This paper examines the marketing strategy of Continental Airlines as a full-service carrier in contrast to low-fare discount carriers such as Southwest Airlines. It provides a company overview of Continental, including its pending merger with United Airlines, and identifies the airline's primary target market and competitive differentiators. The paper analyzes Continental's competitors — both full-service carriers like American Airlines and Delta, and low-cost carriers like Southwest, JetBlue, and AirTran — before describing the airline's products, marketing budget, pricing strategy, and a proposed mobile-based marketing campaign targeting Hispanic consumers in the New York and Houston metro areas.
Today, people have a wide range of transportation alternatives available to them, including personal conveyances, buses, trains, and airplanes. Within these different modes of transportation, a further array of choices exists — such as a luxury automobile versus a compact car, or first-class accommodations on trains compared to coach. With respect to air travel, passengers also face these types of choices, as well as the decision of whether to fly on a full-service airline or a discount fare carrier.
To determine what types of passengers are targeted by marketers at a full-service airline, this paper provides a review of the relevant literature concerning flying on Continental Airlines — a full-service airline — as opposed to a low-fare discount carrier such as Southwest Airlines. The paper concludes with a summary and implementation section.
Continental Airlines (hereinafter alternatively "Continental" or "the company") was operating as an independent airline while in the process of merging with United Airlines, a process expected to be completed within approximately 12 to 18 months pending regulatory approval. According to the company's corporate website, the merger "brings together two of the world's best airlines to create the new United Airlines. Continental and United are working to align key customer services, marketing activities and airport processes, and we expect to complete our merger integration within 12 to 18 months" (About us, 2011, para. 2).
The company maintained headquarters in Chicago and was established in 1934 (About us, 2011). Continental is a global air carrier with hubs in Chicago, Cleveland, Denver, Guam, Houston, Los Angeles, New York, San Francisco, Tokyo, and Washington, D.C., completing almost 6,000 flights every day to more than 370 destinations around the world (About us, 2011). In addition, Continental — along with its merger partner, United — is a member of the Star Alliance, which offers passengers extensive connecting flights to other international destinations (About us, 2011). The company employed almost 87,000 people, broken down as follows: Airport Operations and Cargo (25,057), Food Services/Chelsea (2,043), Continental Micronesia (1,224), Customer Contact Centers (3,475), Flight Operations (9,784), Inflight (21,024), International (3,616), Management/Admin (11,963), and Technical Operations (8,601), for a total of 86,787 employees (About us, 2011).
The general target market for Continental is the entire flying public, as well as mail services, with relatively competitive pricing. However, the company has primarily focused on differentiating itself as a full-service carrier that provides travelers with far more than they can expect from budget carriers. In its promotional material concerning the pending merger with United, Continental emphasized that "the new United will offer customers an enhanced travel experience, combining the best products and services each carrier has to offer. The airline will be focused on being the airline customers want to fly, the airline employees want to work for, and the airline shareholders want to invest in" (The world's leading airline, 2011, para. 3).
Key attributes distinguishing Continental's full service from low-cost providers include the following:
A. The world's most comprehensive global route network, including world-class international gateways to Asia, Europe, Latin America, Africa, and the Middle East, with non-stop or one-stop service from virtually anywhere in the United States.
B. The most modern and fuel-efficient fleet (when adjusted for cabin size) and the best new aircraft order book among U.S. network carriers.
C. An industry-leading frequent flyer program providing more opportunities to earn and redeem miles worldwide.
D. Optimal hub locations in ten cities, including hubs in the four largest cities in the United States (The world's leading airline, 2011).
In addition, Continental continued to provide preferred customers with perquisites such as its "Member Lounges" and United's "Red Carpet Club," where guests receive free Wi-Fi service as well as free snacks and alcoholic and non-alcoholic beverages. The company was also revamping its frequent flyer program to combine both airlines' offerings as a further draw (The world's leading airline, 2011). Elite customers were to receive reciprocal seating and upgrade benefits beginning in October 2010 (The world's leading airline, 2011, para. 5).
With respect to other full-service airlines, Continental competed directly with American Airlines, Delta Airlines, and U.S. Airways. Stock performance data from January 2006 onward indicated that Continental was outperforming its full-service competitors, though the margin was close.
Continental also faced direct competition from low-cost carriers. Flouris and Walker (2005) emphasized that Southwest Airlines in particular, along with JetBlue and AirTran, had eroded Continental's market share in recent years. Both JetBlue and AirTran employ the low-cost business model (Flouris & Walker, 2005). Despite this stiff competition, the company's Form 10-Q SEC filing from October 2010 noted that operating revenues improved year-over-year from 2009 to 2010 as a result of increased demand for business travel and premium service, reflecting improvement in the global economic environment.
The company competes in the air transportation of persons, property, and mail (Form 10-Q, 2010). Representative comments from loyal passengers posting on a travel discussion forum illustrate the value Continental's full-service model provided:
A. "Continental still gives you food. The other airlines don't. When I fly out of Newark, they're quite good. Their services to Europe and South America are good."
B. "Continental has the best customer service of any major U.S. airline, in my opinion, and is one of the best in the world. I fly almost 100 times a year and I love Continental."
C. "It's great if you're traveling to other countries. It's very convenient and they serve very good meals, and have a good entertainment selection."
D. "At airlines, it's not only the traveling that counts but other things which a handful offer."
E. "I'm guessing the other airlines don't want to waste money on advertising in competition with Continental, because it would be just that, a waste."
"Full-service and low-cost airline rivals analyzed"
"Passenger reviews and service quality described"
"Mobile ads five to ten times more effective than online"
"Buy-one-get-one campaign targeting Hispanic travelers"
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