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10/14/2014

The Low Budget Airline Jetstar Asia Airways Tourism Essay

The Low Budget Airline Jetstar Asia


Airways Tourism Essay
Jetstar Asia Airways is a low-cost budget airline operating in the Southeast Asian region. It is founded
by its mother company Australias Qantas Airways in 2003. Unlike Jetstar in Australia, Jetstar Asia is
majority Singapore in which a Singapore investment company, Temasek Holdings Limited holds 19
per cent of shares, two Singaporean businessmen possess 32 percent, and the remaining 49 per cent
of shares belongs to Qantas Group. The company is known as an airline to offer low fares, all day and
every day to South East Asia customers. It has received several valuable awards, such as Best Brand
Experience for Low Cost Carrier (2006), Best Low Cost Airline, Southeast Asia and Asia (2006, 2008),
Top 10 Airlines by Passenger Carriage (2006, 2007), Best Asian Low-Cost Carrier (2006, 2007). The
first Jetstar Asia Airways flight took off for Hong Kong on December 13, 2004. Jetstar Asia and Valuair
Airways Limited were merged on July 22, 2005 (Jetstar, nd).
With a fleet of seven A320 aircrafts, Jetstar Asia now offers up to 126 weekly flights from Singapore to
17 destinations in ten Asian countries. It is planning to increase capacity by more three A320 aircrafts
by early next year and add destinations in India and China.
This marketing study aims to provide the Jetstar Asia Airways current marketing environment. It will
analyse SWOT as well as PESTEL to make clearly internal and external marketing environment. The
report also discuss about the current market plan of Jetstar Asia Airways. From the audit process,
recommendations will come out for improving Jetstar Asia Airways marketing performance in
existing competitive aviation environment.

II. Background
Today, global aviation industry has been divided into three major categories (Lelieur, 2003). The first
category consists of large network carriers, such as United Airlines, American Airlines, and Delta in the
United States; Air France, British Airway, Lufthansa in Europe. The second one is the middle size
carriers such as KLM and SAS in Europe. The final category is the low cost carriers, such as Jet Blue,
Westjet in North America; Virgin Blue and Australian Airlines in Australia; Ryanair, EasyJet, and Air
Berlin in Europe; Air Asia, Oasis Hong Kong Airline, Jetsatr Asia Airway, and Tiger Airway in Asia Pacific.
According to Weiss (2008, p.84), Low-cost carriers, also known as a no frills or discount airlines, offers
low fares in exchange for eliminating many traditional passengers services. These airlines have a
lower cost structures than competitors. They often operate a single passenger class and fleet,
reducing training and servicing costs.
In recent years, the low-cost carriers (LLCs) phenomenon has become more popular in aviation
industry. The low cost airline business has experienced surprising growth in term of passengers
carried and aircraft ordered. LLCs are likely to keep their price down thoroughly online booking as
well as providing the minimum level of onboard services. They can be seen as a new big success in
the world airline industry. According to OAG's Quarterly Airline Traffic Statistics (2007), low cost
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international flights have increased 20% year by year. Asia Pacific witnessed a dramatic growth in low
cost sector, with an increase from 3,900 flights and 600,000 seats in 2001 to 61,000 flights and 9.2
million seats in 2007 (Abacus, 2008). The Asia Pacific low cost market now has accounted for 12% of
all flights and all seats. Many Asian countries such as Singapore, Malaysia, India has opened up LCCs
to attractive a large number of passengers. As an affirmation about Jetstar Airways prospect, Geoff
Dixon, CEO of Qantas Airways Ltd said: We're very confident about the timing of the launch of this
airline. I don't know where other airlines will end up but I can assure you Jetstar Asia will be around in
four years' time and will be profitable, so Temasek and our other investors can be confident." (2004).
Jetstar Asia has announced its revenue increases 20% for the year ended 31 March 2008 (Jetstar, nd).
These proves that low fares has become attract more travellers. The expectation of Jetstar Asia
Airways about the world's largest potential aviation market" is coming true.

