Marketing case study Air Arabia

2. Company profile
• Low cost airline Headquartered in Sharjah,UAE.
• Established in 2003 by the emperor of Sharjah d
by Sultan bin Muhammad Al-Qasimi
• First low cost Airline in the Middle East
• Flies to 118 destination worldwide including New
Delhi,Mumbai,Dhaka,Peshawar,Asmara ...

3. Objectives
• Company moto- “PAY LESS FLY MORE….”
• With Great Flying Experience, Affordable Prices
and Good Customer Service..
Video

5. Setting the Right Price
1. Selecting the pricing objective
2. Determining Demand
3. Estimating Cost
4. Analysing Competitors costs, price and offers
5. Selecting a pricing method

6. Step 1:Selecting the pricing objective
Five major objectives of Price Selection
• Survival
• Maximum Current Profit
• Maximum Market Share
• Maximum Market Skimming
• Product-Quality Leadership
Air Arabia’s pricing objectives revolve around
Survival, Maximum Market Share and Product-Quality
Leadership

7. Step2 :Determining Demand
• Observed the demand for low cost air tickets
• Observed that a major chunk of the immigrant
population in the UAE came from destinations not
catered by national airlines
• Plans to target 85% of the potential customers who
cannot afford normal flying expenses

8. Step 3 Estimating Cost
• Cost of Fuel
• Airport Take off and landing
charges
• Cost of training the staff and
ground crew members
• The cost of the Aircraft
purchased
• The cost of frills and
refreshments
• Fixed
• Fixed
• Fixed
• Fixed
• Variable

9. Cutting costs &optimal pricing

10. Universal Aircraft Model

11. 1. Air Arabias fleet(55 in number) consists only of
A320-200a aircrafts
2. A320 uses Sharplet Technology ,helping on cutting
down on fuel cost by upto 4%
3. Since Air Arabia uses only one type of Aircraft the
order for new Aircraft can be placed in Bulk ,hence
drastically cuts down the fixed costs
4. The ground Staff need not be trained again and
again for different models of planes ,hence cutting
down costs.

13. Cutting take off and landing
costs

14. 1. Flights Scheduled at odd hours,when landing
and take off cost is low
2. The take off and landing costs at Sharjah are
way lower than those in Dubai,Rihyad or Abu
Dhabi.

15. Cutting Fuel Costs

16. 1. Analyzing Competitors costs,price and
offers

17. Fuel Hedging
Strategy
Ordering fuel in
bulk and years in
advance can help
the company to
save millions of
dollars. This is fuel
hedging

18. Step 4: Analysing Competitors
costs, price and offers
• Analysed the Competitors Price Mix like Fly Dubai
and Flynas
• Observed different business models of its
competitors
• Accordingly aimed to set its price 40% cheaper than
regular economy fares.

19. Step 5:Selecting a Pricing Method
• Different pricing methods are
1. Markup pricing
2. Target Return pricing
3. Perceived Value pricing
4. Value Pricing
5. Everyday Low Pricing
6. Going Rate Pricing
7. Auction Type Pricing
• Arabia opted for Value Pricing wherein it aimed to
win customer loyalty by charging a fairly low price
for a high quality offering

20. Future Expansion
• Can create new hubs in upcoming cities like RAK,
Rabat etc.
• Increasing avenues of making profit like selling
merchandise ,and goodies
• Expanding its destinations to far east
• Increasing Revenue by promoting on board
advertising

21. Challenges Air Arabia faces
• High Competition of low cost carrier emerging in
developing countries
• Perceived image as a cheap Airline even after
expansion
• Sharjah losing its magnet as a airline hub to Abu
Dhabi,RAK.
• Resentment in employees due to low payments
• Vulnerability to fluctuations in Fuel Prices.

22. Why don’t all other airlines apply the
same business model as Air Arabia?
• Other rivals targeted comfort and luxury driven consumers
and shifted their focus to hybrid model. But Air Arabia has
always been keen on serving people who can’t afford to pay
high prices for travelling via air. This makes Air Arabia to
provide lowest cost prices than anyone else. Also other
companies might be hesitating in applying same business
model as Air Arabia because then they send bad message to
its target segment that they lack innovation and creativity

23. DISCLAIMER
• Created By Hrishikesh V Wagle(S.P.C.E Mumbai) at a
Marketing Internship under Prof.Sameer Mathur,IIM
Lucknow.