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INTRODUCTION

Air blue is a private Pakistani airline based at Jinnah International Airport Karachi. It started its operations on May 24, 2004. It was the first private carrier of Pakistan to operate the Airbus A320 when it initially started. Air blue has been expanding rapidly despite experiencing competition from the other three airline operators in Pakistan. The airline mainly flies on domestic routes plus internationally to Dubai International Airport and also has plans to fly to the Gulf, UK, and USA.

MISSION STATEMENT
Air blue will be recognized as the most progressive enterprise in the transportation business. We will offer our customers cost effective transportation service within geographical areas and market segments that can benefit from our services and will insure a return on investment and growth rate consistent with current management guidelines.

VISION STATEMENT
Our vision is to make Air blue the most admired airline in the world.
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Ensuring safety comes first Providing Service Straight from the Heart Encouraging product leadership Delivering superior financial returns providing rewarding career opportunities

SWOT ANALYSIS of AIR BLUE:


The SWOT anal i i the process of anal ing organi ations and their environments based on their strengths, weaknesses, opport nities and threats. This incl des the environmental anal sis, the process of scanning the business environment for threats and opportunities, which is considered as external factors, and the organi ational anal sis, the process of anal ing a firms strengths and weaknesses as internal factors. SWOT anal sis was carried out for Air Blue and the results are summari ed as follows: Strengths: 1. Second largest air-carrier of Pakistan, enjoying almost 30 percent market share on domestic routes. 2. Air blue is a Low-cost carrier (LCC). The reason behind air blues low fares is that it uses Dynamic Pricing Model. Air blue puts its entire ticket inventory on the Net and direct t internet booking accounts for 15% of its sale It begins s. selling tickets at a 40% discount to full service carriers (FSCs), but closer to the date of your travel, you may end up paying up to 30% premium ove the price r charged by FSCs. 3. 4. 5. 6. 98% punctuality of on-time flight departures. Innovative e-ticketing and wireless check-in technologies. Operational efficiency. Air blue is using latest technology for the airline's advantage and its valued customers. Many corporate entities tried to create a paperless work environment, in order to minimi e its costs and maximi e its efficiency, but only Air blue had been successful to the extent that its management does not need offices to function.

7. The air blue aircraft are the latest fly-by-wire technology Airbus A320's and A321's. This allows the airline more flexibility and scales of economy in crew planning and maintenance capability, adding directly to bottom-line profitability 8. Lesser workforce because of extensive technology usage. 9. Air Blue is the first among public and private sector airlines in South-Asia and second after Emirates in the region to introduce latest s elf check-in system at Karachi airport. The self check-in system will facilitate the passengers carrying baggage with them, to get boarding card through the new touch screen system without reporting at the counter. 10. Package for students and special children. 11. Good food, good entertainment, spacious seats, most exciting hospitality, elegant and charming hostesses. 12. Year 2006 witnessed exceptional performance in the short term financing which was reduced from Rs 206 million to Rs 48 million, showing a decrease of 330 percent. 13. Air blue showed a record operating profit of over Rs 150 million for year 2006 while providing a high quality product to the consumers. 14. Air blue outsources most of its secondary tasks to third parties. It helps airline to cut costs. Weaknesses: 1. Difficulty in developing brand-awareness as a startup company. 2. Engaged only in passenger service, whereas its competitor PIA is also providing cargo services (SPEEDEX . 3. Not having its own repair and maintenance facilities. 4. Doing less on the advertising and promotion of air line. 5. Not operating flights for Hajj Pilgrims, which could be a major source of income. 6. Small fleet of air crafts. 7. Two aircrafts are acquired on dry lease and one on wet lease. 8. It connects only seven cities in Pakistan. 9. Very tight schedule of flights, which puts extra burden on pilots, cabin crew and hostesses Opportunities: 1. Year 2007 is being celebrated as Visit Pakistan Year. So, the number of foreign visitors is likely to increase and complimentary tourism industry will increase demand for airline service. 2. Agreement with Airbus Industries for the purchase of eight airbus A320-200 and two airbus A330-200 aircrafts for an estimated cost of $ 790 million. New aircrafts will be used for additional frequencies and destinations on domestic and regional routes. 3. Low fares enable market share growth. 4. Introducing new domestic and international routes like Gulf, UK, Jordan, India etc.