2.2 PEST analysis


PEST analysis is a common tool for analysing an organisations macro-environment to identify those
factors that might increase the potential for crisis. (Elliott, Swartz and Herbane, 2002). These include
political, economic, social and technological factors and the analysis examines the impact of each of
them on the business.

2.2.1 Political factors


On the August 09, 1965, Singapore left Malaysia Federation and became sovereign, democratic and
independent nation. In 1967, Singapore, Indonesia, Malaysia, the Philippines and Thailand established
the Association of Southeast Asian Nations (Asnic, nd). From 1970 Singapore is considered as a
political stability nation. It has become the prosperous nation with a widespread network of trading
links. So far, Singapore political stability has leaded to a high rate of economic growth. As one of Asia
most stable economics, many Singapore companies have developed well. Singapore economic has
been developing services industries such as wealth management and tourism, aviation industry.
Singaporean airline industry plays a key role in Singaporean economy. It now includes mainstream
Singapore Airlines and two low cost airlines Tiger Airways and Jetstar Asia Airways. However,
September 11th terrorist attack event in United States caused significant falling in travelling. Besides,
the political instability in South East Asia region, such as Thailand, Indonesia, and Malaysia influenced
negatively on aviation industry in Asia areas.

2.2.2 Economic factors


The economic environment consists of factors that affect consumer purchasing power and spending
patterns.(Kotler and Armstrong, 2009, p103). These following analyses will show how economic
factors have an effect on aviation industry.
In recent years, global economic crisis has pushed the trade-service dependent countries into worst
recession. The world travel market has also been affected in this crisis. According to International Air
Transport Association, due to economic recession, the global passenger traffic will decrease by 3% in
2009 and not growing above 4% until 2011 (IATA, 2008). Another major factor effects strongly on
airline market, especially budget airlines, that is the increase in fuel price. From 2004, the oil price
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surge was a result of three main factors: increased demand, a small global excess of production
capability, and the fear of supply disruption. The fuel cost increase caused of 36% rising of airline
operating costs in 2008. The deadly combination of falling demand and high oil prices made a plunge
of aviation industrys profitability, approximately losses of US$10.4 billion in 2008. At the same year,
Asia Pacific airline industry incurred losses US$ 300 million (IATA, 2009).

2.2.3 Social factors


Trends in social factors are significant component of the PEST analysis for airline industry. Firstly,
some factors such as advanced medical provisions and low ratio at birth have allowed people to live
longer. The average age of the population has been increasing steadily. Thus, the products that
airlines offer concerning to older and disabled passengers who need help at airports. Besides,
traditional family structure has been changing in today modern society. The increase of divorce rate
as well as number of one-parent family has become contemporary trend that travel industry has to
do to accommodate. They can be promotional and product planning policies, which offer to those
who are singles or one-parent family. Furthermore, the changes in the job market have impacts for
airline marketing policies. Due to work pressures, executives often have to make a day-return trip
instead of two days. This has become more important for short-haul markets.

2.2.4 Technology factors


As an advanced technology, Internet now plays an important role in airlines industry. All airlines have
websites that allow customers to book air ticket online. In making reservation, customers can also
select their seat. Utilization of internet in aviation industry brings benefits for both airlines and
passengers based on cost saving. The application of Simplifying the Business (StB) project in almost
airlines brings not only convenience to consumers but also lower costs to airlines industry. The
project includes electronic-ticketing, Common-Use Self-Service kiosks, and bar-coded boarding passes
(BCBP). BCBP can be accessed through websites, kiosk, and a check-in desk. It will eliminate magneticstripe boarding passes in near future.
With PEST analysis as above, marketing environment of Jetstar Asia Airways has just evaluated to
consider how the company operates in the today changing environment.

