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An Integrated Marketing Communications Campaign

For Philippine Airlines, Inc. (PAL)

Presented to:
The Faculty of Marketing Management Department
Ramon V. Del Rosario College of Business
De La Salle University - Manila

In Partial Fulfillment of the Requirements for


MKT535M – MARKETING MANAGEMENT
Term 1, A.Y. 2018 to 2019

Macro Environment and Industry Analysis

Submitted by:

Cheng, Kevin Jayson O.

Figuracion, Kris Elaine G.


THE BRAND Commented [1]: https://www.philippineairlines.com/Ab
outUs/newsandevents/ethof

As the flagship carrier of the Philippines, PAL offers its products and services to the
Filipino people located across the globe but still accessible to other countries for international
transfers. As the company continues to expand and improve their operations, they launched their
brand campaign “Experience the Heart of the Filipino”. With PAL being the first and oldest
commercial airline in the country, it is apparent that they should and is leading the industry being
the only airline with a 4-star rating in the country. Hence, there is no challenge when one say that
PAL offers the best service in the airline industry. The tagline is therefore fitting for foreign
travellers as the company is deemed to represent the country. Of course, with such service exists
a steeper price that one can infer their primary target market would be business travelers
specifically from mid to top level and people from upper middle class and up. They simply offer
premier and outstanding service that makes their brand different. This would be further discussed
in the competitive situation of the paper.
MACRO ENVIRONMENT ANALYSIS

OPPORTUNITIES THREATS
● Growing number of ● Competitors are equipped with
tourists from 5,967,005 to mobile applications for all types of
E 6,602,908 which generated smartphones specifically Air Asia
X an 11% growth from and Cebu Pacific
T 2016’s tourist arrivals. ● Effect of TRAIN law (price hike in
E ● Implementation of the commodities)
R approved 10 year passport ● Increased competition with the low
N for Filipino citizens fare airlines and aggressive promo
A ● ASEAN-Single Aviation fares of competitors (PISO fare,
L Market “open skies policy” holiday sale, etc)
● Increase in take home pay ● Increase in oil price
per capita due to recently
implemented TRAIN law.
● Development in
technology to maximize
operational efficiency
(fuel, etc..) and improve
customer service/feedback

I STRENGTHS WEAKNESSES
N ● PAL is a 628 million dollar ● Increasing number of customer
T company and was able to complaints (average of 52,000 calls
E maintain market leadership per month)
R in the aviation industry of ● Slow feedback to customers in
N the Philippines PAL’s helpline centers
A ● Tri-class seat offering ● Unorganized data collection for
L (economy, premium, & customer
business) complaints/suggestions/requests
● World-class service and ● Prerogative of PAL management to
approved by Skytrax focus investments on income
● Brand reputation as generating departments rather than
flagship carrier of the in back offices
Philippines ● High operating cost
External Analysis

The growing number of tourists arriving in the Philippines can become an opportunity for
PAL to market its services not only to local tourists but also those coming in from other
countries. With the growing competition amongst Cebu Pacific and Air Asia, not being able to
take advantage of the application software that can be installed in smartphones may lead to loss
in sales and market share. Being able to update the marketing strategy is crucial with the
incoming implementation of “Open Skies” policy for ASEAN-Single Aviation market. The
organization should also be careful of the impact of price hikes in commodities that may directly
affect the fare prices as it may push customers to choose other airlines for a cheaper flight. The
balancing impact of increased spending power and increase in commodity prices should be
closely monitored to manage its consequences and turn around a possible threat into PAL’s
market advantage.

Internal Analysis

With first mover advantage in the industry and world-class service recognized by
Skytrax, an increasing amount of customer complaints and slow feedback to customers can lead
to loss in sales and difficulty in reaching its goal of a 5-star rating recognition. The decision of
the management to focus on income generating areas of the organization can lead to a major
overlook in small details such as customer retention and satisfaction. The high competition
among competitors is strong therefore it is paramount that customers are retained to keep them
from shifting and to maintain market share in the aviation industry.

