Air Leo

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Airline Business Plan

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Strategy and Implementation Summary

The airline's strategy has already been adequately explained elsewhere in this plan: target unserved and under-served markets, seek out niches and unmet demand, and offer a higher level of service and a higher standard than the competition. The airline will utilize technology to reduce costs and offer better service and greater convenience to the passenger.

In this section we'll examine how the new airline will go about cutting out its niche through its marketing strategy.

5.1 Marketing Strategy

The proposed new airline intends to cut out new territory as it goes about marketing itself. While it will clearly serve the target markets of Southeastern Europe and Turkey, it will just as clearly be a different kind of player on the field, and will seek to be known not only as a Western airline, but at the cutting edge of the aviation business in Europe.

The airline's emphasis on the latest information and electronic technology, and its stress on comfort, convenience, safety and customer service, will be cornerstones on which the marketing strategy will be built.

The airline will utilize a combination of methods to achieve the recognition that it both desires and needs. A fairly large advertising budget is planned to buy the space and time to get its name and message in front of the largest possible group of potential customers that it can. Given the crowded field of European regional airlines, it is better to come on like a lion than a lamb, or you may be lost in the herd.

The airline will also utilize public relations to good advantage to extend and supplement its advertising budget.

There are a number of "hooks," aside simply from its newness, that the airline can utilize to get the media's attention. The airline is opening up new markets, and it also is transcending the technological barrier with the latest technology in the business in Europe, or anywhere. It has big ambitions, but knows that it needs to serve the customer first to realize them. And it wants to know and serve its markets better than anyone else.

Everything about this airline, from its name to its colors, from the look of its planes to its airport kiosks, from its smart but informal crew uniforms to its advertisements and literature should set it apart. And it costs little more to do things freshly and smartly than the more ordinary way of doing things. An organization is new only once in its life, so the airline should grab that opportunity and get all the attention it can at the outset. And it needs to have both an adequate budget, as well as an outwardly directed management, to achieve that end.

The new airline will become known as one where all the staff practice the motto, "We have a job to do, and we do it every day - for you!""

5.1.1 Pricing Strategy

Like everything else about it, the new airline's pricing strategy will also set it apart from the pack and will form a key aspect of its overall marketing strategy.

It is almost a stock joke, the unwieldy and impenetrable forest of airline tariffs and fares and promotions (often available for something like three seats on a flight - and that is meant to win customers) common in the industry today. Few things have garnered the notoriety and degree of customer suspicion and dislike that airline pricing has, and yet there are few moves afoot to improve the situation.

We intend to change that, and will not only make our business more predictable and "user-friendly" to the passenger, but also will help fill our planes and make our financial direction more predictable and clear to our management and our bankers as well.

The game plan is simple enough, offer customers good service to places they want (or need) to go to, and at a fair and predictable price. Competition on the basis of price alone has spelled disaster for more than one carrier (start-up and veteran alike), and once down that slippery slope it is hard to turn back. And while price is clearly an important factor driving the marketplace, it is by no means the only one. It will not be our aim to be the lowest-priced competitor in the market (though we may be on occasion). Nor will we seek to be the highest priced, either. Fairness, clarity, and a rational fare basis, combined with better service and greater convenience than offered elsewhere, will be our guiding principles.

Essentially, we will work from only two sets of fares (existing for market segmentation purposes) for our service:

  • Weekday fares, in both Value and Premium (aimed primarily at business travelers who are willing to pay a higher price to be able to go and come back during the week).
  • Stay-over weekend fares, in both Value and Premium (aimed more at the personal or leisure traveler for whom price is more important than traveling mid-week).

The only variations on those fares (not new fare bases) will be these:

  • Set, publicized discounts for early reservations and purchasing tickets in advance.
  • Set, publicized discounts for reserving and ticketing online, electronically.
  • Seasonal and certain peak-period adjustments to the basic fares, or adjustments due to spikes in fuel prices and the like.
  • Infant and child discounts based on the original fare (up to free in the case of infants).
  • And possibly a stand-by fare (call it the "Gambler Fare") for people who are willing to take what's available at the last minute (helps us fill seats, helps them get on a nearly full flight, and it does not have to be radically discounted from the normal fare - probably no more than 5 percent discount - since the normal fare will be just that, a normal fare, and not some outrageously priced gouger).