5. Stable economy and growing GDP. 6. The air transport sector of Pakistan would also get a boost from newly developed Port of Gwadar in the Baluchistan province. The development of the Gwadar Port, the third deep sea port of the country and the first of Baluchistan, would serve as a link with the Central Asian States. The government is upgrading the Gwadar International Airport at a cost of 480million rupees. Once upgraded, the airport will be able to handle wide -body aircraft such as Airbus and Boeing 747 aircraft. 7. Poor performance & red tapism in PIA. 8. Worldwide deregulation makes the skies more accessible, Open Skies. 9. Excellent credit rating allows Air Blue to purchase its expansion strategy. Threats: 1. Escalating jet fuel prices. 2. Low-cost Chinese airlines planning to enter into Pakistans domestic air market. 3. Cutthroat price war among airlines. 4. Buses business continuously improving speed in service in mid and long distant routes, attracting passengers away from air service. 5. PIA is also procuring 10 new Boeing planes. 6. Threat of terrorism. 7. No level-playing field for private airlines, as government always rescues PIA from risks. 8. Incapability of national airport runways to handle big crafts. 9. Competition is heating up as four new local airlines are going to start their operations very soon. 10. High insurance costs for aircrafts and passengers.

MARKETING MIX:
Marketing -mix is the set of all the controllable elements by the organization. Every service marketing organization contains the following four elements or 4 Ps; I. II. III. IV. Product Price Place Promotion

I.

Product:
 Levels of products:

The Core Product, which is the most basic level of the product i.e. the benefit that the product offers, the basic of using the Air blue services are the convenient, fast and high quality mode of traveling. The actual level of product, The actual product is Air blue airlines, and having the following characteristics:

i. Quality level: They are maintaining their quality mainly through all the competitive advantages gaining strategies namely, their product differentiation, service differentiation channel differentiation, image differentiation and people differentiation.

The Augmented Level of Product: They provide high service augmentations to their product i.e. product classification, individual product design e.t.c.

 Range of services: The range of service means the number of services provided. So, Air blue provides the transport as well as cargo services and  E-Ticketing : Air Blue has introduced the concept of total e-ticketing for the convenience of passenger, first time in Pakistan. E-Ticketing System is an online seat reservation service which facilitates all the travelers that they can reserve their seats and also they can retrieve their seat reservation and they can also postpone their reservation e-ticketing needs a lot of high tech infrastructure and skilled employees which increases their cost and providing high valued services.  Product attributes : Product attributes like Branding, Packaging, Labeling and product support services. AirBlue aims to focus passenger comfort at prices that offer value for money and that explains its decision to have leather-upholstered seats in the Business class and offering inflight entertainment not offered by any other airline, including the PIA, on the domestic sector. The airline has also made arrangements with quality caterer outside to serve what it calls "exquisite cuisine" to the travelers.  Cargo services: Air blue offers more than 70,000 kgs cargo space on more than 18 fleet everyday. Their certified Air blue cargo Agents book cargo directly on-line, saving time and cutting costs. Air blue is proud to help businesses to ship goods faster and more reliable than ever before. Pickup and drop-off centers are conveniently located near city airports. To participate as an agent of cargo of air blue we have to fill the form on this website address:

II.

Price:

Generally price is the amount of money for which the customer is willing to pay. From the marketers point of view, an efficient price is a price that is very close to the maximum that customers are prepared to pay. In economic terms, it is a price that shifts most of the consumer surplus to the producer. The effective price is the price the company receives after accounting for discounts, promotions, and other incentives.

A.

PRICING OBJECTIVES:

A well chosen price should be planned to achieve some specific objectives; Pricing objectives of air blue are given as under;

1. 2. 3. 4.

Achieve financial goals of the firm (i.e. profitability) Fit the realities of the marketplace (will customers buy at that price?) Support positioning and be consistent with the other variables in the marketing mix Cost determination

1.

