Network carriers throughout the world are currently struggling with the question of how to best address the leisure market within their existing operational and commercial business models. Lufthansa Consulting is working with a number of airlines to successfully reposition their strategies to profitably and more effectively take a larger share of this valuable market.
The fundamentals of the leisure market remain strong in all markets, but handling the seasonal volatility and the changing customer demands are the greatest challenges network airlines are facing. In the last decade most network carriers focused their attention on high value corporate customers, but since the financial crisis corporate revenues have failed to return to pre-crisis levels and future growth remains in doubt. For this reason network carriers are returning to the leisure market but finding that it has changed significantly in the interim. The disruptive effects of low cost carriers and online distribution have had a far greater impact on this segment than any other. Leisure customers have become better informed and as a result more price sensitive.
Network airlines looking to re-enter major leisure markets are realizing that they struggle in three key areas – competitive operating costs, balancing seasonality and addressing a highly fragmented distribution market. The ability to be competitive with leisure-focused and low-cost carriers is hindered by inflexible labor agreements, as well as premium focused cabin configurations, passenger service and product levels.
Maintaining the product and service standards of the premium brand while targeting the price sensitive leisure market presents a major dilemma. Here Lufthansa Consulting has advised client airlines in the establishment of sub-brands and independent brands which have the advantage of preventing long-term brand deterioration as well as providing the opportunity to establish new lower cost structures. Less radically, optimization of the airlines network to balance premium trunk routes with seasonal leisure opportunities and an optimization of the cabin configuration has brought clients significant improvements.
Successfully positioning an airline in the leisure distribution channels is a major challenge for network carriers who have focused on corporate travel agents as well as direct online sales. Lufthansa Consulting can address the key issues here from pricing to suit the leisure customer, establishing better agreements with consolidators and aggregators as well as emerging player-hub technologies and dynamic packaging.
Successfully targeting the leisure market provides a positive portfolio effect for an airline as well as growth opportunities outside core markets. In Lufthansa Consulting’s experience there is no blueprint solution, but a strong business requirement to develop a tailored leisure market strategy that suits your airline’s current position and your individual market dynamics.
If you are interested in the best strategy to position your airline for profitable growth in the leisure market, please contact Lufthansa Consulting’s Associate Partner Dr. Andreas Kraus or Senior Consultant Birte Schormann.