A Comparative Study of International Airline’s Ancillary Functions
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Date
2016
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UMT, Lahore
Abstract
The airline industry has been struggling to survive in economic turbulence throughout its history. The volatility of the industry structure has driven the policy makers to come up with new sources of income in order to survive the fierce competitions from local and foreign competitors and the high fuel costs. Although airlines have been generating non-ticket revenue in the past by auxiliary functions, e.g. ground handling, maintenance, cargo logistics, duty-free shopping, consultancy, charters, inflight catering, and so on but these functions were generally viewed as separate businesses. The current mutually destructive competition market has created what strategy guru W. Chan Kim called a Red Ocean. In order to create a blue ocean, airlines are now focused on competing through brand differentiation. One strategy for differentiation is offering lower airfares via unbundling and offering ancillary services.
This thesis discussed airline ancillary services from a marketing perspective, specifically from the retail and service industry point of view. The concept of airline ancillary offerings is explained with the help of applied examples from the airline industry with the support of marketing concepts. The researcher investigated the effects of ancillary offerings in the airline industry and the practices in use for their marketing. It was found that airline ancillary offerings allow passengers to buy only what they need for their travel and gives them control over travel costs thus building airline brand loyalty. The technical process of buying airline ancillary offerings via online retail and GDS travel agents was discussed briefly.
Key words: Airline retail, ancillary services, à la carte pricing, bundling/unbundling of services.