Achieve financial goals of the firm (i.e. profitability)

Air Blue achieved operational profit in the first two months of its operations. This shows that the differentiation strategy proved to be a great success for Air Blue. Air Blue started operations in May 2004, when the jet fuel price in Pakistan was around Rs .16 per liter, which almost doubled to Rs. 29 a liter within three months, much beyond their cushion provision for such an exigency. Air Blue, through its operations efficiency, managed to sustain the dramatic increase in jet fuel price, which was over 30 percent of the entire operational cost. It not only gained a substantial market share within a short span of time but also had a profitable load factor of over 90 percent, due to the fact that it was the only 100 percent e-ticketing start-up airline in the world. So despite the fact that Air Blue offered premium quality at premium prices, it has been able to meet the first objective i.e. profitability.

2. Fit the realities of the marketplace: (Will customers buy at that price?):
The prices set by Air Blue targeted the elite class including the business travelers and vacationers. Its differentiated and quality services generated loyal and satisfied customers. The prices by Air Blue have been set keeping in view the competitive environment and customer buying patterns. The tickets by Air Blue are affordable and economical to every customer and set by them after analyzing their potential customer needs.

3. Support positioning: (Be consistent with the other variables in the marketing mix)
As Air Blue aimed to position itself as a high end service provider, it offered premium prices to the customers. This fit well with the image the company was trying to portray viz. high quality services at a premium price. This is evident from Air Blues consistent success despite its high prices. This shows that the target market of Air Blue is the upper and middle class of the society that can afford luxuries.

4.

Cost determination:

Cost set the floor for the price that the company can charge for its product. The company wants to charge a price that both covers all its costs for producing distribution and selling the product and delivers a fair rate of return for its effort and risk. A companys cost may be an important element in its pricing strategy. The Planes that AirBlue is using are all reconditioned so that helps reduce the cost much but on the other hand they have been providing high quality catering and efficient cabin crew with high language skills which tend to increase their costs. Other factor affecting their cost is the e-Ticketing System which is an online and paperless seat reservation service which needs a lot of high tech infrastructure and skilled employees which increases their cost.

B.

PRICING STRATEGIES OF AIRBLUE:

Air Blue is using the following pricing strategies.

1.

Premium pricing:

Premium pricing also called prestige pricing, is the strategy of pricing at, or near, the high end of the possible price range. People will buy a premium priced product because they believe the high price is an indication of good quality. They believe it to be a sign of self worth They are worth it. It authenticates their success and status and acts as a signal of peoples status and success. They require flawless performance in this application, the cost of product malfunction is too high to buy anything but the best. In the airline industry, PIA and Air Blue are offering a premium price as compared to their competitors. Air Blue is a full frill service despite its image as the contrary and superior quality of their services is what differentiates them from competitors.

2.

Penetration:

Penetration pricing is the pricing technique of setting a relatively low initial entry price, a price that is often lower than the eventual market price. The expectation is that the initial low price will secure market acceptance by breaking down existing brand loyalties. Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than short term profit maximization. Air Blue initially offered a penetration price. The ticket fares were relatively low, whereas the quality of services was high when the company entered the market. The prices were then increased as the company established a brand image.

3.

Skimming:

Price skimming is a pricing strategy in which the marketer sets a relatively high price for a product or service at first, and then lowers the price over time. It is a temporal version of price discrimination/yield management. Until a few years back, PIA was offering skimmed prices where the quality of services was not equivalent to the price being charged for the tickets. Most of the customers did not receive a value for the money they paid. Now, however, PIA has improved the quality of the services and is offering a premium price.

This kind of strategy is usually implemented when an organi ation position itself in the mind of potential customers

4.

