The Marketing of services

The marketing plan of AIRBLUE

Kamran Hassan

ID: 4229 (BBA 7th )

Submitted to :: Sir Shahzad Khan

DEPARTMENT OF MANAGEMENT SCIENCES CITY UNIVERITY PESHAWAR. (1) SERVICE ORGANIZATION I have selected the private service organization in airline sector that is AIRBLUE (styled as airblue), whose little description is given as under; Airblue Limited is a private airline with its head office on the 12th floor of the Islamabad Stock Exchange (ISE) Towers in Islamabad, Pakistan. It is Pakistan's second largest airline with over 30% share of the domestic market. Airblue operates scheduled flights operating 30 daily services linking four domesticdestinations and international services to Dubai, Abu Dhabi, Sharjah, Muscat and Manchester. It carried 1.4 million passengers on domestic flights in the 200607 fiscal year.Its main base is Jinnah

International Airport, Karachi.It started its operations on May 24, 2004. It was the first private carrier of Pakistan to operate the Airbus A320 when it initially started. Airblue has been expanding rapidly despite experiencing competition from the other three airline operators in Pakistan.

(2) MISSION STATEMENT Air blue will be a cost effective airline aiming to provide affordable and convenient air travel with luxury and elegance. Enjoy The Difference Freedom, Flexibility And Savings. (3) VISION STATEMENT The vision statement of airblue is given as under: To provide exceptional customer service at low prices (4) MARKETING MIX

Marketing -mix is the set of all the controllable elements by the organization. Every service

marketing organization contains the following seven elements or 7 Ps; I. II. III. IV. V. VI. VII. Product Price Place Promotion People Physical evidence Processes

I.

Product:

Levels of products: The Core Product, which is the most basic level of the product i.e. the benefit that the product offers, the basic of using the Airblue services are the convenient, fast and high quality mode of traveling. The actual level of product, The actual product is Airblue airlines, and having the following characteristics: Quality level: They are maintaining their quality mainly through all the competitive advantages gaining strategies namely, their product differentiation, service differentiation channel differentiation, image differentiation and people differentiation. The Augmented Level of Product: They provide high service augmentations to their product i.e. product classification, individual product design e.t.c.

Range of services: The range of service means the number of services provided. So, Airblue provides the transport as well as cargo services and e-Ticketing : AirBlue has introduced the concept of total e-ticketing for the convenience of passenger, first time in Pakistan. E-Ticketing System is an online seat reservation service which facilitates all the travelers that they can reserve their seats and also they can retrieve their seat reservation and they can also postpone their reservation e-ticketing needs a lot of high tech infrastructure and skilled employees which increases their cost and providing high valued services. Cargo services: Airblue offers more than 70,000 kgs cargo space on more than 18 fleet everyday. Their certified Airblue eCargo Agents book cargo directly on-line, saving time and cutting costs. Airblue is proud to help businesses to ship goods faster and more reliable than ever before. Pickup and drop-off centers are conveniently located near city airports. To participate as an agent of cargo of airblue we have to fill the form on this website address:

II.

Price: Generally price is the amount of money for which the customer is willing to pay.A profit organization faces the task of setting a price on their product and services. Price is the amount of money that customer willing to pay for the services. How are prices set? Air blue set their prices on the basis of two type of situation. Domestic routes International routes

Domestic routes Prices for domestic route are fix by air blue . The cost plus method is used to set the price at domestic level. The air blue management estimates the price by using following 6 steps. I. Selecting the price objective II. Determining the demand III. Estimating costs IV. Analyzing competitor price and offers. V. Selecting a price method. VI. Select the final price. International routes.

The price for international routes is set by air bluethe IATA doesnt allow any discount on any international routes. Ticket show the full pries for the route while air lines charge discounted fare by cutting their share of profit. However, air blue establishes the pricing strategies on different international routes keeping in view the following points . Competitor price Cost of operation Type of aircraft used On the other hand AIR BLUE has three categories of their pricing as below, they also vary by season to season and at peak time Higher prices Shoulder prices Low prices

Countries UK DUBAI

Higher prices PKR 67450 57650

Shoulder price PKR 53750 49550

Low price PKR 45500 42500

III.

