Case Study Analysis Philippine Orient Airways

A Written Report Submitted in Partial Fulfilment of the Course Requirements in Marketing Management (MKT 511M)

Background of the Case

Philippine Orient Airways (POA) has been in operation since 1998, and one of the major players in the air transportation industry. Currently, a rumour has been circulating that POA’s going to fold up, this is mainly due to the recent event of scrapped merger with POA’s sister airline company; Pan Philippine Air (PPA). As a result of the rumour, POA was loosing passengers for the past three weeks, even though the start of Christmas season is at hand. In addition to the recent event, POA has announced for contract termination with travel agents. These travel agents are not recommending POA flights due to unstable situation of POA.

The CEO of POA has instructed the Marketing and Sales Director to prepare a comprehensive plan on immediate improvements of POA’s market share and passenger loads while in the middle of a crisis.

Statement of the Problem

What marketing plan should the Marketing and Sales Director implement in order to alleviate the current crisis on rumours of fold up and improve market share and passenger load?

Objective of the Case Analysis

To implement an effective and efficient short term marketing plan in order to the address the current crisis and improve the market share and passenger load of POA; and to implement a long term marketing plan in order to sustain or increase more the market share and passenger load of POA.

Assumptions

  • The decision making to be done in the point of view of the CEO of POA and the marketing plan to be conceptualized and implemented by the point of view of the Marketing & Sales Director of POA
  • Financial data and analysis are accounted in the marketing plan for their opportunity advantage and cost.

Facts / Data of the Case

Company Vision & Mission

POA Vision:

  • To be a chosen airline that surpasses world-class standards

POA Mission:

  • Deliver the first-rate customer service combining Filipino hospitality and world-class competence
  • Carry people and cargo at the least cost and earliest time
  • Provide its employees with an ideal working atmosphere
  • Provide its stockholders profitability and fair gain on their investments

Definition of Terms

Market Share:   the percentage of passengers has used POA in terms of the entire airline industry and an indicator on how competitive POA against POA’s competitors in the airline industry.

Passenger Load Factor:                 the percentage utilization of available seat capacity and an indicator of how efficient the airline is operating its resources.

 

 

Environmental / Industry Analysis

Michael Porter‘s Five Forces analysis – Industry Competition Analysis

The framework will determine and identify the current competitions in the airline industry.

Rivalry among Existing Competitors

The existing competitors of POA are the SAL & PPA. There exists a rivalry between the three major airlines in terms of market share.

Threat of New Entrants

Since the airline industry in capital intensive and labour intensive, there is little possibility that new entrants will join the airline industry

Threat of Substitute Services

The alternative transportations are by land travel and sea travel. There exists a threat in these substitutes since they are cheaper that airline travel.

Bargaining Power of Buyers

The Buyers of airline industry are the travellers; they can control the success and pressure the company when travellers want to patronize POA or not. Other Buyers are the companies that use the airlines for cargo deliveries

Bargaining Power of Suppliers

The airplanes have long service life, the suppliers of planes poses little threat. However, the supplier for maintenance is from a single company that also employs by POA’s sister company,  a bargaining power that the maintenance company may favour or give more priority to POA’s sister company.

In summary, POA have existing direct and indirect competitions in the airline industry. The Direct competitors are SAL & PPA. On the other hand, the indirect competitors of POA are the alternative modes of transportation through land and sea. However, this case will be focusing on the direct competitors of POA.

 

Consumer Analysis

Consumer Analysis for airline service is needed in order to determine and identify the target market for this case.

Airline industry has two services, transferring passengers and cargo. The passengers can be sub categorized to two, private and corporate passengers. Cargos are from courier companies and from goods and products business companies.

Private passengers are travelling for leisure and personal purposes, while corporate passengers are for business purposes.

Passengers can avail seat reservations via travel agencies or through direct transactions with POA offices.

For this case, the focus will be given to flight passengers since the objective is to improve market share and passenger load in terms of number of seats sold per flight.

SWOT Analysis

SWOT analysis is used in order to identify POA’s internal and external factors in order to conceptualize a marketing plan.

External Factors:

Opportunities

  • There are routes that are not covered by POA & SAL
  • Low cost fare compared to POA’s sister company PPA
  • Low cost rate that is comparable to alternative transportation

Threats

  • Direct competitor for low cost fare; SAL
  • SAL has routes that POA does not have.

