Airline Business Models and Competitive Strategies - virtual simulation course

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This virtual simulation program was developed to help airline management teams understand competitive market dynamics and improve problem solving and decision-making skills.

Find out more at: http://www.iata.org/airline-business-simulation

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Airline Business Models and Competitive Strategies - virtual simulation course

  1. 1. Airline Business Models and Competitive Strategies – virtual simulation course Preview lesson: Scheduled airlines vs. low cost, low fare airlinesCreated inpartnershipwith IATA Copyright © 2012
  2. 2. Lesson overview  Airline competitive advantage  Comparing airline business models  Low cost, low fare airline market growth  Why bundle services?  What’s next?IATA Copyright © 2012 Airline Business Models and Competitive Strategies
  3. 3. Airline competitive advantage STRATEGIC ADVANTAGE Perceived Low cost uniqueness position Industry-wide Differentiation Overall cost STRATEGIC leadership TARGET Particular Focus segment only Source: PorterIATA Copyright © 2012 Airline Business Models and Competitive Strategies
  4. 4. Airline competitive advantage Exercise: put these airlines into the correct category STRATEGIC ADVANTAGE Perceived Low cost uniqueness position Industry-wide STRATEGIC TARGET Particular segment onlyIATA Copyright © 2012 Airline Business Models and Competitive Strategies
  5. 5. Airline competitive advantage STRATEGIC ADVANTAGE Perceived Low cost uniqueness position Industry-wide STRATEGIC TARGET Particular segment onlyIATA Copyright © 2012 Airline Business Models and Competitive Strategies
  6. 6. Airline business models: products Scheduled airline Low cost-low fare model airline model Multiple, differentiated Short average flight products (to mitigate risk) lengths, high frequency Wide route networks Bundled/unbundled Enhanced airport facilities services Alliances, mergers and Congested hub airports takeovers avoided Low fares, fewer traditional passenger servicesIATA Copyright © 2012 Airline Business Models and Competitive Strategies
  7. 7. HIGH Pattern of Alliance Cooperation Merger-like integration Revenue, cost and benefit sharing joint Expanded cooperation to venture develop joint network Direct coordination (incl. prices, Limited cooperation routes, scheduling, facilities) on specific routes Code sharing FFP and Lounge Access Interlining LOW Source: Airline industry presentation, DOTIATA Copyright © 2012 Airline Business Models and Competitive Strategies
  8. 8. Bundling services Balancing service level with customer demand PASSENGER TYPE Business In-between Leisure Traditional: Travel Agencies, CHANNEL corporate, IB Bundle Unbundle New: Website, portal High Medium Low SERVICE / CHOICE Source: ClickairIATA Copyright © 2012 Airline Business Models and Competitive Strategies
  9. 9. Airline business models: finance Scheduled airline Low cost-low fare model airline model High production costs Low overhead costs High competition (outsourcing) Low yield effect Low yield, high volume concept Revenue management techniques employed Lean business processes in the product set-upIATA Copyright © 2012 Airline Business Models and Competitive Strategies
  10. 10. Airline business models: marketing Scheduled airline Low cost-low fare model airline model Brand building “Outsourced” marketing Frequent flyer programs through airports Traditional channels Internet based CRMIATA Copyright © 2012 Airline Business Models and Competitive Strategies
  11. 11. Airline business models: distribution Scheduled airline Low cost-low fare model airline model Chartered seats are Low distribution costs usually returned to the Ticketless travel operator Can bypass GDS through Global distribution internet distribution systems are widely used (Amadeus, Sabre, etc.) Higher yield pax focus through interline agreements and GDSIATA Copyright © 2012 Airline Business Models and Competitive Strategies
  12. 12. Low cost, low fare model growth  LCLF airlines continue to gain market share  Fares and cost structures throughout the industry are under pressure to compete  European LCLF networks are expanding (more regional airports)  Many new LCLF airlines are entering the marketIATA Copyright © 2012 12 Airline Business Models and Competitive Strategies
  13. 13. Projected airline traffic growth PASSENGER TRAFFIC IN EUROPE AND NORTH AMERICA (IN MILLION PAX) Sources: AEA, Ryanair, easyJetIATA Copyright © 2012 Airline Business Models and Competitive Strategies
  14. 14. What next?  The low cost, low fare business model has shaken the airline industry  Some LCLF carriers are now targeting a new market segment, high-yield business passengers What can scheduled airlines do to renew their competitive advantage? Are the scheduled and LCLF business models as differentiated as they seem?IATA Copyright © 2012 Airline Business Models and Competitive Strategies
  15. 15. Find out more about this course at:www.iata.org/airline-business-simulationFor other Airline Management courses, visit:www.iata.org/training-airline-management IATA Copyright © 2012 15 Airline Business Models and Competitive Strategies

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