Place :

Place refers to the location of service providers and their accessibility, which is not related to only physical place but it also relates to distribution channels and other means of contact and communications. for example, travel agents and other intermediaries e.t.c. Level of channel According to our opinion, air blue uses two level of channel which are as follow. Zero level channels It is also called the direct marketing channel. Now the air sells the tickets to final users through its ticket counter. In Lahore, air blue has ticket and booking office to different place to sell the ticket to customer. These offices are computerized and directly linked with the head office at Islamabad One level channel Here traveling agents and intermediaries are involved in selling the ticket to customers. Many travel agents are provided auto ticketing and reservation system. Ther are two types of agents which are defined as follow,

IATA agencies There are 30 IATA approved agencies which deal with air blue.These agencies can also be stocked and sell tickets of other airlines. Commission of these agents is as follow, International sector = 9% Domestic sector=5%

District sector agents. These are agents who exclusively deal with AIR BLUE ticket and cannot deal in other air lines normally these are located where AIR BLUE does not have sale point. The commission provided to general sale agents is International sector=12% Domestic sector=5%

A. Airblue routes:
AirBlue is currently operating in Karachi, Islamabad, Peshawar and Lahore as frequent fleet and also daily fleet to Sukkur, Faisalabad, Quetta, Gwadar, and Multan and expecting to start its service to Chitral in near future. Excepting domestic fleet, they also have started their regular international fleets since various years to Dubai, Abu Dhabi, Sharjah, Muscat, Manchester, Oman and UK. And planning to start fleet to Saudi Arabia, Qatar e.t.c. The following are the different routes of airblue: Airblue Domestic Routes: Karachi Islamabad Karachi Lahore Karachi Peshawar Karachi Dubai Lahore Dubai Islamabad Dubai Peshawar Dubai Islamabad - Manchester

Airblue International Routes: Islamabad - Abu Dhabi Islamabad Sharjah Lahore Sharjah Lahore - Abu Dhabi Lahore Muscat The following are the routes of airblue as shown in map graphically; Source: ISLAMABAD

Source:LAHORE

Source: MANCHESTER

Source: MUSCAT

Source: PESHAWAR

Source: Dubai & Sharjah

Source: Abu-DHABI

IV.

Promotion: This includes various methods of communicating with markets. The major methods of promotion are: 1. Advertising 2. Personal selling 3. Sales promotion Since, airblue uses the following two methods of promotions;

1. Advertising:
Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor. There are three major objectives of advertising which are to inform, to persuade and to remind. AirBlue promoted its airline by showing commercials on major television channels like GEO TV, ARY TV which was for a very short time and extensive advertising in major newspapers like Dawn, The News, and Daily Jang.

2. Sales promotion:
Sales promotions are rebates or discount of money during purchasing of services or products. Major sales promotion tools are; Cash Refund Offer (Rebates): Offer to refund part of the purchase price of a product to consumers who send a proof of purchase to the manufacturer. AirBlue offers a complete cash refund on cancellation of tickets prior to 24 hours of departure; the refund will be shown in full as a separate item in passenger sales history report. And within 24 hours of flight departures, a penalty of Rs. 300 applies. Advertising specialties: Useful article imprinted with an advertisers name, given as a gift to consumers. Airblue gives key chains and toys as souvenirs to their passengers during the flight. Patronage rewards: Cash or other award for the regular use of a certain companys products or services. Airblue offers its Blue Miles Frequent Flier programs, awarding points for miles traveled that can be turned in for free airline trips. For example, on every 10,000 miles traveled, a customer is eligible for a free domestic ticket to any city.

V.

People: Two types of people are included in service organizations which are;

 Service producers

Administration personnel Airblue utilizes personnel utilities regarding their services as in their organization chart given as under:

It is the first airline to have employees trained according to international standards. It is technologically advanced. The organo-gram of the organization follows. It shows that the employees report to their divisional heads that in turn are answerable to the Chief Executive Officer.

VI.

Physical evidence: This include the following elements like; Physical environment: Furnishings, colors, layout, noise of airplanes as well as offices are all very best provided by Airblue to position their image in the mind of prospects.

