PASSENGER AIR

TRANSPORT
INDUSTRY
A REPORT BY
MARY GRAZIELLYNN J. DE GUZMAN
M.DE-GUZMAN@TBS-EDUCATION.ORG

LEISURE
FLYER

SHORT &
MEDIUM HAUL
LEISURE
FLIGHT

LONG HAUL
LEISURE
FLIGHT

BUSINESS
FLYER

CUSTOMER VARIATION

STRATEGIC SEGMENTATION

SHORT &
MEDIUM HAUL
BUSINESS
FLIGHT

LONG HAUL
BUSINESS
FLIGHT

SHORT &
MEDIUM HAUL

LONG
HAUL

LENGTH OF JOURNEY

STRATEGIC SEGMENTATION

MAIN POINTS

CUSTOMER
VARIATION

LENGTH OF
JOURNEY

STRATEGIC SEGMENTATION
CUSTOMER VARIATION

LENGTH OF JOURNEY
SHORT & MEDIUM HAUL
VS LONG HAUL

BUSINESS VS LEISURE
MAIN DIFFERENCE BEING
IN THEIR ATTITUDE
TOWARDS PRICE

DIFFERENT SERVICES
OFFERED DEPENDING ON
THE DURATION OF THE
FLIGHT SUCH AS INFLIGHT FOOD &
AMENITIES, AIRCRAFT
TYPE, ETC.

TRADITIONAL VS LOW
COST
LOW COST
TRADITIONAL
AIRLINES

MAKES USE OF GLOBAL

DISTRIBUTION SYSTEMS
(HIGH COSTS) FOR
DISTRIBUTION
USUALLY UNIONIZED AND
USED TO BE FREE FROM
COMPETITION WITH OTHER
TRADITIONAL CARRIERS
SELLS WITH THEIR PREMIUM
IMAGE

AIRLINES
MAKES USE MAINLY OF
TELEPHONE AND INTERNET
COMMUNICATION FOR
DISTRIBUTION
SELLS WITH THEIR LOW
PRICING
HAS LOWER COSTS
COMAPRED TO CARRIERS
(MORE ON SHORT HAUL,
COST-EFFICIENT
SYSTEMS,ETC.)

TRADITIONAL VS LOW
COST
LOW COST
TRADITIONAL
AIRLINES

USED TO HOLD THE

INDUSTRY TO THEMSELVES
TARGETS BOTH LEISURE
AND BUSINESS TRAVELLERS
OFFERS SHORT, MEDIUM,
AND LONG HAUL FLIGHTS
GETS PROFIT FROM
BUSINESS CLASS FLIGHTS

AIRLINES
NEWCOMERS TO THE INDUSTRY
(DUE TO THE DEREGULATIONA
CT)
TARGETS LEISURE TRAVELLERS
(THOSE THAT ARE MORE COST
CONSCIOUS) THAN BUSINESS
TRAVELLERS
USUALLY OFFERS SHORT AND
MEDIUM HAUL FLIGHTS ONLY
PROFITS FROM EXTRA CHARGES
FROM SMALL SERVICES USED BY
THE CUSTOMER

INDUSTRY ANALYSIS
SHORT HAUL
WESTERN EUROPEAN
FLIGHTS
LEISURE SEGMENT

PORTERS 6 FORCES
ENTRANTS

SUPPLIERS

COMPETITIVE
RIVALRY

CUSTOMERS

SUBSTITUTES

ENVIRONMEN
T

COMPETITIVE RIVALRY

Competition among old

and
new
players
is
increasing. The presence of
both low cost carriers and
multiple
major
carriers
creates
a
tense
atmosphere.
Both kinds of carriers offer
this kind of flight.

ENTRANTS

The creation of the

Deregulation
Act
allowed
for
easier
entrance
into
the
industry.
However,
capital is quite huge
and is considered to be
a huge barrier to entry.

CUSTOMERS

Cost-conscious travelers are

looking
for
price
competitiveness.
While the business travelers
expect in-flight luxury as they
do not pay for their flights.
Ease of use in distribution
channels is a plus. Like having
presence in internet travel
sites, etc.

SUBSTITUTES

Substitutes are high

speed
trains
and
sometimes
the
bus.
However these modes
of transportation are
time consuming albeit
inexpensive.

SUPPLIERS

There are only two suppliers for

the main airplane models and
quite a few for engines. Pricing is
usually tied with the companies
and so there is not much of a
problem.
Airport slots are slightly less
accessible
considering
the
increase in competition.
Fuel has to be hedged in order to
regulate costs.

ENVIRONMENT

The European Union is a key

player as to why there are
more airlines today. Their
Deregulation Act based on
that of the United States
allowed for the entry of these
new Low Cost Carriers. Some
support was offered to them
and
restrictions
were
lessened.

PORTERS 6 FORCES
3: ENTRANTS

2: SUPPLIERS

4: COMPETITIVE
RIVALRY

3: CUSTOMERS

1: SUBSTITUTES
3: ENVIRONMENT

VALUE CHAIN
FIRM INFRASTRUCTURE
HUMAN RESOURCES MANAGEMENT
RESEARCH & DEVELOPMENT
PROCUREMENT

INBOUND
LOGISTICS

OPERATIONS

OUTBOUND
LOGISTCS

MARKETING
& SALES

SERVICES

FIRM
INFRASTRUCTURE
The industry works
with a set of
passenger aircrafts
ready for use
Flight crew and staff
Communication
systems for
purchasing tickets

HUMAN RESOURCES

Board of Directors
CEO, CFO, COO
Staff
In-Flight crew
Sales staff

RESEARCH & DEV

PROCUREMENT

The airlines do not do

the research for the
aircraft manufacturing.
Only for use.
Basic
tech
systems
used for maintaining
the flight database and
ticket management.

Most items required

for operations is done
with
long
time
partners.
Catering and in-flight
amenities are usually
from sister companies.
Fuel
is
highly
managed due to its
sensitivity

INBOUND LOGISTICS

OPERATIONS

Makes use of yield

management
(optimizing revenues
per flight by adjusting
prices)
Maintenance of planes
Sales & ticket data
tracking

Flight reservation or
purchase
Flight boarding and
proper
Sometimes
with
additional services like
travel lounges after
fligt

OUTBOUND LOGISTICS
Baggage delivery
After flight assistance
from staff
Aircraft
check
after
flight

MARKETING &SALES

Deals with reservation

and sales
Offers economy and
Takes
into
business class seats
consideration
yield
Service and service
management.
quality depends on
class
SERVICES

FOCUS & OUTSOURCING

Considering the high costs
surrounding the industry,
Procurement is highly sensitive and
as such must be handled with utmost
care
Marketing & Sales and R&D can be
outsourced as it may cost too much
from the firms to hire and train
specialists on the area

WHAT TO DO FOR MAJORS

The major airlines are in deep trouble if they
do not start finding ways to innovate their
current operations. Price sensitive customers
are most likely to switch to LCCs as quality
of service is not on the top of their list.
The dependence on the business class for
revenue may hurt the majors in the long run
seeing that some companies are also cost
cutting their employee business travels.

WHAT TO DO FOR MAJORS

Higher efficiency in plane preparation
can be done in order to increase
operation hours
Systems can be simplified, especially
with the emergence of the internet
the costs in the global distribution
system can be cut slowly and replace
with a more practical data transfer
solution