Economic Environment Commented [2]: Will add later on

Despite some notable improvements in the last five years, public institutions in the
Philippines remain very weak. In its annual index measuring perceptions of public sector
corruption, international anti-corruption watchdog Transparency International ranked the country
101st out of 176 countries and territories in 2016, worse than Indonesia (ranked 90th) and on par
with Thailand. Standards of governance vary among agencies. Most are vulnerable to the
influence of well-connected individuals or illicit payments from individuals with malicious
interests. There is a growing acceptance of the rule of law (at least in commercial and civil cases)
among domestic business elites, though foreign companies generally believe that their interests
will come second to well-connected local individuals and entities. There are also areas where
competing interests continue to lead to active disincentives for certain investors, notably in laws
covering mining legislation. Politically motivated policy shifts occur, mainly under the influence
of powerful and connected domestic conglomerates. There are no indications that these practices
will end in the longer term, or during President Rodrigo Duterte's tenure.
Socio-Political Environment Commented [3]: Edit later on

Political stability is likely to continue for the remainder of President Rodrigo Duterte's
term (which ends in 2022). Despite his unpredictable leadership style and authoritarian instincts,
support for the president has remained solid, given public confidence in his administration's
economic vision, and his pledges to create growth, eradicate poverty and eliminate crime and
drug use. These key themes continue to resonate with the Filipino public and investors, and
continue to be assuaged by the country's high growth projections and this administration's pro-
business economic reforms, despite the negative headlines on human rights violations in
connection with the anti-drug campaign. Key economic reforms that the business community has
centred on are the government's efforts to drive infrastructure execution and pass its
Comprehensive Tax Reform Programme (CTRP). Growth for the second quarter of 2017 hit
6.5%, in line with the growth forecasts for 2017 (also projected at 6.5%).

Domestic terrorists - both ideologically and criminally motivated - are present in the
country, as are transnational terrorists. Crime presents greater risks to foreign personnel in the
Philippines than elsewhere in the region, with these problems most concentrated in the Manila
area. Banditry is a problem in rural areas, but the line between insurgency and criminal banditry
is frequently blurred. Following a deadly September 2016 bombing in Davao City, the president
declared an indefinite nationwide state of emergency on account of lawlessness, which also gives
law enforcement expanded powers to enforce Duterte's flagship "war on drugs'. Anti-drug
operations are in full swing nationwide. The campaign has mostly affected locals, and Western
expatriates have thus far not been directly affected. Tourist- and expatriate-frequented areas have
seen fewer killings than more poverty-afflicted areas of the capital region. There is a risk of
foreigners and locals getting inadvertently caught in the cross-hairs of random shootings, with
the increased number of vigilante drive-by shootings underlining this point. Meanwhile, the
opportunity costs of the war on drugs are mounting, in terms of diverting resources away from
urgent security concerns, particularly the rise of IS-linked extremism in Mindanao. Commented [4]: Add Technological Advancement and
Ecological Concerns
INDUSTRY ANALYSIS
Industry Identification

According to the International Air Transport Association (IATA), airline industry


globally started 2018Y in a good place as it ended with an 8% growth as of November last year. Commented [5]: https://www.manilatimes.net/global-
airline-industry-good-place-iata/374003/
City-pair connections have increased which entails unique matches that in turn increase demand
as passengers have diverse options of places to travel to. The cost of travel became affordable
with fare sales happening every now and then but companies continuously deliver normal levels
of profitability with regards to their shareholders. Despite this growth and opportunity, industry
faces challenge with regards to security threats, infrastructure issues and the fees/charges
associated and being added to the cost base. Furthermore, airports and air traffic management is
becoming an issue with the demand of people.

Airline Industry in the Philippines Commented [6]: http://www.wccaviation.com/overview


-airline-industry-philippines/

1931 The government created Department of Commerce and Communications to


handle airline matters
1941 PAL was founded and is the first domestic airline and the flag-carrier of the
Philippines ever since
1952 Reorganization of The Civil Aeronautics Board and the Civil Aeronautics
Administration due to the Republic Act 776. Commented [7]: Expound further
1974 PAL monopolized the aviation industry as per President Ferdinand Marcos
1978 New franchise of the airline has been established governed by the government to
regulate the fares and make sure it is reasonable. Return on investment was
capped to 12%. They experienced loss but recovered through subsidies of
government and charging higher fares in high density markets
1995 Liberalization of the industry as domestic and international civil aviation
liberalization policy has been established and government control removed
1999 Entry of competitors that resulted to PAL’s decreased market share.

Industry Size and Growth

According to Civil Aviation Authority of the Philippines, Philippines currently have 71


airports with only 11 handling international flights, 32 domestic travel and 28 for general
navigation.The largest in the country would no doubt be Ninoy Aquino International Airport that Commented [8]: Not quite sure with the numbers
has 4 terminals and can handle hundreds of flights - domestic or international - everyday. The
four major players in the industry would be Air Asia, Cebu Pacific, Philippine Airlines and
Skyket who carry majority of the flights in the country.
Commented [9]: Will explain later on. Sorry cramming

Taking note of the country’s performance, one can easily tell that people have more gross
personal income which primarily be due to the recent changes in taxation.