Given our stress on electronic reservations and ticketing, most tickets will be paid for in advance of the departure date, which means the new airline - again, as part of its marketing strategy and offering a higher level of concern for the traveler - should avoid the common and much detested practice of overbooking. This also is where stand-bys can help fill any voids that may occur.

In addition, fares for the most part should be based on some rational system that is calculated on distance and actual costs, and not simply what the market will bear. One must wonder how much legitimate business is lost to the industry simply because many passengers cannot and will not pay the near-equivalent of a round-the-world fare only to go between two neighboring countries in Europe.

Here is an example of how this user-friendly fare system will work for the London-Berlin route:

  • Value Fare is $XXX for weekday round-trip travel.
  • Value Fare is $XXX - 20 percent for Saturday stay over round-trip travel.
  • Value Fare one-way is one-half the round-trip cost of $XXX + 10 percent.
  • Premium Fare is Value Fare plus 30 percent (for any category. So you can stay over Saturday and travel Premium for only 10 percent more than the regular weekday Value fare - this will help fill Premium seats and get people used to the idea of traveling Premium during the rest of the week, too).
  • Reserve and pay for your ticket on the airline's website, and receive a 5 percent discount on whatever the fare is (a lot cheaper than paying a 9 or 10 percent commission plus reservation-system handling charges, and it gets the customer to be e-ticketed, other advantages for the airline as well as the customer. And it beats operations like EasyJet that only offer a flat 2.50-British pound sterling discount, regardless of the fare).
  • Reserve and buy your ticket up to 30 days in advance, and take another 15 percent discount. Or reserve and buy your ticket up to 14 days in advance, and take a 10 percent discount. Up to seven days in advance, and a 5 percent discount. So essentially, the maximum discount is 40 percent (20 percent for Saturday stay over, 15 percent 30-day-advance purchase, and 5 percent online reservations and ticketing. Predictable for the traveller, predictable for the airline). Fly Premium weekends and reserve 30+ days in advance online, and you fly at 10 percent less than weekday Value fare - another marketing hook. And since the basic fare will be a "fair" one, the airline will not be staging loss-leaders even with the steepest discount. But no one is likely to complain about the fare, either.
  • Go non-stop, or make connections if you need to - no penalty if you don't disembark at the interconnect and if the fare to the interconnect point is equal to or less than the fare to the passenger's stated destination, as it would be in most cases. Otherwise the higher fare is charged to eliminate the argument (it's all in the computer's database).
  • And that's it. Unless there is an adjustment for seasonality or other special conditions. No impenetrable forest of fares. Few promotions needed (though they might be used from time-to-time). No reading the small print on the back of the ticket or trying to make out the "fare basis" (except maybe for those through tickets connecting to or from another carrier). How can the customer not love it? The only real danger is that it could set a new trend for the industry.

5.1.2 Promotion Strategy

The overall concept and design of the airline sets the stage for its promotion. Marketing and promotion will stress the unique qualities of the airline and the points that set it apart. Strong public relations combined with well-placed, well-designed, distinctive advertising appealing directly to people who are the airline's prospective customers will help get the word out.

Special effort must be made to develop and operate a highly functional, fast, rock-solid, and user-friendly website for online information, reservations, and e-ticketing. Internet marketing, combined with conventional non-Web marketing, will steer people to the website. The more customers use the website, the easier and more pleasant the experience will be for them, and the more economical and efficient, and predictable, will be the process for the airline.

Special attention will be made at the outset to reach the trend-setters and opinion-leaders in our various target markets, even going so far as to arrange personal meetings between airline executives and marketing directors and those opinion leaders, particularly either in Southeast Europe and Turkey or who deal or otherwise have a close connection to the target region.

While in general, special promotional fares and the like will be limited, the airline may consider launching with a special promotion simply to get known and to "get off the ground" with planes that are not mostly empty, as is often the case with new airlines. Overall, management and the sales and marketing department will coordinate closely and will employ outside consultants as need be to assure the most positive possible launch.

