeing 747-400 aircraft, a more superior plane series offered by Skyways’ competitor companies. This meant that customer preference was favouring the competitors to the disadvantage of Skyways.
An advantage that Skyways enjoyed over the three competitors was back in its domestic setting, within the United States. It was a result of better network for feeder flights which linked to Los Angeles as a collection point before setting for the South Pacific regions.
Skyways initially had no direct flight from Los Angeles to Sydney or Auckland but with the introduction of McDonnell-Douglas aircrafts, this achievement was made possible. The improvement started its operation four years ago and this meant that planes would not have to take a break at Honolulu for refuelling.
In order to prepare an appropriate promotional program for Skyways, Eric Bale had to sample some of the company’s research findings on marketing studies. From these reviews, he fund out that the company commanded 15% market share for flights from the United States to South Pacific cities. Further in-depth analysis showed that the flights were at peak during the season of Northern Hemisphere winters with the majority of passengers being rich couples travelling for pleasure.
Determinants of this transport activity were air ticket price, travelling schedule, place or intended destination and nature of travel agents. 1990s was a bad time for Skyways as well as other airline operators due to frequent flight deregulations, low traffic, Asian depression and exorbitant costs.
An incentive by Skyways to reduce its fares was matched with an immediate response by competitors forcing Eric Bale to formulate an effective promotional program. Describing South Pacific region as a growing market important for the future of Skyways, Bale believed in a special promotional approach.
This evoked mixed reactions from company executives with others suggesting the improvement of service delivery to attract more customers. Comprehensive promotional program proposals for the coming year were to be presented by Eric Bale to the company’s president within two weeks.