Situation of the case:

Companies included in above categories:

Traditional airline

are getting Threat from

Low cost trains Low cost airlines

Companies

Airlines

High cost airlines

Sabena

Swissair

Lufthansa

Low cost airlines

Ryanair

Buzz

Go

Railway

Eurotunnel

Thalys high speed

Franco-Spanish Elipsos

Introduction to the Companies discussed in Case study:Details of high cost airlines:

Saben

It was the national airline of Belgium. It operated between 1923 to 2001. Brussels National Airport was its base. After its bankruptcy in 2001, the newly formed SN Brussels Airlines took over part of Sabena's assets in February 2002, which became Brussels Airlines after a merger with Virgin Express in 2007. One of the main causes of its bankruptcy was that Swissair breached its contract to inject funds in Sabena. Swissair did so because it also faced some financial problems during this period. Later swiss inposed the purchase of 34 airbus planes which was unable to cope with.

Swissair:

It was the national airline of Switzerland. It was most profitable airline of Switzerland known as “flying bank”. It ceased its operations in March 2002 having its operation duration for 71 years. The profitability disrupted after the event of September 11, 2001 and poor management of the company led the company to cease its operations.

Lufthansa:

It is the flag carrier of Germany and the largest airline of Europe. It operates services to 18 domestic destinations and 197 international destinations in 78 countries across Africa, the Americas, Asia, and Europe. Business Class is offered on all long-haul aircraft. Newer seats convert to 2 meters lie-flat beds including laptop power outlets and entertainment facilities with each seat. They provide extra security and better services to business class.

Details about low cost airlines:

Ryanair:

It is Irelands low cost airline having its headquarter in Dublin. In 2013, it became the largest European airline by scheduled passengers carried, and the busiest international airline by passenger numbers. It operates 300 boeing 737-800 aircraft. It has flexibility in reduction of cost.

Buzz:

It is a discount airline. It commenced its operation in 2000 and ceased operation in October 31, 2004. It was operating with collaboration of Ryanair.

Go:

It was british low cost airline that were founded by British Airlines in 1998. It ceased its operations in 2005. From December 2002, it operated under EasyJet but later in 2005, its existence became difficult due to Barbara Cassani’s publication.

Details about railways:

Eurotunnel:

It is paris based but operates in between UK and France. It has been listed in London Stock Exchange and Euronext Paris. It is performing double track service in Europe.

Thalys High speed:

It is a high speed train operator that operated mainly between two destinations, Paris and Brussels. It shares track with Eurostar. It has occupied the market as follows:

Paris-Brussels 55.6%Paris-Belgium (outside Brussels) 8.9%Paris-Belgium-Netherlands 21.3%Paris-Belgium-Germany 11.8%Others 2.4%

Franco-Spanish Elipsos:

It is a train service that operates linking Paris with Barcelona and Madrid. They offer free drinks and other facilities to passengers. It also provides sleeper service with a proper dining car in which a passenger can make full use of the longer journey time. 

Situation Analysis:Nature of demand: Answers

No. of stores shoppedPassengers can surf every website to check the availability of flight to their required time and price of travelling.

degree of overt info. Seeking  High because it’s a matter of time and cost.

degree of brand awareness & loyalty

 People want to know the brand that is providing them with high number of facilities at low cost. So they began to use it for travelling. So brand loyalty is low.

location of product category decision

 People mostly decide in homes that which mean will be used by them to travel form one place to another.

location of brand decision

 Brand is also decided from home mostly because they have to manage cost of travelling. Moreover, online booking facility is available so they can decide the brand at home.

sources of product  Customers may get information from internet or from friends who have

information for customers

used a better service and has told them. They may also get information from TV ads.

who makes buying decision

 Any traveler can make this decision for himself if he/she is travelling alone. But if whole family is travelling, then consent of everyone is taken.

who influence decision maker

 There are many persons who can influence decision making regarding travelling like:Children can influence decision if traveling with them,females of house can influence decision making for travelling mediaAn emergency can influence decision

individual or group decision

 Mostly, the travelling decision is made on group basis. Everyone’s consent is taken. In Europe however, males decide about travelling.

