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    The Strategy of A Modern Airlines

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    vaibhavraj7
    Modern airline segmentation strategies can significantly improve profitability compared to non-segmented approaches. The document provides an example comparing a flight with 300 total seats, 80% load factor, and $250 per passenger price to a segmented approach. With segmentation, 144 seats are economy at $250, 72 seats are business at $500, and 24 seats are first class at $1000. Total revenue increases from $60,000 to $96,000. Costs also increase but profit rises substantially from $5,200 to $32,840. Segmentation allows higher prices and profits for premium seats while maintaining economy prices and profits. Proper segmentation benefits all stakeholders by increasing total profits, passengers by providing options at different price points, and

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    The Strategy of A Modern Airlines

    Uploaded by

    vaibhavraj7
    88 views14 pages
    Modern airline segmentation strategies can significantly improve profitability compared to non-segmented approaches. The document provides an example comparing a flight with 300 total seats, 80% load factor, and $250 per passenger price to a segmented approach. With segmentation, 144 seats are economy at $250, 72 seats are business at $500, and 24 seats are first class at $1000. Total revenue increases from $60,000 to $96,000. Costs also increase but profit rises substantially from $5,200 to $32,840. Segmentation allows higher prices and profits for premium seats while maintaining economy prices and profits. Proper segmentation benefits all stakeholders by increasing total profits, passengers by providing options at different price points, and

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    Modern airline segmentation strategies can significantly improve profitability compared to non-segmented approaches. The document provides an example comparing a flight with 300 total seats, 80% load factor, and $250 per passenger price to a segmented approach. With segmentation, 144 seats are economy at $250, 72 seats are business at $500, and 24 seats are first class at $1000. Total revenue increases from $60,000 to $96,000. Costs also increase but profit rises substantially from $5,200 to $32,840. Segmentation allows higher prices and profits for premium seats while maintaining economy prices and profits. Proper segmentation benefits all stakeholders by increasing total profits, passengers by providing options at different price points, and

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    88 views14 pages

    The Strategy of A Modern Airlines

    Uploaded by

    vaibhavraj7
    Modern airline segmentation strategies can significantly improve profitability compared to non-segmented approaches. The document provides an example comparing a flight with 300 total seats, 80% load factor, and $250 per passenger price to a segmented approach. With segmentation, 144 seats are economy at $250, 72 seats are business at $500, and 24 seats are first class at $1000. Total revenue increases from $60,000 to $96,000. Costs also increase but profit rises substantially from $5,200 to $32,840. Segmentation allows higher prices and profits for premium seats while maintaining economy prices and profits. Proper segmentation benefits all stakeholders by increasing total profits, passengers by providing options at different price points, and

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 14

    The Strategy of a Modern

    Airlines
    Without Segmentation
    Profit and Profitability
    Without Modern Strategy
     Total no. of Seats = 300, Average Load Factor = 80%
     Occupied Seats = 80% of 300 = 240
     Price per passenger = $250
     Total Earning/ Revenue = 240*250= $60000
     Fixed Airline Cost = $50000
     Variable Cost = $20 per passenger
     Total Cost/ Expenditure = Fixed + Variable Cost = 50000 + 20*240=
    $54800
     Total Profit per Flight = Total Earning – Total Expenditure= $(60000-
    54800) = $5200
     Profitability= (Profit/Total Cost)*100 = (5200/54800)*100= 9.48%
     Profit per passenger = $5200/240 = $21.66
    Segmentation
    First class Business class