Facilitating goods: It enable the services to be provided like the the food provided, music during flight e.t.c. Other tangible goods : It includes packaging, tickets formats e.t.c.

VII.

Process: It includes the following terms; Policies and procedures adopted The degree of mechanization Operational management Airblue control its flight operations by well-trained employees either pilots or other related staff. Airblue uses full-computerized soft wares of sales management and reservation through every customer can buy ticket through 24/7 means twenty four hours through a week.

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SWOT ANALYSIS

The SWOT analysis is the process of analyzing organizations and their environments based on their strengths, weaknesses, opportunities and threats. This includes the environmental analysis, the process of scanning the business environment for threats and opportunities, which is considered as external factors, and the organizational analysis, the process of analyzing a firms strengths and weaknesses as internal factors.

Strengths: Strength is an internal characteristic that has the potential of improving the organizations competitive position. The following are the major strengths of Airblue; 1. Leading market position: AirBlue is one of Pakistans leading air carrier, with more than 800 daily flights to 8 destinations. Around 100,000 passengers a month fly on AirBlue, making it one of the major operators in the domestic market in terms of passenger kilometers. Its revenue growth was driven by stronger yields per passenger, up 2.8 percent year-on-year. Its strong market position is driven by consistently low fares as well as reliable service, frequent and convenient flights, use of new technologies like e-ticketing and self check-in terminals, comfortable cabins and superior customer service. Brand recognition: Airblue has high brand recall. It is recognized by travelers all over the country. AirBlue commenced operations in 2004, and reached the milestone of serving one million customers within two years. This helps clarify why customers prefer AirBlue to other carriers such as AIR BLUE, Aero Asia and Shaheen Airlines. AirBlue earned the number one ranking in customer satisfaction for 2005, based on least number of complaints per passenger carried as reported to the Civil Aviation Authority (CAA). This strong market position gives the company a scale advantage and helps it strengthen its brand image. Superior operating structure: AirBlue has maintained its position as the low cost carrier for the last two years. It has one of the lowest operating cost structures, being first in the Pakistani market to use the latest technology. Factors contributing to its low cost structure include; single type aircraft (Airbus) and an efficient, high-utilization and point-to- point route structure. Flying one type of aircraft significantly simplifies scheduling, maintenance, flight operations, and training activities. AirBlue has continually achieved high asset utilization and employee efficiency. Superior operating structure serves as the primary competitive advantage of AirBlue. Network presence: AirBlue enjoys a strong network in key domestic and international destinations. The companys network includes three the major airports in Pakistan, as well as major international airport such as Dubai International Airport. Having a strong network means that AirBlue can generate traffic feed for both its domestic and international flights. Efficient use of technology: AirBlue has successfully incorporated latest technology in all its systems, giving it an edge over competitors. As discussed in the case study, AirBlue takes credit for 5. 4. 3. 2.

I.

introducing most new technologies to the Pakistani market. It was the first carrier in Pakistan to incorporate the e-ticketing system and the second in South Asia to introduce self check in systems at the Jinnah International Airport Karachi. It also has an efficient intranet called AirBlue EDNET that helps it successfully maintain a paperless environment, providing managers and employees real time access to information. It has also vertically integrated the intranet incorporating major strategic partners such as American Express. Time punctual: 98% punctuality of on-time flight departures. 7. Operational efficiency: By using efficient technology, it shows all its operations very efficient. 8. Latest Airbus: The airblue aircraft are the latest fly-by-wire technology Airbus A320's and A321's. This allows the airline more flexibility and scales of economy in crew planning and maintenance capability, adding directly to bottom-line profitability. 9. Ranking: AirBlue is the first among private sector airlines in South-Asia and second after Emirates in the region to introduce latest self check-in system at Karachi airport. The self check-in system will facilitate the passengers carrying baggage with them, to get boarding card through the new touch screen system without reporting at the counter. 10. Frequent flyer program: Frequent flyer service, which is a promotional strategy in which airblue offer special prices after travel of the given or specified blue-miles. It works in the following way when you attain blue miles: The trip mileage from each of your traveled fares to your BlueMiles account. Redemption requires a minimum accrual of 7,500 Miles. Use your BlueMiles to purchase economy or business class ticket 6.