III. External analysis


1. Micro-environment (app 1,200 words)
- Description of the market
- Competitors analysis
- Market size, location, growth and opportunities
- Government participation in the marketplace

2. Macro-environment
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2.1 SWOT analysis


A SWOT analysis is an in-depth examination of key factors that are internal (strengths and
weaknesses) and external (opportunities and threats) to a business (Pinson, 2008, p.33). Strengths
are internal capabilities that may help a company reach its objects. Weaknesses are internal
limitations that may interfere with a companys ability to achieve its objects. Opportunities are
external factors that the company may be able to exploit to its advantages. Threats are current
external factors that may challenge the companys performance. (Kotler and Armstrong, 2009, p.78).
SWOT analysis helps a business to concentrate on those areas that present the greatest opportunities
and those competencies in which it is strongest. That business look into ways to diminish its
weaknesses, develop strategies to defeat threats. The following analysis focuses on Jetstar Asias
SWOT.

SWOT ANALYSIS OF JETSTAR ASIA AIRWAYS


Internal
Strengths
Weaknesses
- Flexible ticket price structure
- Growth in market share
- One type of aircraft
- Performance
- Narrow flight destinations.
- Limited fleet.

External
Opportunities
Threats
- Strengthen competitive capability.
- Increase in short-haul travelling.
- Growth in Singapore tourism
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- Increase of fuel price


- Unpredictable disaster factors
- Swine flu spread
- Customers belief.

2.1.1 Strengths
- Flexible ticket price structure: Jetstar Asia Airways has applied flexible ticket price structure that
allows customers can choose any kind of ticket, depending on customers demand. Customers can
purchase which ticket with or without luggage. By this application, Jetstar Asia Airways desires to
meet customers diversified demands.
- Growth in market share: The Company is going to launch its first service into China on December 16,
2009 (BusinessWeek, 2009). After that, it will offer new destination in India. Moreover, with 3
additional A320 aircrafts, it will expand its current capacity by 46 per cent by launching twice daily
services on the Singapore-Phuket route.
- One type of aircraft: Thanks to exploiting one type of aircraft - Airbus A320- Jetstar Asia Airways can
save cost of fuel consumption, cost of maintaining other aircrafts and reduce cost of staff training,
leading to lower operation cost. As a result, Jetstar Asia Airways can make up competitive advantage
to lure more customers by offering low ticket price.
- Performance: One of the most important factors affecting customers choice in airline industry is ontime performance. Understand this; Jetstar has used the computerised Aircraft Communication
Addressing and Reporting System (ACARS) to assure the accuracy of departure time and arrival time.
In 2008 and 2009, Jetstars on-time performance always achieved from 92% to 98% (Jetstar, nd).

2.1.2 Weaknesses
- Narrow flight destinations: So far, Jetstar Asia Airways has just exploited its aeronautic routes to 17
destinations across 10 countries in Asia Pacific (Jetstar, nd). Meanwhile, Tiger Airways has operating
with 27 destinations, and Asia Airways has 50 destinations. This can be seen weaknesses of Jetstar
Asia in aviation competition to attain customers.
- Limited fleet: Due to the limited fleet of seven A320 aircrafts, Jetstar Asia Airways has some
difficulties in expanding its market share to new destinations.

2.1.3 Opportunities
Jetstar Asia Airways has focused on not only individual passengers but also business travellers. It has
set up several kinds of privilege services for business travellers to increase number of passengers
year by year. From only 50 firms in 2004, now Jetstar has 400 corporations travelling with it (Baoying,
2009). More and more businesses, even multinational companies, are likely to choose low cost
airlines to save their business cost that create potential low cost market for Jetstar Asia Airways and
other airlines. Besides, trend of short-haul travelling is increasing in number of Asian tourists; instead
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of long-haul holidays because it enables Asian people travel more regularly in year. Focusing on these
subjects, Jetstar Asia will catch more opportunities to expand its market share. In addition to this, in
Singapore, two integrated resorts - the Marina Bay Sands and Resorts World Sentosa will be opened
in 2010. At that time, number of traveller visits Singapore will increase dramatically. There will be
about 15 million visitors coming to Singapore (integratedresort, nd). Such general trends as
mentioned above will bring prospect for Singapore airline industry, including budget airlines and
mainstream airlines.

