Submitted By: BUENAVENTURA, ROBERTO MARTIN S.

ID No: ENAC 2019-1005

Course: ENAC Advanced Master in Air Transport Management 2019
(Module 8 – Air Transport Market and Airline Distribution)
Date: 11 September 2019

I. Introduction

This paper aims to present a viable business model that incorporates an effective
distribution plan for an emerging start up private airline. The airline subject of this
paper is a fictional airline named BCB Airlines, which is a new low-cost commercial
airline in the Philippines. It is set to cater to Asia Pacific routes, particularly within
the South East Asian destinations, while its head office main hub is the Manila
International Airport, Philippines. This paper will briefly discuss the proposed initial
distribution plan, ancillary services, and other strategies, and plans on operation.

The strategy adopted in order for BCB Airlines to be competitive as a low-cost

carrier is the cheap fares for its passengers, achieved through high aircraft
utilization, proper management of manpower, courteous customer service, among
others.

II. Background: Prevailing Issues in the Industry

Considering that the subject airline is eyeing into operating within the south east
Asian routes, some issues need to be considered. Primarily, budget airlines in the
Asian market are struggling when it comes to fleet expansion to address the growing
number of passengers in recent years. In consonance with this, issues on offloading
or overbooking passengers is a constant complaint heard from the consumers, which
also has its scattered effect in terms of airport congestion, flight delays, and difficulty
in passenger processing. These are the prevailing issues faced by emerging low-cost
airlines.

As more markets are being served in the south east Asian region, it has been a bigger
challenge for carriers to reach more passengers. In this regard, interline and
codeshare agreements are primordial, and the use of smaller aircraft to handle
further distances help in distribution of asset utility. Despite these significant
demand in the market, there is a constant demand to lower ticket prices on the side
of the passengers.

In addition, the old-fashioned style of booking of flights, baggage, connecting flights,

issuance of tickets, flight reservations, rebooking, and other services need to be made
simpler and accessible, considering that more and more passengers need to be
 catered to by emerging airlines. These services need to be accessible in the most
convenient and efficient way possible, preferably through the use of mobile
applications and online tools. In view of this, the use of a comprehensive distribution
system needs to be in place in order to accommodate every need of every flying
passenger.1

III. Marketing Strategies Adopted

Due to the intensely competitive environment currently faced in the aviation

industry, BCB Airlines need to project its image so customers can easily differentiate
its product from main competitors, focusing more on the low fares and quality flight
services. BCB Airlines need to focus its marketing communications on being the
lowest fare, high frequency, point to point carrier in South East Asia.

On top of being an airline capable of providing the lowest fares to its passengers,
BCB Airlines need to establish a brand which also makes the impression of being
fun, and able to provide quality services while setting off the consequences of its low
fares, showcased in a positive light.

Foremost, the key strategy to be adopted by BCB Airlines is to be more transparent

to its passengers by allowing passengers to see exactly what services the ticket price
will cover. It will be an upfront offer of great inflight service services. To achieve all
this, BCB airlines uses media through progressive marketing campaigns.

IV. Power Relations of the Airlines with its Stakeholders

BCB Airlines recognizes the power relations among its stakeholders. With the
consumers, the airlines recognize that they want access to all information and
ultimately do not want to shoulder the cost of the GDS to the fares they will avail.

As regards the other airlines, BCB Airlines is in partnership with them in so far as
creating codeshare agreements, and the pursuit of lowering GDS fees by mutual
cooperation in terms of accessing other avenues of distribution through travel agents
and direct selling.

In so far as Travel Management Corporations and Agencies are concerned, BCB

Airlines values the services they provide in terms of booking for passengers and
providing access to other ancillary services. Hence , BCB Airlines will continue to
form strong partnerships with travel agencies.

V. Use of the Global Distribution System (GDS)

1
Mecti, Blog [Online] https://www.mecabincrew.com/2018/03/12/current-challenges-in-the-airline-industry-
2018/
 At the onset, while there are already advantages in terms of choosing a different
mode of distribution (I.E. direct selling) depending on the magnitude and nature of
the airline’s operations, to date, using the Global Distribution System (GDS) is still
the most beneficial for a low-cost emerging airline such as BCB Airlines.