Internal Factors:

Strengths

  • More competitive programs for frequent flyers compared to SAL
  • Covering the same routes as POA’s sister company at a low cost fare
  • POA have highly trained flight attendants and stewards.
  • POA has an 97% on-time performance from Oct 2003
  • Passenger load factors (efficiency) of POA is more by 2% compared to the 2% of SAL

Weaknesses

  • POA is operating on thin profit margins
  • POA only have a 52% passenger load factor, lowest compared to SAL & PPA on 2002
  • POA has decreased most passengers carried to 9% from 2001 to 2002
  • POA has decreased the most seat capacity offered by 25% from 2001 to 2002

Ethical Considerations

 

  • All employees of POA have regular position & have benefits.
  • POA work place is safe and comfortable to employees.
  • POA hubs are safe and comfortable to passengers
  • POA are working under safety and environment rules and regulations

Alternative Courses of Action

ACA 1: Increase POA hubs by accommodating the same routes of competitors; SAL

Pros:      Market share will increase for POA since POA will now compete with SAL for passengers on the new route.

Cons:     Passenger load for POA will decrease since the new routes have slim demand to accommodate the seat capacity of both POA & SAL.

POA will incur opportunity loss to low passenger load created by the new routes and operations of new hubs.

ACA 2: Seat sales for advanced booking of flights

Pros:      Market share and passenger load will increase for POA since the advance booking will secure seats in the future designated dates.

Cons:     POA will incur loss in profit since the sale rate is lower than regular rates.

ACA 3: Tie up with banks and travel agencies for deferred and instalment payments of fares for passengers; a fly now pay later campaign

Pros:      Market share and passenger load will increase for POA since passengers can pay later for the fares and the campaign will be enticing to passengers without considerations of their current budget
Cons:     POA will incur loss in terms of cash flow since the account receivables will increase and deferred payment from the banks, however yearend revenue and profit will increase

Recommendation

Recommendation of ACA 3 out of the three ACAs, a campaign for deferred and instalment payment for passenger fares.

Market share and passenger load will increase at the same time no profit loss will be experienced by POA since the campaign is not a seat sale or a reduction of fares, only a deferred of payments from the banks and travel agencies.

POA can guarantee that passengers will have seats for flights since passenger load factor of POA is only 52%.

Marketing Action Plan

Marketing Tactics

 

  • Conduct a press conference and press release clarifying that POA business is at its strong operations despite the recent events of cancelled merger with PAA. This event will eliminate the rumours that POA will fold up and will shown the stability of the company.
  • Conduct a campaign through above the line campaigns for a month with weekly intervals in order to strengthen the brand and company name. In addition to persistently remind the people of the presence of POA and its quality services. The campaign will feature the highlights of POA though quality equipments and amenities, credible manpower, accessibility, on time records and low rates.
  • Simultaneous with the brand and identity campaigns, POA will reconnect and strengthens the partnership with old and new travel agencies. This will ensure a stable market share and passenger load for POA.

Marketing & Sales Strategic Plans

  • Simultaneous to the month long brand and identity campaign, the marketing and sales division will conduct conceptualization activities for a week in alignment to the fly now pay later campaign.
  • Upon conceptualization of the marketing plan, organization of resources and marketing activities, the division shall conduct a week long negotiations with banks and travel agencies on the duration of the campaign.
  • Marketing division will adjust the marketing campaign for a week based on the results of the negotiations and will have the final approval of the plan to the CEO of POA
  • Marketing division will conduct a creative and advertising plan for a week, along side with production of collateral designs for above the line advertising.
  • Upon the last week of the brand and identity campaign, the new campaign will be introduced and will continue for a weekly duration. This will ensure the continuity of presence of POA in the media industry.


References

Websites

Five forces analysis

http://www.provenmodels.com/25/five-forces/michael-e.-porter

http://en.wikipedia.org/wiki/Porter_five_forces_analysis

SWOT analysis

http://www.provenmodels.com/37/swot-analysis/c.-roland-christensen–edmund-p.-learned–kenneth-r.-andrews–william-d.-guth

http://en.wikipedia.org/wiki/SWOT_analysis

Book

                Marketing Management             

Kotler/Keller, MARKETING MANAGEMENT, 12e. (Prentice-Hall, 2006).

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About marvzmartinez
an Engineer

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