duration of decision process (frequent/ one time/irrepeatable)

 These types of decisions are frequent because every person has to travel either for working purposes or for entertainment purposes.

buyer's interest level

 Buyer’s interest level is high because he wants to spend little money and must reach the destination at minimum possible time. And time and cost both are considered to be important resources in Europe. So a tradeoff between them becomes the decision.

risk of negative purchase outcome

 Risk is high in some cases where high cost is received, the customer expects that same high level of return but if the company fails to provide it, then it will lose the customer for long period of time or sometimes may be forever.

functional vs. psychological considerations

 Psychological consideration is that person must be comfortable throughout the journey. And functional level decision is that the person must reach the destination in time. Today, all those companies which are focusing on both functional and psychological aspect are considered by customer, others have failed to gain market share.

time of consumption It may be weekly or may be monthly or yearly for far long travelled cities and countries for which high amount of money is required.

Segments:

Age Children travel with their parents, youngsters age 15-18 and above that. Mostly business class people are included in identified segment.

family life cycleAll travelling companies can target all type of customer but business class is more important because they become cash cows later on.

geographic location

 People from all the Europe can travel within Europe using low cost trains because they have crossed the national boundries using agreements. But the people who want to travel outside Europe need high cost planes.

heavy vs light users Light users are for high priced airlines and heavy users are for low prices airlines as well as trains.

nature of buying process

 Important for traveller that he considers every pros and cons before selecting any mean to reach the destination.

product usage  Medium usage by business class.

Extent of demand:size of market (Present & Future)  Whole of Europe

Current market shares, trends

 Eurostar has Year-on-year growth of 3% in passenger numbers and 2% sales revenues in Q3 2014.

analyze on segmented or aggregate base? Trains are mostly used and more profitable business.

Nature of competition:competition structure (present & future)

 Time is the main base of competition with facilities in addition.

market shares

Financial resources

 National Express Group (40%), SNCF (35%), SNCB (15%) and British Airways (10%), which is a sleeping partner.

Deutsche Bank owns Lufthansa airline. 849 million euro is profit.

marketing resourcesGareth Williams, Strategy Director and Company SecretaryGareth leads on the development and appraisal of Eurostar’s strategic choices and new business proposals, as well as all regulatory matters, working alongside other business

The increasing harmonisation of products and processes gives passengers considerable added value by enabling seamless travelling within the Group’s route network with 246 destinations.

functions to advise on issues affecting Eurostar where government legislation or industry regulation is involved.

competitors current marketing programs (successful/ unsuccessful)  SuccessfulOpportunity for other competitors?  Time for check in reduced and low cost

Environmental climate:

Relevant PEST analysis

trends (OT)Time is mostly preferred by all passengers and the level of comfort during journey. These are the things for which the customers pay.

Stage of product life cycle:

In what stage is product category? Between growth and maturity is railways and low cost airline. The traditional airlines are declining.

consumers' state of knowledge Consumer that travel frequently, keeps up to date knowledge about services.

Political:Agreements are formed between countries to enhance the coperation for travelling.

stable policies of countries with each other

Economic:all the countries of EU share common benefits.

economic condition of people is well

demand for travelling exists largely.

Social:People love travelling and consider it good for health

parties and events cause people to travel to other places

Technology:people use the facility of internet for booking seats to travel

people of europe are welcoming for better technologies

Financial resources:

Available? 8,499,000,000 (Profit in quarter 3 of 2014) cost was 170 million euro (in 2014 q3)

Distribution structure:

what channels exist?

Eurostar: Lufthansa:

cost and benefit analysis  Given in the table below:***nature of channel competition

 Intense competition between low cost trains and low cost airlines. Intense competition between low cost carriers and major airlines

**Cost and benefit analysis from customer perspective:

Cost of travelling by airplanes Benefits of travelling by airplanesAirports are not situated inside the city and people have to come from far off places for boarding through airport.

It is a well-known brand to customers.

People have to wait for long to receive their luggage back.

Airplane can travel inside as well as outside Europe.

