For the aircraft manufacturers, forecasting the air travel demand is very important for the range of economic decisions, R&D, modification of the design and the production planning.
For the Boeing, the forecast for Air travel is done by matching the top-down and bottom-up analysis. The bottom-up analysis is used forecast the air traffic by connecting the domestic routes, which are too based on the several economic parameters, growth perspective, trends, route attractiveness, and various regulations. In addition to these, the government statistics about the incoming and the outgoing passengers are used to confirm the trend validity. On the other hand, the regional, as well as international market, forms the base for a top-down approach.
Later, both the projections coming from top-down and bottom-up projections are merged to get the industry business model. All the air traffic developments in the region including the population, transportation preference, and other factors affecting the air traffic are taken into consideration that helps in the forecasting of air traffic to understand the aircraft demand forecast (Boeing Company (Seattle, Wash.), 2015).
Global Market of Airbus Forecast has a course which is being constantly updated for many years. Every transformation in the industry i.e. development of low-cost models of business or growth of spoke and hub operations has been a way the Airbus improves and enhances its models repeatedly (Airbus Inc., 2013).
The company Airbus and Boeing had developed their 20 years forecast which highlighted price and distribution of price as a major aspect of growth. The influence of these factors was studied which determined that demand influenced the price. However, it was discovered through research of airlines in the US and the UK that legacy airlines adopted a high-low strategy in price. Even in the same airlines, pricing techniques differed. The legacy airlines captured high market shares and lowered the prices in order to undermine its competitors. Such activities were done after the deregulation in 1978. The research also found out that air transport market is increasing, but the real air fees are reducing. The airlines companies have reduced their fees in order to attract more consumers. The fees are reduced based on maximum and minimum stay, special fees, etc. Since the development of low-cost carriers, the demand has increased for air travels. Considering the shift in consumer buying behavior, some companies have new strategies for reducing the price of the ticket along with better services to compete with low-cost carriers.
The demand for air traffic is affected by the economic condition of the Europe. If the economy suffers recession, then the demand decreases. The impact on the pricing due to various reasons like government taxation, fuel prices, etc. also affect the demand. In addition to this, the competition level and the distance haul marks the impact on the demand side. The effect of trans-national business, globalization and the liberalization cannot be undermined to affect the demand. On the supply side, the number of flights or the flight frequency is the major factor affecting the supply. The size of the aircraft used, departure time and transit hours also affect the supply of seats.
As a means of promotion, airlines companies are using advertising. It can be used as a means to enhance brand values and image of the company, but it cannot fool the consumers as a poor service can easily be differentiated from what is actually advertised. A research highlighted the relationship between expenses in advertising and perspective of people on its safety. It was discovered that advertising expenses are not increased to project about accidents rather promote parts of safety and various discounts offered at different times of the year.
Gilbert, Child, and Bennett (2001) studied different strategy in advertising mainly for low-cost carriers centered in Europe. The research found that the low-cost carriers use means that have been carried out in the United States, which they believe, would make awareness for their consumers. The medium of advertising includes magazines, radios, poster sites, and newspapers. Advertising plays a key role in this industry. Many companies to upgrade their image, to create brand awareness, which attracts more consumers, have already used it. It is also a tool to spread the news about the crisis in an organization.
The other medium to promote their brand could be through online sales and promotion. It is an area of great potential for an industry as airlines also started to provide discounts if tickets are purchased online. Gilbert, Child, and Bennett (2001) also discovered that low-cost carriers provided discounts on online purchase of tickets, as it is a more convenient, easy and cheap method of advertising and distribution. The behaviors of consumers in buying tickets online have been a matter of investigation for many researchers.
Different researchers has discovered that the internet has escalated sales as well as developed electronic commerce. It is an interactive medium, which allows for global access in a cost-efficient way along with the options to customize. Sonal & Preeta (2005) also provided evidence of improvement in other communication tools due to the internet. Toh & Raven (2003) studied about strategies for Integrated Internet Marketing (IIM) used by airlines. Adopting the strategies related to IIM, there are an increment in consumer suitability, reduction in price and decline in unfairness which customer experiences when dealing through travel agents. As the internet acts as a substitute for promoting and distributing products, Kolsaker, Lee-Kelley & Pui Ching (2004) analyzed several problems attached to the online purchase of tickets such as privacy concern, a security issue, and poor customer services.
The internet is an essential tool in the airline industry. It enables consumers to get adequate information and online purchase of tickets. Internet usage has attracted the attention of customers mainly for the customers of low-cost carriers who utilize the benefits of the internet as an allocation medium and reduce the cost. This will increase the demand of customers especially if they are price elastic.
References
Airbus Inc. (2013, September 24). Global Market Forecast 2013-2032: Continuing the trend toward larger and more efficient aircraft | Airbus Press release. Retrieved from http://www.airbus.com/newsevents/news-events-single/detail/global-market-forecast-2013-2032-continuing-the-trend-toward-larger-and-more-efficient-aircraft/
Boeing Company (Seattle, Wash.). (2015). Current market outlook. Seattle, Wash.
Gilbert, D., Child, D., & Bennett, M. (2001). A qualitative study of the current practices of 'no-frills' airlines operating in the UK. Journal of Vacation Marketing, 7(4), 302-315. doi:10.1177/135676670100700402
Kolsaker, A., Lee-Kelley, L., & Choy, P. C. (2004). The reluctant Hong Kong consumer: purchasing travel online. International Journal of Consumer Studies, 28(3), 295-304. doi:10.1111/j.1470-6431.2004.00373.x
Sonal, K., & Preeta, V. (2005). Practices, Perceptions and Avenues of Net-Based Promotions.Electronic Commerce Research, 5(3-4), 401-424. doi:10.1007/s10660-005-1182-6
Toh, R. S., & Raven, P. (2005). Perishable Asset Revenue Management: Integrated Internet Marketing Strategies for the Airlines. Transportation Journal, 42(4), 30-43.
