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Studies show that as customer satisfaction and loyalty increases, consumers are less sensitive to price changes. Generally, they are willing to pay more for their preferred brand because they perceive some unique value that other alternatives do not provide (Giddens, 2002).
Long-haul international business travelers and short/medium-haul domestic business travelers are the customers that are not price sensitive and are, therefore, the best market segments for the legacy carriers to target. However, as legacy airlines have tried to compete with low-cost carriers on price, they've had to cut back on things business travels value such as a large selection of destinations and flight options leg room, meal service, and airline clubs. As a result, legacy service really isn't that differentiated from the low-cost carriers. Legacy airlines need to think of inexpensive ways to set their service apart from the low-cost airlines. For example, Wi-Fi availability would be a flight enhancement that would appeal to business travelers without adding significantly to costs.
IV. Conclusion
Legacy airlines have significant barriers to lowering prices. Therefore, they have to have a different plan for competing against lower-cost airlines that offer low fares. Theories of price discrimination and premium pricing through one-to-one marketing identify ways that legacies can avoid price competition. Long-haul international business travelers and short/medium-haul domestic business travelers are the customers that make the best segments to target because they are not price sensitive. but, to be successful, the airlines will have to differentiate their services from the low-cost carriers to appeal to its target audience and understand the needs of individual consumers within market segments.
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Air travel demand elasticities: Concepts, issues and measurement. Retrieved from Web site: http://www.fin.gc.ca/consultresp/Airtravel/airtravStdy_3e.html
American Airlines re-launches direct corporate booking oortal CorporateAAccess.com (2005, November 17). Retrieved from Web site: http://biz.yahoo.com/prnews/051117/dath051.html?.v=23
American cancels some flights on fuel costs (2005, September 30). Associated Press. Retrieved from Web site: http://news.yahoo.com/s/ap/20050930/ap_on_bi_ge/airlines_jet_fuel
America's airlines, flying on empty (2005, September 6). The Economist. Retrieved from Web site: http://www.economist.com/agenda/displayStory.cfm?Story_ID=4399993
Bonsor, K. How airlines work. Retrieved from Web site: http://travel.howstuffworks.com/airline3.htm
The budget and economic outlook: Fiscal years 2008 to 2017, (2007, January). Congressional Budget Office. Retrieved from Web site: http://www.cbo.gov/ftpdoc.cfm?index=7731
Chakravorty, J. (2005, January 4). Airlines shares fall as oil prices rise. Retrieved from Web site: http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh69917_2005-01-24_19-48-44_n24162794_newsml
Coy, P. And Zellner, W. (2002, August 5). Commentary: The airlines: Caught between a hub and a hard place. BusinessWeek. Retrieved from Web site: http://www.businessweek.com/magazine/content/02_31/b3794112.htm
Delta hampered by fuel costs in Q4, notes job cuts (2007, December 4). Sacramento Business Journal. Retrieved from Web site: http://sacramento.bizjournals.com/sacramento/stories/2007/12/03/daily20.html?surround=lfn
Eli, D. Legacy airlines could learn from low-cost competitors. Global Insight. Retrieved from Web site: http://www.globalinsight.com/Perspective/PerspectiveDetail857.htm
Giddens, N. (2002, August). Brand loyalty. Retrieved from Web site: http://www.extension.iastate.edu/agdm/wholefarm/html/c5-54.html
Global airline industry to return to profitability in 2007: IATA (2007, April). Retrieved from Web site: http://findarticles.com/p/articles/mi_kmafp/is_200704/ai_n18773303
Judge OKs Delta pilots' pay cut. (2006, May 31). CNN. Retrieved from Web site: http://money.cnn.com/2006/05/31/news/companies/delta_pilots/index.htm
Odlyzko, a. (2003, July 27). Privacy, economics and price discrimination on the Internet. Digital Technology Center, University of Minnesota. Retrieved from Web site: http://www.dtc.umn.edu/~odlyzko/doc/privacy.economics.pdf
Peppers, D., Rogers, M. And Dorf, B. (1999, January-February). Is your company ready for one-to-one marketing? Harvard Business Review. Retrieved from Web site: http://www.wjdoll.utoledo.edu/Ideas%20for%20discussion/IsYourCompReadyforOne-to-OneMarketing.pdf
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