Airplane authorities charge money for taking the weight of luggage more than as specified.

Airport authorities charge extra money for changing the name of flight and such kind of facilities.

Trains have more number of departures as compared to airplanes. So, people can adjust time according to their convenience.Trains cover a large number of destinations but the airplane cover only a few destinations.

Problems Faced by Major Airlines:Major airlines were in trouble. There might be chances of losing whole of the market. Following diagram will describe shortly the problems faced by major/traditional airlines:

SWOT Analysis of Major Airlines:

Time consuming from customer point of view

Long Check in Process tease Customers

Behavior of People is changing due to World Trade Center Event

Railways are Providing low cost , safe and fast Journey

Low cost Airlines are now in the Market

SWOT Analysis of Low Cost Airlines:

StrengthsWell known brand namesalready having business class passengers

Weaknesseshad not grasped the change in environment.staff was not well motivated to achieve the win situation.High cost of travellingMore time wastage due to several times checkings

Opportunitieshad to maximize the yield against the amount they are recieving from their customers.Enable meeting during boarding using internet facilitiesit can reach corporate client more widely because of its existing unique position in airline industry.decreasing fuel prices

ThreatLow cost Railways will be taking benefit from contracts of cross boarder cooperationLow cost railways are providing sleeper berth within ticket priceLow cost railways is taking over the routes of airlines.Any incident like World trade center may become threat for company

SWOT Analysis of Low Cost Trains:

Strengthslowest possible cost of travellingAttracting cash cows of traditional airlines

Weaknessescharge more amount for cancelling, infants, extra weight, etc.no booking of taxi facility from boarding

OpportunitiesEnable meeting during boarding using internet facilitiesLow cost airlines can start operations all over world or atleast in countries of triad.decreased fuel prices all over the world

ThreatLow cost Railways is taking benefit from contracts of cross boarder cooperationLow cost railways are providing sleeper berth within ticket priceLow cost railways is taking over the routes of airlines.

Routes of British Airways:

Strengthsthey are offering services at low cost to passengersSleeping berths are provided to passengers in case of inter-country travelgreater comfort, facilities and servicesIncreasing market share

Weaknesshigh cost as compared to low cost airlinesTakes more time to take passengers to destination as compared to low cost airlines

OpportunitiesFree mealsFree bookings for taxiCross boader allianceMore routes can be taken in future

ThreatsLow cost airline became a threat to themSecurity requirements increased due to event of 9/11Intense competition in market

Routes of Air France:

In Asia:

Eurostar destinations:

Eurostars Destinations From London

Eurostar charges the following amounts from people for reasching the destinations:

Paris-London   train details:

Start City: London, England End City: Paris, France Duration: 2 hours 20 minutes Distance: 346 km Cost: From £69

Trains Destination From London

Prices

Trains To France Starts From £ 69Trains to Paris Starts From £ 69Trains To Disneyland Starts From £ 69Trains To Belgium Starts From £ 69Trains To Brussels Starts From £ 69Trains To Germany Starts From £ 49.50Trains To Switzerland Starts From £ 123Trains to Netherland Starts From £ 99

Note: Airplane time duration does not include check in process time.

Eurostar

Brirish Airways

AirFrance

Lufthansa

0 20 40 60 80 100 120 140 160 180

Chart Title

Cost ( £ ) Duration(Minutes)

DestinationLondon to Paris

Railways

Eurostar Railways

Price:£ 69

Distance:346 km

Duration:2 h 20 m

Airways

Lufthansa

Price:£ 146

Distance:342 km

Duration:2h 25 m

British Airways

Price:£ 112

Distance:342 km

Duration:2h 30m

Airfrance

Price:£ 122

Distance:342 km

Duration:2h 20m

Road

Distance:454 km

Duration:5h 48m

Alternative Solutions:

POSSIBLE SOLUTIONS

TIME FOCUS

Focus of Check in Process

Decrease No. of Seats and Increase

No. of Flights

Make efficient use of hub system

REDUCE FARES

Cut down expenses

Strategic Alliances

CHANGE BEHAVIOR OF

PEOPLE

Advertisemnets

Maintain Quality Standards

Details of Alternative Solutions:Time management:

