Airline Industry Case

Johnathan R. Clark

MKT501 Strategic Marketing

Case Study 1

October 17, 2014

Introduction

Deregulation in 1978 put the airline industry into a new environment. They could then compete on pricing and decide where to fly, when to fly, and with what planes they wanted to fly with. Not long after deregulation did the industry develop decision support systems, helping with the scheduling, pricing, revenue management, and operations.

During the 1980’s and 1990’s the revenue management systems generated millions of dollars in annual revenue. The customers at this time made phone calls to book reservations and didn’t take time to call around for price comparison. Everything changed again in the 2000’s as customers made their reservations differently. Despite the downfall of 9/11, the internet allowed price information to be available to consumers and travel agencies became available in the facilitation of price comparisons. (Rothkopf & Wald, 2011)

Low-cost carriers entered the market and have made a difference in the transition the airline industry has undergone throughout the last decade. The airline industry is now intensely competitive and remains a growing industry. The market is overly competitive due to the amount of airlines available and their flight schedules. (Wen and Yeh, 2010)

 The market structure of each airline is what sets them apart. The airline connections in the market, strength of buyers and sellers, levels of competition, product differences, and entry into and exit from the market differentiates the market structure within.

This paper will address the external factors impacting the passenger airline industry, the major airline market segments, and a look into a couple of the industry leads and their difference in positioning.

Key External Factors

The airline industry is largely dependent on the supply of the oil industry. The oil price directly affects the price of airfare, whether increased or decreased. The demands in the industry don’t play a huge role as the rates have to be adjusted by the oil industry dictations. (Pilcher, 2006)

Terrorism has played a huge part in many factors. The attacks from September 11, 2001, caused security to undergo a dramatic shift in taking safety precautions. While the increased security may ease the mind of some it also raises frustration and anxiety in others. Passengers and their families now have to deal with the extended amount of time and effort to get from purchasing a ticket to their terminal gate. (Bearden, 2011)

Plane crashes affect the willingness of consumers to travel by air. The perception of our people has changed due to those certain events. Some make judgments on ethnicity and relate certain genders and races to past events making them feel discouraged in flying.