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Marketing in Action Low Cost Airlines Take Off Case Solution

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The airline industry is growing in the year 2007 (at the time of writing the case study), and the number of airline services is also increasing rapidly. The growth in the number of passengers who choose to travel by air is increasing in developing economies of Asia and Middle-east (Hudson & Hudson, 2007). The reason for the growth in the number of passengers is government deregulation in these economies and an emerging upper-middle-income group. The case study analysis discusses the competitive strategies adopted by rival airlines and their pricing strategies. The analysis also takes into account the benefits sought by the customers when they choose to travel by airplane rather than by road. The last part of the report evaluates the factors that influence the pricing strategies of these airlines.

Following questions are answered in this case study solution

  1. Introduction

  2. Pricing Strategies 

  3. Benefits sought by the Customers 

  4. Factors that affect pricing 

  5. Conclusion

Case Analysis for Marketing in Action Low Cost Airlines Take Off

2. Pricing Strategies 

The pricing strategies of the airlines differ significantly from one another depending on the market they operate and their approach. The pricing strategy of three airlines is compared in this section: 

  1. SpiceJet is an Indian airline that follows market-penetration pricing strategy. The objective of the pricing strategy is to maximize the market share of the company and to divide the fixed cost of the operations over a greater number of travelers. When the fixed costs (salaries of the staff, airport fee, the rental cost of the planes, etc.) are divided over a larger number of passengers, the cost per passenger is low. Thus, SpiceJet can offer its service at highly competitive prices to its customers and still make a profit. The amount of a ticket is calculated by the cost-plus-pricing mechanism. The pricing strategy of the airline also dictates its operations and distribution strategy. 70% of the sales of the tickets of the airline are done via the Internet (Hudson & Hudson, 2007). A 12-hour utilization rate is followed for a majority of the aircraft by SpiceJet to maximize the yield on the fixed rent (Hudson & Hudson, 2007). 

  2. Tiger Airways is a Singaporean airline that follows a competitive pricing strategy. The airline even operates three Thai routes at a price of $1 as loss-leaders (Hudson & Hudson, 2007). The objective of this pricing strategy is to undercut the competition and to gain word-of-mouth publicity. The pricing strategy is supported by offering bare-minimum amenities to the passengers on the flight. No food or beverages are served to travelers during the trip. Any form of update (for instance, the increase in luggage above the threshold limit) is heavily charged. 

  3. Emirates is a Middle-eastern airline that follows a premium pricing strategy. In the year 2007, Emirates has increased its focus on the American market. 42% of its flights operate from within the United States (Hudson & Hudson, 2007). These flights are either on long-haul domestic routes or international routes. High service provisions are offered by Emirates to its passengers. The reason Emirates chose to focus on long-haul flights is the propensity of the consumers to seek convenience and luxury on long-haul flights. 

3. Benefits sought by the Customers 

The expectations of the customers are not the same as air travel. The benefits sought by the customer depend on the price paid by them for the ticket and the type of travel. 

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