11. High quality services during flight: Good food, good entertainment, spacious seats, most exciting hospitality, elegant and charming hostesses e.t.c.

Weaknesses: Weakness is an internal characteristic that leaves the organization potentially vulnerable to strategic moves by competitors. 1. High dependence on passenger revenues:

II.

Passenger revenues accounted for 78 percent of the AirBlues total revenue in 2005. Cargo services allow airlines to generate additional revenues from existing passenger flights. In addition, cargo revenues are usually counter cyclical to passenger revenues and have lower demand elasticity than passenger business, which allows airlines to pass on fuel price hikes to customers. 2. Debt: AirBlue has a significant amount of debt. It has short term financing of Rs. 254 million. Current and future debts could have important consequences for stakeholders of the company. For example, debt could impair AirBlues ability to make investments and obtain additional financing for working capital, capital expenditures, acquisitions or general corporate or other purposes. Debts could also put AirBlue at a competitive disadvantage to competitors that have lesser debt and could also increase the companys vulnerability to interest rate increases. 3. Reliance on Oil prices: AirBlues sustainability, growth and revenues directly depend on oil prices . A steep rise in oil prices can seriously damage the long term viability of any airline. Recently many airlines around the world went bankrupt due to rising oil prices. Airlines need to hedge against this risk by taking proper measures. In case of AirBlue, fuel prices also had an impact as fuel cost increased from Rs. 519 million to Rs 1,475 million. 4. Avoiding Cargo services: They are going to enhance the passenger services while they are avoiding the development of cargo services, which is the transportation of baggage from source to destinations by receiving huge amount of revenues. 5. Technical limitations: Not having its own repair and maintenance facilities. And having Small fleet of aircrafts. It connects only seven cities in Pakistan. And about five airports outside of country. Very tight schedule of flights, which puts extra burden on pilots, cabin crew and hostesses. 6. No Govt. contracts: They havent any flight for Hajj Pilgrims, which could be a major source of income and also having no contracts for transportation of political personalities.

7. Weak promotion: Airblue is promoting only packages and less on the advertising and promotion of air line i.e., A320, e.t.c. 8. Un-guaranteed Fares: The fares on which you make reservations are un-guaranteed. In case you cancel your reservation and need to make it again, you have to start the procedure all over again and will be offered a completely new set of fares in accordance with the flexible fare system. A person getting a 25% discounted seat may get a 15% discounted seat if he tries to make a rereservation past 5 min of the earlier reservation. 9. High Traffic Slow Service On Website:

Due to the bandwidth limitations offered by ISPs in Pakistan, the Airblues web site open at a very slow speed and the reservation processing time become slower than usual. There is high traffic on website and with the rate at which the sales are expected to grow, there will be extremely heavy traffic load on the website. This inconvenience sometimes tests the patience of the customers bringing down the customer satisfaction level. Opportunities: 1. Route and fleet expansion: AirBlue is planning to include more domestic and international destinations in its network in 2005. Expansion plans are already in the pipeline with permission to start flights to SAUDIA ARAB awaiting clearance whilst an application to start flights to Jordan has been submitted. Other destinations included in their long term plans include further cities in the UK and USA, and India. Route and fleet expansion will positively impact the companys operations by increasing revenues and expanding its network. 2. Growing demand for low cost airlines The growing demand for air travel is driven by lower fares and consumer confidence. A survey by International Aviation Authority showed that ticket price is the number one criterion for passengers when selecting a flight, well ahead of the availability of a non-stop service. 3. Expansion of freight business: Though a late starter, AirBlues cargo revenue is developing. Cargo revenue showed an increase of 32 percent, as it touched Rs. 41 million this year up from Rs. 31 million. The current growth in AirBlues freight segment is aided by recent introduction of scanning technology, which meets the requirements private courier service providers operating in Pakistan. Equipped with the right technology, AirBlue is now in a position to cash in on increasing demand for freight and reduce its business risk by reducing dependence on passenger traffic. 4. Customer loyalty: AirBlues frequent flyer and loyalty programs can help it retain customers. AirBlues BlueMiles (frequent flyer program) was established to develop passenger loyalty by offering awards and services to frequent travelers. Such schemes encourage repeat travel on AirBlue, as passengers seek to accrue the benefits given to regular travelers. This enables the airline to retain customers and reduce costs, as it does not have to spend money targeting new customers to replace those lost to other airlines. 5. Shifting customer needs: The needs of air passengers are increasingly changing, as they are becoming more and more price sensitive. The effect of this has been that traditional airlines such