Choosing the right GDS is primordial in the productivity and efficiency an emerging
airline can achieve in its early stages. Hence, BCB Airlines is careful to consider
certain factors in choosing the GDS it will avail of. With the advent of a wider scope
of services being provided by current available GDS providers, the selection process
for the appropriate is becoming more and more complex. As such, consideration has
to be made on the system supported by GDS like partner websites and booking
software; extent and reliability of its coverage; cost effectiveness of the flights
selected; connectivity and upgrade capabilities; and other features which could make
the passenger experience more comprehensive, and enjoyable at the same time. We
must likewise look into the process of implementation in terms of separate and
independent contracts to be filled up and accomplished.

Ultimately, BCB Airlines would opt to avail a GDS that is far reaching in terms of
features, but at the same time affordable as not to shift the costs of operating the
system to the fares of the passengers. 2

Considering that BCB Airlines is aiming to reach the widest possible market,
Amadeus, being one of the more preferred GDS by travel agents around the glove, is
the ideal GDS to be used. Apart from the traditional content of other GDS’s,
Amadeus is able to provide availability, pricing, reservation functionalities, which
serves as a one-stop shop for passengers. Amadaeus also has a wide array of
information availability that would let passengers have the options best suited for
their travel needs.3

VI. Internal Sales Organization

The internal sales organization of BCB Airlines shall consist of dynamic teams of
marketing professionals, distribution coordination personnel, efficient customer care
service, and an effective IT management personnel. The sales team must be able to
clearly communicate to the customers, the entirety of the brand they represent, and
the extent of services the airline is willing to provide. As such, the Sales operations
activities must be able to provide an effective sales strategy, measurement of results,
realistic expectations and set of sales quota, effective technology and tools, and a

2
Lorraine Salmond [Online] https://www.travelport.com/blog/how-choose-gds-your-travel-agency
3
Provab.com, Why is Amadeus GDS popular among travel agents than any other GDS systems? (online)
https://www.provab.com/hotelbookingsystem/why-is-amadeus-gds-popular-among-travel-agents-than-any-other-
gds-systems/
 good Customer Care System. Ultimately, BCB Airlines will have a good mix of
product, market, and activity specialist with the objective of balancing sales force
productivity.

VII. Focus on Ancillary Services and Media in Airline Operations

BCB Airlines realizes the need and potential for generating more revenue through
ancillary services. Hence, while working on lowering fares for the riding public, the
airline seeks to offset the costs of operation by making new avenues of generating
income. This includes BCB Airline offering more legroom for a fee, quality inflight
meals to be served, and additional baggage allowance.

In order to better control operational costs and the anticipated increase in oil prices,
BCB Airline will also generate ancillary revenue from frequent flyer miles to airline
partners, commissions from hotel bookings, transportation services of the passenger
from one land destination to another. The goal is to offer passengers the right
product and foster loyalty among its customers.

In addition, BCB Airlines will also bring in digital services for the passengers who
are becoming more and more digitally-savvy. It is worth noting that passengers of
today are focused not only on the airline’s ability to transport them from one place to
another, but rather they look into the whole travel experience and the sense of
enjoyment they feel in the process. In order to do this, BCB Airlines will make need
to make digitally engaging inflight entertainment, including the availment of
onboard wifi or broadband. This in addition to the variety of inflight entertainment
that must be readily available like movies and games.4

VIII. Conclusion

In sum, the strategies availed of by BCB Airlines as a new player in commercial

aviation is a very straightforward approach of lowering fares while providing a wide
array of ancillary services, at the same time utilizing a marketing approach which is
honest, transparent, and dynamic, in keeping with the growth of technology and the
changing travelling culture of the prospective passengers.

In consonance with these, BCB Airlines maintains its adherence to well established
distribution mechanisms, via the GDS, while seeking to get the most out of its
relationships with other stakeholders, making sure to maintain its relevance in the
distribution aspect of the industry.

4
Bogdan Avram, Ancillaries in the Aviation Industry. Importance, Trends, Going Digital, December 2017 [Online]
http://marketing.expertjournals.com/23446773-507/
BCB Airlines values and leverages on the use of modern technology in creating
avenues on ancillary services for alternative source of revenue and seeks to utilize
online social media and other mobile means in terms of advertising and marketing,
as well as incorporating more convenient methods to reach the market.
All this backed with the efficient performance of a solid internal sales structure,
coupled with the use of stable IT infrastructure.