    Economy class
    Profit and Profitability
     With Modern Strategy
     Total no. of Seats = 300
     Average Load Factor = 80%
     Occupied Seats= 80% of 300 = 240 (Economy: 144, Business: 72, First class: 24 )
     Price per passenger = $250(Economy), $500(Business), $1000(First class)
     Total Earning/ Revenue = 144*250 + 72*500 + 24*1000 = $96000
     Fixed Airline Cost = $55000
     Variable Cost = $20, $40, $100 per passenger
     Total Cost/ Expenditure = Fixed + Variable Cost = 55000 + 20*144 + 40*72 +
    100*24 = $63160
     Total Profit per Flight = Total Earning – Total Expenditure
    = $(96000-63160)= $32840
     Profitability= (Profit/Total Cost)*100 = (32840/63160)*100 = 51.99%
     Profit per passenger = $32840/240 = $136.8
    Contd…
     Earning of Economy class = (144*250)$ = $36000
     Earning of Business class = (72*500)$ = $36000
     Earning of First class = (24*1000) = $24000
     Expenditure of Economy class = (30000+2880)$ = 32880$
    Business class = (15000+2880+2500)$ = 20380$
    First class = (5000+2400+2500)$ = 9900$
     Profit of Economy class = Earning – Expenditure = (36000-32880)$ = 3120$
    per passenger = (3120/144)$ =21.66$
    Business class = (36000-20380)$ = 15620$
    per passenger = (15620/72)$ = 216.94$
    First class = (24000-9900)$ = 14100$
    per passenger = (14100/24)$ = 587.5$
     Profitability of Economy class = (3120/32880)* 100 = 9.48%
    Business class = (15620/20380)*100 = 76.64%
    First class = (14100/9900)*100 = 142.42%
    Total Profit Profitability Profit per
    passenger

    Without $5,200 9.48% $21.66


    Modern
    Strategy

    With Modern $32,840 51.99% $136.8


    Strategy

    $3120 9.48% $21.66


    Economy Class

    Business Class $15620 76.64% $216.94

    First Class $14100 142.42% $587.5O


    Break even point
    The break-even point (BEP) is the point at which cost or
    expenses and revenue are equal.
     BEP without Modern strategy is at 73.06 Occupancy rate
    and for 219 seats.
    BEP with Modern strategy is at 52.6 Occupancy rate and for
    157 seats approximately.
    1) List all the benefits of segmentation to all stake
    holders of the airlines

    After segmentation as per the above example Profit


    has been increased to all the stake holders.
    Increase in the no. of the passengers.
    Brand value and increase in the stake value in the
    market.
    Luxury, Status: as per the requirement for all the
    classes.
    2) Who all could be the beneficiaries??
    Passengers,
    Stake holders,
    Employees and Employers of Airlines,
    Travel agency.
    Government in the form of taxes etc.
    3) 1) Do u think any segment is subsidizing for any other segment?
    If so who to whom? If not; why not? 2) What do you understand
    by absolute satisfaction and relative satisfaction? 3) Do you think
    there is a possibility that any case may feel relatively dissatisfied
    although absolutely satisfied when would that happen? 4) How
    would management prevent it?
     1A) None of them subsidizing.
     2A) Absolute satisfaction – by means of service and facilities that are
    worthy for the fare to respective passengers
    Relative satisfaction – by means of comparison to other class of
    passengers in facilities, sophistication, respect and etc.,
    Contd…
    4A) Prevention:
     There should be separation between the different class people, such
    that no two different class people enter each other.
     People make sure that they enjoy the facilities with the price they have
    paid.
     Passengers should be segmented according to their level of comfort.
     Respecting all the passengers equally.
    4) When can segmentation can go wrong? How to avoid
    segmentation from going wrong? What precautions to take?

     Segmentation may go Wrong when


     Improper allocation of seats and facilities to the passengers.
     Not suitable Service to the passengers.
     Price variation is inappropriate to different class passengers.
     Avoid segmentation from going wrong
     Segmenting them according to their Luxury, respect equally to all
    passengers.
     Good service to passengers.
     Reasonable ticket price.
     Precautions to take
     Understand the needs of the passengers in which different class people
    enjoys in accordance.
     Price should be proportionate to the benefits.
     Availing them the best services available.
    merci
    Any doubts?

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