2.1.4 Threats
The increase in fuel price over the past few years has bad affected on sustainable growth of Jetstar
Asia Airways and aviation industry. This can be seen an implicit threats to profitability of airlines.
Furthermore, the spread swine flu in many regions has affected significantly on airline travelling due
to the dramatic decrease of travellers. Unpredictable accidents that come from bad weather or
technical problems are also threats to airlines. Passengers may hesitate in choosing between budget
airlines and mainstream airlines because of the safety in budget airlines. This threat may negative
impact on sales of Jetstar Asia.

Recommendation
Nowadays, Asian airlines industry is getting more fiercely competitive between budget airlines and
traditional full services airlines. Moreover, competition among the emergence of Asian budget
airlines, such as Air Asia, Tiger Airways and Jetstar Asia has also become intensely. In order to
improve the companys marketing performance, we suggest some recommendations based on SWOT
analysis above and results collected from an interview with people who are concerning about airlines
market.
Firstly, we suggest Jetstar Asia should design a customer driven marketing strategy to identify its
target market. Its market segmentation includes customers those who usually travel on short haul
trips and cannot afford average international tickets. Then the company should build profitable
customer relationships based on subjects: travellers for leisure, businessmen and students.
Understanding who its customers are, the company will build customer relationship to satisfy their
demands.
In addition to this, the results from interviewing reflect the companys convenience and services are
not too high, just over 50% of respondents think that it is fair. In order to capture value from
customers and own customer loyalty, in its marketing strategies, the company needs to build the
right relationship with right customers and create customer delight. The company should strengthen
customers belief that lower price does not mean bad services. Besides, Jetstar Asia should develop
effective advertising strategy to consolidate their brand name through mass media.
Furthermore, limited fleet and flight destinations caused restriction in expansion marketplace as well
as attracting target customers. Thus, we recommend the company to apply competitive strategies.
The company should carry out not only protect its current market shares but also increase it further.

Books
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Weiss, J.W. (2008) Business Ethics: A Stakeholder and Issues Management Approach, Cengage
Learning, New York.

Lelieur, I. (2003) Law and policy of substantial


ownership and effective control of airlines
Prospects for change, Ashgate Publishing,
Hampshire.
Pinson, L.J.(2008) Anatomy of a business plan: the step-by-step guide to building a business and
securing your company future, Out of your mindand into the marketplace, California.

Kotler, P and Amstrong, G (2009) Principles of


Marketing, Pearson, New Jersey.
Elliott, D., Swartz, E. and Herbane, B (2002) Business continuity management: a crisis management
approach, Routledge, London

Websites
Abacus (2008) The Year of the Resourceful & Enterprising Rat, accessed September 06, 2009,
http://www.abacus.com.sg
BusinessWeek (2009) Jetstar Airways Pty Ltd, accessed September 06, 2009,
http://investing.businessweek.com/research/stocks/private/snapshot.asp?
privcapId=10917341&goback=.cps_1247149767187_1
Baoying, Ng. (2009) Jetstar Asia expands fleet and routes to keep up with competition, accessed
September 06, 2009,
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/450077/1/.html
integratedresort (nd) Singapore Integrated Resorts, accessed September 06, 2009,
http://integratedresorts.com.sg/
jetstar (nd) News, accessed September 06, 2009,
http://www.jetstar.com/sg/en/about-us/news.aspx#SinApr16b
Asnic (nd) Singapore history, accessed September 06, 2009,
http://asnic.utexas.edu/asnic/countries/singapore/Singapore-History.html
IATA (2008) IATA Economic briefing-The impact of recession on air traffic volumes, accessed
September 07, 2009,