5.2 Sales Strategy

The airline's sales strategy will flow from its overall concept and marketing approach. Mass marketing, but with a personal touch utilizing airline employees as spokesmen and women to explain that "I have a job to do, and I do it everyday - for you!", will aim to steer as many people as possible either to the airline's website, or to its telephone-based customer-service representatives. While clients are free to utilize their own travel agents, and the airline may also want to be accessible through general travel sites such as Travelocity, the more customers that can be encouraged to use the airline's own reservations and ticketing services, the less revenue will have to be shared in the form of expensive commissions.

E-reservations and e-ticketing, combined with e-check-in, make the most sense for any customers who have online access, and also for the airline itself. But nonetheless, the airline must not lose sight of the fact that many people do not have access to the Internet, or do not care to use it to arrange their travel, or perhaps just prefer a more personal touch, and so other means of access must always be readily available.

The regional and specialized sales and marketing managers, as explained in the section on Personnel, will concentrate their effort on targeting specific clients that have the potential to offer corporate or group travel (including contract arrangements), or who are potential air-cargo customers. The airline will not have the resources to field a large sales team, and so these regional managers must target their efforts, and the airline must effectively utilize its mass marketing methods as well as the Internet to attract individual travelers who, once they experience the new airline, hopefully will feel a close affinity toward it and will become loyal and happy customers.

5.2.1 Sales Forecast

The following chart and table show the projected sales figures for Air Leo.

Sales Forecast
Year 1 Year 2 Year 3
Sales
Scheduled Passenger Revenues $37,653,000 $88,642,656 $139,694,250
Scheduled Cargo Revenues $2,282,000 $4,132,800 $5,473,300
Special Flights Passenger Revenues $1,483,200 $2,013,600 $3,502,000
Special Flights Cargo Revenues $34,560 $43,200 $72,000
Package trips $79,000 $270,000 $405,000
Other $0 $0 $0
Total Sales $41,531,760 $95,102,256 $149,146,550
Direct Cost of Sales Year 1 Year 2 Year 3
Scheduled Passenger Revenues $1,995,120 $4,309,920 $5,989,354
Scheduled Cargo Revenues $0 $0 $0
Special Flights Passenger Revenues $85,680 $104,340 $167,300
Special Flights Cargo Revenues $0 $0 $0
Package trips $31,600 $108,000 $162,000
Other $0 $0 $0
Subtotal Direct Cost of Sales $2,112,400 $4,522,260 $6,318,654

5.3 Milestones

The accompanying chart gives some notional milestones for setting up the new airline, beginning recruitment, training, and operations, and also reaching profitability on a month-to-month basis. The timetable is ambitious, and it is meant to be. The time for action is now, and once a decision is made to go forward there will be no time, or resources, to waste. Of course, once a final plan, team, organization, and financing is in place, a more refined timetable will be established and specific duties delegated to responsible team members.

Milestones
Milestone Start Date End Date Budget Manager Department
Establish a firm financial plan 5/1/2002 5/1/2002 $0 ABC Team
Identify an anchor investor 5/15/2002 5/15/2002 $0 ABC Team
Commence leasing negotiations 6/1/2002 6/1/2002 $0 ABC Team
Set up new company 6/5/2002 6/5/2002 $0 ABC Team
Begin negotiating for offices 6/5/2002 6/5/2002 $0 ABC Team
Select core mngmnt team 6/10/2002 6/10/2002 $0 ABC Team
Commence co. operations 6/15/2002 6/15/2002 $0 ABC Team
Make initial aircraft lease pymnt 6/30/2002 6/30/2002 $0 ABC Team
Begin hiring key personnel 7/1/2002 7/1/2002 $0 ABC Team
Begin crew training 8/1/2002 8/1/2002 $0 ABC Team
Take delivery of aircraft 8/15/2002 8/15/2002 $0 ABC Team
Begin inaugural flights 9/5/2002 9/5/2002 $0 ABC Team
Operation turns profitable 1/1/2003 1/1/2003 $0 ABC Team
Take delivery of fourth aircraft 4/15/2003 4/15/2003 $0 ABC Team
Totals $0