Classic Airlines Marketing Solution

Classic Airlines Marketing Solution

Classic Airlines Marketing Solution

Classic Airlines is has been named one of the top five airline carriers internationally. At this time, Classic completes nearly 2,300 flights per day and owns 375 airplanes landing in 240 cities globally. Records from last year showed that the company earned a total net income of $10 million from its 8.7 billion operation costs (University of Phoenix, 2011). Aside from the success, the stability of the company has been threatened. The monetary performance of the company as well as the employees' morale has been drastically compromised. Classic must introduce strategies addressing the challenges. Classic has been mandated to a 15% cost reduction plan over 18 months while recovering 20% or 120,000 lost customers and recover 20% lost frequent flier customers (University of Phoenix, 2011). This paper proposes the final five steps in the marketing solution for Classic to withstand difficult economic times by maintaining customer confidence and satisfaction while increasing structural efficiency.

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Classic should focus the limited funds to growing the marketing strategies and not in maintaining a fuel hedging program; the ramifications could prove to be permanent. The graph below demonstrates Classic's benefits from participating in the fuel hedging program.

Fuel Hedging Program Cost Savings

Q1 2004 Q2 2004 Q3 2004 Q4 2004 2004 Total

Fuel Gallons Consumed (in millions) 294 388 394 359 1,435

Market Price Per Gallon $0.82 $0.90 $0.97 $1.01 $0.93

Total Fuel Cost (in millions) $241 $349 $382 $363 $1,335

Fuel Gallons Consumed (in millions) 294 388 394 359 1,435

Hedged Price Per Gallon $0.82 $0.82 $0.82 $0.82 $0.82

Total Hedged Fuel Cost (in millions) $241 $318 $323 $294 $1,176

TOTAL SAVINGS (in millions) $0 $31 $59 $68 $158

** Chart retrieved from University of Phoenix

Airline labor costs are unavoidable; however, if labor costs are properly managed and the airline workforce is properly used achieving employee maximum cross-utilization, the high cost will be understood in many areas.

"Perhaps the most critical elements of the successful low-fare airline business model are significantly higher labor productivity than traditional network carriers. The differences lie in labor productivity, not in unionization or even wage rates. Southwest is the most heavily unionized US airline and its salary rates are considered to be at or above average compared to the US airline industry. The low-fare carrier labor advantage is in much more flexible work rules that allow cross-utilization of virtually all employees [except where disallowed by licensing and safety standards]. Such cross-utilization and a long-standing culture of cooperation among labor groups translate into lower unit labor cost. Carriers like Southwest have a tremendous cost advantage over network airlines simply because their workforce generates more output per employee" (Belobaba, 2005).

Offering enticing amenities, lowering rates, and improved customer service are challenging aspects of Classic's marketing battle. Accomplishing this is a tough task. Classic must understand customer's