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http://www.iata.org/NR/rdonlyres/7E25AD13-E0AD-4166-ABD8CFA192D51AB4/0/IATA_Economics_Briefing_Impact_of_Recession_Dec08.pdf
IATA (2009) Annual report 2009, accessed September 07, 2009,
http://www.iata.org/nr/rdonlyres/a33bc4b3-431b-4690-be6d6788900c8ae3/0/iataannualreport2009.pdf

Primary Resource Interview


We have conducted market research by an interview with clients of Jetstar Asia and non-clients at
Changi Airport to find answers then develop marketing strategy for Jetstar Asia.
We would be thankful if you could assist our group by completing our questionnaires, which will
provide useful information to us.

Personal information
1. Sex: Male Female
2. Age range: 18-25 26-30 31-40 41-50 51-60
3. Occupation: _______________

A. Questionnaires
1. Which airline with do you usually fly?
Mainstream airlines Budget airlines Never
2. Which budget airline with do you usually fly?
Jetstar Asia Tiger Airways Air Asia Others ____________
3. What concerns you most when you think of choosing the budget airline?
Money Service Convenience Others ____________
4. Which source lead you know Jetstar Asia?
Newspapers Internet Friends Others ____________
5. What is the purpose of your trip? Leisure Business Study Others
6. How would you rate Jetstar Asia in terms of service?
Poor Fair Good Excellent
7. How would you rate Jetstar Asia in terms of convenience?
Poor Fair Good Excellent
8. What do you think about Jetstar Asias ticket price comparing to other budget airlines?
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High Reasonable Low


Thank you very much for taking the time to answer these questions.

B. Answers from surveying


Question 1:
For this question, the results show that passengers of budget airlines are lower than that of
mainstream airlines, 27% compared to 69%. It means that budget aviations market share is small. 4%
of the respondents have never been on plane.

Question 2:
Responding this question, outcomes point out that Jetstar Asia rank at third position behind Tiger
Airways and Air Asia, with 23% whereas Tiger Airways and Air Asia are 31% and 42% respectively. 4%
of the answers flew with other airlines. It should be recommended that Jetstar Asia need more
effective marketing strategy to enhance the competitive capacity.

Question 3:
The result illustrate that the most customers concern when they choose budget airlines is saving
money, with 69% of the respondents. Service criteria and convenient criteria rank the second and the
third choice, with 16% and 13% respectively. 2% of the answers chose budget airlines primarily
because accompanying with friends.

Question 4:
41% of the answers show that they knew Jetstar Asia through Internet. Newspapers, Friends and
Others are ordered by 27%, 25% and 7% respectively.

Question 5:
For purpose of business, 31% of the respondents chose this result. 44% of the answers show that
their trip for leisure. For studying purpose is 19%, other purpose is 6%, such as health care, visiting
old friends. Therefore, Jetstar Asia should focus on target customers who are travellers in order to
boost up its sales. Besides it should pay attention to potential customer segment, including
businessmen and students.

Question 6:
In term of services, 53% of respondents explained that they considered Jetstar Asias services are
reasonable and acceptable. In contrast, 8% of interviewees admitted poorness of service. Good
criteria and excellent criteria are appraised by 25% and 14% respectively.
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Question 7:
Similarly, 51% of interviewees illustrated that they evaluated convenience is fair. 23% of the answers
think that convenience offered by Jetstar Asia is good whilst 15% of them considered it as excellent.
Remaining 11% of respondents are not pleased with Jetstar Asia convenience as they think it is poor.

Question 8:
What do you think about ticket price of Jetstar Asia comparing to other budget airlines?
64% of them think that ticket price offered by Jetstar Asia is reasonable. 29% of them believe that is
low. Only 7% of the answers claim its price is high.

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