III.

as AIR BLUE have struggled, while low-cost airlines such as AirBlue have experienced significant growth despite a turbulent industry, especially in the short haul market in Pakistan. If AirBlue succeeds in making its prices more competitive, then the company will be able to gain significant market share. 6. Industry recovery Market analysts believe that the global airline industry will experience an upturn in fortunes over the next few years. This represents an opportunity for AirBlue, as it could generate increased revenues and command market share if it capitalizes on increases in demand. 7. Very few competitors: There are a very few number is existing airlines in Pakistan aviation industry. Though they maintain a monopoly in Pakistans domestic aviation industry but due to the presence of very few airlines in aviation industry there exists a niche in the market for a new airline and Airblue is trying to tap that potential. The state-owned carrier AIR BLUE possesses over 75 percent of market share, the rest is held by two private airlines, Aero Asia and Shaheen Air.

Threats: Threat is an environmental condition that offers significant prospects for undermining an organizations competitive situation High interest rates: The past few years have seen State Bank of Pakistan impose high as well as low interest rates to check inflation and the overheating of Pakistani economy. Inflation in Pakistan may see another raise in the short-term.now the effective interest rate is about 13 percent. This could depress consumer spending and offset some of the positive trends for AirBlue, in Pakistan. 2. Accidents It is high risk of accidents when flying in air. It has to continuously ensure utmost safety and security of its passengers. Accidents can adversely affect customer confidence in AirBlue and result in declined revenues intensifying competition. The accident of Airblue in margalla hills have fall it down their image. 1.

IV.

3. Strong competition: AirBlue is now competing against more credible low cost carriers such as Shaheen Airline, AeroAsia and AIR BLUE Express. AIR BLUE remains AirBlues strongest competitor because of the huge market it has gained over time, strong brand image and customer loyalty.

AirBlue also faces competition from AIR BLUEs new low-fares subsidiary, AIR BLUE Express. Moreover, major legacy airlines have been focusing on restructuring costs, which has improved their competitiveness. Increasing competition could adversely affect the companys margins. 4. Interest and foreign currency exchange rates: Fluctuating foreign currency exchange rates can have a significant impact on AirBlues earnings. 5. Decline in airline industry: A number of factors have caused the current decline in the airline industry. For example, the threat of further terrorist attacks since September 11 and a fall in the number of business travelers have both caused passenger numbers to fall. These and other factors may continue to affect demand for air travel in the future, which will affect revenues of AirBlue. For example, global problems such as an increased threat of terrorism in response to the coalitions war on terrorism could have an adverse effect on AirBlue. The threat of terrorism may discourage people from traveling by air and could espeically reduce the number of passengers traveling on international flights.

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Competitive environment(analysis)

Analyzing an organizations competitors helps it decide the strategies it will follow in both the short and long term. By looking at competitors, a firm can determine the industry trends and make decisions on crucial issues such as discounts to be offered, quality of services provided, and channel of distribution and promotion strategy. A firm can improve its operations and is in a better position to compete by taking into account all these aspects. The

