The price of oil is a significant concern, however, as this impacts on the price of jet fuel (though they are not perfectly correlated). Airlines typically rely on sophisticated hedging strategies in order to control fuel costs, as rapidly rising fuel costs can be devastating for business (McAllister, 2010).
The technological environment is one characterized by changes in plane configurations and models, in order to capitalize on the latest trends in the airline industry. As airline manufacturers become more responsive to the market needs, this will benefit Pet Airways, as our company will need to have specialized cargo holds to handle our star passengers. The political and legal environment is generally favorable. While laws regulating airlines are strict, they are universally applied. The biggest challenge will be when tighter security regulations reduce demand for flights, as most flights are within a few passengers of being unprofitable. The cultural and social environment is in the company's favor, as people like to fly, they value pets and they like to fly with their pets. There is always room in the market for another well-run low-cost carrier, as evidenced by markets like Europe where several low-cost carriers compete with each other successfully.
As a new company, Pet Airways has few strengths on which to draw. The company has a unique concept that will help it to differentiate itself from the competition. Pet has also studied the low-cost airline niche, learning from the successes and failures of the companies that have gone before it. In addition, Pet has a strong management team with extensive airline experience, and is fairly well financed for a startup airline. There are a number of weaknesses as well, however. One key weakness is that the brand has yet to become established. Nobody knows about Pet and it will take a substantial marketing effort to change that. Another weakness is the lack of key landing routes. Pet needs to have access to the best airports in order to be attractive to customers, but landing rights can be difficult to acquire, especially for new airlines. Lastly, the airline still needs to put together its staff and training programs. These are essential for the airline's success, but may need time to gel before becoming the well-oiled machine the staff will need to be -- a learning curve at the airline's launch could be challenging.
There are a couple of main opportunities that Pet Airways has been built to take advantage of. The first of these is the relatively untapped animal market, which other airlines either do not serve or serve poorly. Another is that it is believed there is still room for another major low-cost carrier in the Northeastern U.S.. JetBlue's growth rates and the ongoing poor performance of legacy carriers indicates that there is not only growth in the segment but further opportunity to cull customers from the legacy carriers. There are a number of threats in the environment as well. The first is the competition -- it has already been noted that the response of the competition is likely to be intense. The second is the state of the economy. Slow growth and high fuel prices are expected to put pressure on airlines, making it difficult to grow the industry. It would be easier to launch in a different economic environment. Lastly, there is the threat represented by the ongoing security issues at airports. The security burden not only adds costs to the industry but also reduces demand for air travel as consumers opt to use other modes of transportation.
The market plan objectives will be to capture enough of the market to achieve 82-83% load factors, and to dominate business amongst people traveling with pets. This will be the main point of differentiation, but within that niche it is expected that Pet Airways will otherwise compete as a low-cost carrier. This is the only growing segment of the market, but firms entering this segment will need to have some points of differentiation with respect to their services in order to help them build their businesses. The marketing strategy will support this by being focused on building brand exposure, on creating specific brand associations and on generating interest in the concept in general. The three target markets for the marketing plan are the pet owner market, the business traveler market and the general, price-sensitive leisure traveler market.
The primary service that will be provided is air travel. The primary sub-service will be air travel for pets, being a specific service niche that Pet Airways hopes to exploit. Exploiting this niche will require that the company develop specific competency in animal handling for flights, including in-depth knowledge of how all animal types fly. This will include the involvement of trained veterinarians. For non-pet customers, the flight will be the service, with the service level from the staff as the secondary service offering. This product is in the mature stage of the life cycle, but could be viewed as a cash cow in the BCG Matrix (NetMBA, 2010). Place is a critical component to this service, as airline attractiveness is often predicated on destinations. To this end, Pet Airways must secure access to the most attractive airports in the core Northeast market. The company will need, for example, Boston, New York, DC, Philadelphia and other key markets, even if at secondary airports. Without access to the most important destinations, the airline will not have a high enough convenience factor to attract customers. It is expected that while the initial routes will number in the single digits, Pet Airways will need to rapidly expand to a few dozen routes.
Promotion is going to be critical because this is a new company that nobody knows about. The promotion mix needs to be therefore extensive and aggressive. This will include social media/Internet, radio ads, television ads and print ads. In addition, publicity will be an important part of the Pet Airways launch. It is believed that the unique concept will gain the company a significant amount of publicity and provide opportunities for its management to appear on talk shows and in print media discussing the concept. As such, the broad objectives for the promotion plan will be to saturate the market with the Pet Airways brand. While awareness is the primary objective, it is also important to create the intent to purchase. This will be a key focus on promotion at all stages of the launch cycle. The consumers will find it very easy to purchase and our webpage will be highly accessible for online purchasing in particular.
There are a number of potential pricing strategies. Airlines typically use a form of price discrimination known as skimming to earn high profits from business customers and fill space on the planes with consumers. In the case of Pet Airways, the skimming strategy will also be utilized. This will be with business customers and with the pet segment as well, as this is where the most important value-added service will be delivered. The consumer segment will receive lower prices as an enticement to purchase. However, in addition to skimming, as a startup airline it will be important to also implement penetration pricing. Building brand loyalty is going to be crucial to the survival of Pet Airways. The company expects to be able to undercut the competition during the first few months of business on all seats. Doing this will help increase the load factors and allow the company to establish brand loyalty. The pricing life cycle will be utilized here -- penetration pricing will only remain for a short time. It is expected that the competition will match our prices, so penetration pricing is not sustainable in the long-run anyway, and after a few months the company will implement normal pricing for all customers, aside from the aforementioned skimming strategy.
Implementation and Control
Budget forecasts will be used in help provide financial controls. In addition, an internal audit team will be higher and given autonomy. There will be an anonymous whistleblowing hotline as well, to encourage internal reporting of ethical issues or financial malfeasance. Beyond these basic control issues, the company will have a strong Code of Ethics, and substantial ethical training as well. Ethical lapses will not be tolerated.
The timing of implementation will take about one year. Starting an airline is a challenging endeavor so this much time is required to ensure that everything is done right. The pre-launch phase through months 9-12 will be when most of the marketing plan is implemented, but market research and setting up operations will be done before that. There will be contingency plans for most actions -- especially with respect to the major threats and risks in the economy. The company will have strategies to not only mitigate these risks but make adjustments if any of those risks comes to pass. Lastly, the company…