It can be done in three ways. Increase the number of staff for check in will increase the cost of business on one hand, and reduces the lost customers. Because time was the major issue of customer loss, if this starts going effectively, company will gain the excess profit. Second method is increasing the number of flights, this means that company has to purchase more airplanes that will be small but in short run, company has to incur the capital cost in huge. So, this decision is not feasible considering the weak position of the major airlines companies. The third method is to shorten the duration of security check ins, it means that airline companies have to improve the efficiency of security staff by training or by using better technology. It seems somehow feasible. It will also help in controlling two major problems indicated by consumersaffairs.com:

Hidden charges Staff misconduct

The main competition between Airlines and Railways is due to Time Factor.

Reduce Check in time:

Airlines should try to decrease the check in process time. Check in time should be fast and efficient. Check in time should be mentioned to the customers to get their loyalty.

Decrease No. of Seats and Increase No. of Flights:

Due to too much crowd, it takes more time for checking and managing. If number of seats will be reduced and number of flights will be increased

then it may lead to reduce the time factor impact that highly affecting the Airline.

Make efficient use of hub system:

Traditional or major airlines are adopting hub system for their operations. These airlines must make efficient use of the system because according to a study conducted, hub systems have high flexibility that they can operate and connect with secondary hubs and planes in half of the time than low cost airlines or trains.

Cost leadership:

We just have to make use of system efficiently and effectively. Major airlines proficient in one service will collaborate with the other companies generating low cost and better profit.

Cut down Expenses:

Airlines should try to cut down their expenses. This is the only way they can reduce fares of tickets

Strategic Alliance:

By facilitation smoother connections and stimulating traffic and alliance can dramatically lower its cost, cut fares, and increase flight frequency without requiring substantial investment in additional aircraft, facilities and route authority

Change the behavior of people:

Changing the way people think is most difficult to change. It is said that once a perception is made, it becomes very difficult to change. But a mixture of logics and emotions can change the perception of people. So, following techniques can be adopted in order to change the behavior of people.

Advertise safety standards adopted:

Advertisement is very essential to grab the attention of customers. A best product with poor advertisement cannot get customer’s attention until its advertisement either message or media used are both effective.

If major airlines advertise that security which is extremely important in today’s world, how the low cost airlines are ignoring it just for survive competition.

Maintain Quality Standard:

If quality standard will be maintained then Airlines will never lose its customers.

Quality service always attracts the customers for which they are ready to pay even high prices because it provides them comfort.

Evaluation of Alternatives:Sr.# Alternatives Criteria Weight Total#1 TIME FOCUS

Focus of Check in Process 4 0.3 1.2Decrease No. of Seats, Increase No. of Flights 2 0.1 0.2Make efficient use of hub system 3 0.2 0.6

#2 REDUCE FARESCut down Expenses 3 0.2 0.6Strategic Alliances 2 0.05 0.1

#3 CHANGE BEHAVIOR OF PEOPLEAdvertisements 1 0.05 0.05Maintain Quality Standards 2 0.1 0.2

Best Solution:According to the evaluation, the time focus is most important for the major airlines because business people mostly focus of this aspect while travelling. But to revive again in the market, a combination of different factors must be used. For example, the major airlines must cut down expenses by removing the extra activities from services. But the tasks performed by them must be 100% accurate and qualitative. Similarly, they should improve the time taken for check in by reducing it. Hub system already has the capacity for fast services and connectivity, the major airlines must analyze and get the advantage of hub system. Similarly, if the situation gets out of control for the airlines, they can go toward the option of strategic alliance as well.

Additional problems:

Some additional problems that we came to know about some airlines, like, Lufthansa are misbehavior of staff with customers. Some of the customers’ complaint that staff is dissatisfied and they misbehave with customers. Some people say that staff treat people angrily that’s why they have decided not to travel by Lufthansa again.

Some people say that major airlines don’t disclose some of the charges and it annoys the customers. So most appropriate thing is staff training that is necessary for survival of the company.

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