airline industry in Pakistan currently has cut throat competition. Passengers, today, are time conscious since time is the only rare commodity in todays world. The offering of the airlines are continuously changing with changing customer needs. The airlines are deploying more efforts to meet customer requirements and provide superior quality of services. Every organization faces competition and so does Air Blue. Its competitors include AIR BLUE, Aero Asia, Emirates airline and Shaheen Airways. I. PAKISTAN INTERNATIONAL AIRLINES ( AIR BLUE ): AIR BLUE is the flag carrier of Pakistan and the national airline operating passenger and cargo services around the world. It is the oldest airline in Pakistan, (dating back to the Indo-Pak subcontinent) and has the first movers advantage. Its main hubs include Jinnah International Airport, Karachi, Allama Iqbal International Airport, Lahore and Islamabad International Airport, Islamabad. Its current fleet size is 40 and it flies to 82 destinations. AIR BLUE has a rich history and made through variousups and downs of the economy. It still claims --- percent market share and is the largest airline in the country by all standards (i.e. fleet size, number of passengers per month, income etc). In December 2003, AIR BLUE introduced a revamped its corporate image from changing the outlook of its planes to its logo. The new image was also applied to their first 777-200ER and another newly leased A310300. Under the new style, the tail was painted beige and a flowing Pakistan flag placed on it, AIR BLUE acronym was enlarged and moved onto the fuselage. In early 2006, AIR BLUE unveiled four designs representing the four provinces of Pakistan to be applied throughout their fleet, these will replace the present flag.

II.

AERO ASIA INTERNATIONAL:

Aero Asia is a private Pakistani airline based at Jinnah International Airport, Karachi and Dubai International Airport, Dubai. Aero Asia was previously owned and operated by the Tabani Group, which sold it to the UK based Regal Group, following the temporary suspension of its flights in the summer of 2006. It was the first low cost airline in Pakistan and operates to destinations in Pakistan and the Gulf states. The fleet size is 10, and it has total of 11 destinations, 7 domestic and 4 international. Aero Asia has already covers the Middle-East and has been granted permission to fly to the United Kingdom and United States from December 2005 by the CAA. However, because of its current restructuring, international flights are expected to commence in 2007. It will start from Manchester, London and Birmingham gradually including New York, Singapore, Copenhagen, Oslo and Bahrain. The latest Boeing and Airbus aircraft are being inducted in the fleet. Within Pakistan it currently provides services at Karachi, Lahore, Islamabad, Peshawar, Multan, Faisalabad and Sukkur. Internationally, it covers Abu Dhabi, Dubai, Doha, Manchester and Muscat.

III.

SHAHEEN AIR:

Shaheen Airways is the second national airline after AIR BLUE. It mainly covers Karachi, Lahore and Islamabad and the Gulf. Its base is Jinnah International Airport, Karachi, with a hub at Islamabad International Airport, Islamabad. Its fleet size is 10 and destinations are 11 which are further divided into 5 domestic and 6 international. This depicts that it is mainly focusing international customers. It currently operates in Islamabad, Karachi, Lahore, Peshawar, Quetta, AbuDhabi, UAE, Doha, UK, Kuwait and Oman.

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Existing situation of AIRBLUE:

Air blue is an emerging quality career from Pakistan. Air blue started it operation in Pakistan with domestic flight in 2004, Air Blues fleet of next -generation Airbus A320 and A321 aircraft started operating with a unique offer of airfares based on time of booking. This was a unique and innovative idea. Many big airlines of the world had not started online reservation back in 2004 when airblue started sand jacket online airline tickets. Soon airblue became second best airline of Pakistan offering quality service at low fares. Now Airblue not necessarily is a low fare airline but it is still a pioneer in bringing about new technologies in the air ticketing based on the internet. Airblue now offers flights to five international destinations including UAE airports Dubai, Sharjah and Abu Dhabi, as well as Muscat, Oman and Manchester, UK. Led by a team with decades of experience in the industry, Airblue embodies a new era in passenger air travel. Airblue has integrated unique innovations to ensure security and affordability. Among these are complete online reservation systems, online reservation hold/in person payment at various locations, and mobile airport check in procedures. Airblue besides its innovative eticketing has also achieved following recognition: First airline in Pakistan to start e-ticketing.

 First airline in Pakistan and only the third carrier in the region after Emirates and Royal Jordanian to introduce self-service check-in facilities. First private airline in Pakistan to initiate long-haul services on (IslamabadManchester) sector. Airblue makes a fuel stop at Trabzon in Turkey when flying to and from Manchester. This route is the longest route operated by an Airbus A321 aircraft in the world, and the longest scheduled route operated by an Airbus narrow-body aircraft (excluding the Airbus A319LR).