E onomy:

conomy pricing is a pricing strategy in which a marketer follows low cost strategy. An airline is said to have set economical prices when they charge low, or almost lowest in the industry, for tickets and offer low quality services. In Pakistani airline industry, Aero Asia is following the low cost strategy where the ticket prices are the lowest and the quality of services is also meager. All the above discussed pricing strategies can be illustrated in the following figure:

C. FACTORS TO CONSIDER WHEN SETTING PRICES:


Before setting prices here are some major factors which should be considered during setting prices:

1. Internal factors affecting pricing decisions:


The internal factors are;
   

Marketing Objectives Marketing Mix Strategy Cost Organizational consideration

2. External Factors affecting Pricing Decisions:


In considering prices we should also considered some external factors which are given as under:
  

Nature of the Market and Demand Competition Other External Factors like promotional and special-event pricing

D. AIRBLUE FARES:
Air blue Airfares depend on the time you are making your reservation. Earlier you make the reservation cheaper fare you will get. To get the current fares for the trip of your choice, you will need to provide date and flight details and you have to visit online reservations centre and select flight options to see the available fares. You Save when you buy early: Save 10 to 90% on air blue flights just by planning ahead and booking in advance. Percentage discount given to children are shown in the following table

Category
Child, Lap Infant

Age
2-11

%age of discount
with seat 50% of Adult Full 10% of Adult Full

Up to 2.5 years

AIRBLUE KARACHI -ISLAMABAD FARE FARE 5,168 4,651 4,134 3,618 3,101 2,584 2,067 1,550 1,034 YQ 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 APT 120 120 120 120 120 120 120 120 120 CED 1,075 998 920 843 765 688 610 533 455 TOTAL 8,363 7,769 7,175 6,580 5,986 5,392 4,797 4,203 3,609 FULL 10% 20% 30% 40% 50% 60% 70% 80%

AIR BULES PRICING STRATEGY:


A well chosen price should do three things: 1. Achieving Financial Goals of the Firm : Air Blue achieved operational profit in the first two months of its operations. This shows that the differentiation strategy proved to be a great success for AirBlue. AirBlue started operations in May 2004, when the jet fuel price in Pakistan was around Rs .16 per liter, which almost doubled to Rs. 29 a liter within three months, much beyond their cushion provision for such an exigency. AirBlue, through its operations efficiency, managed to sustain the drastic increase in jet fuel price, which was over 30 percent of the entire operational cost. It not only gained a substantial market share within a short span of time but also had a profitable load factor of over 90 percent, due to the fact that it was the only 100 percent e-ticketing start-up airline in the world. So despite the fact that AirBlue offered premium quality at premium prices, it has been able to meet the first objective i.e. profitability.

2. Fit realities of the market place:

The prices set by Air Blue targeted the elite class including the business travelers and vacationers. Its differentiated and quality services generated loyal and satisfied customers. The prices by Air Blue have been set keeping in view the

competitive environment and customer buying patterns. The tickets by Air Blue are affordable and economical. Support Positioning and be consistent with other variables in the Marketing Mix As Air Blue aimed to position itself as a high end service provider, it offered premium prices to the customers. This fit well with the image the company was trying to portray viz. high quality services at a premium price. This is evident from AirBlues consistent success despite its high prices. This shows that the target market of AirBlue is the upper and middle class of the society that can afford luxuries. From the marketers point of view, an efficient price is a price that is very close to the maximum that customers are prepared to pay. In economic terms, it is a price that shifts most of the consumer surplus to the producer. The effective price is the price the company receives after accounting for discounts, promotions, and other incentives. For this marketers use the following strategies. 1. Premium Pricing Premium pricing also called prestige pricing, is the strategy of pricing at, or near, the high end of the possible price range. People will buy a premium priced product because they believe the high price is an indication of good quality. They believe it to be a sign of self worth They are worth it. It authenticates their success and status and acts as a signal of peoples status and success. They require flawless performance in this application, the cost of product malfunction is too high to buy anything but the best. In the airline industry, PIA and AirBlue are offering a premium price as compared to their competitors. AirBlue is a full frill service despite its image as the contrary and superior quality of their services is what differentiates them from competitors. 2. Penetration: Penetration pricing is the pricing technique of setting a relatively low initial entr y price, a price that is often lower than the eventual market price. The expectation is that the initial low price will secure market acceptance by breaking down existing brand loyalties. Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than short term profit maximization. Air Blue initially offered a penetration price. The ticket fares were relatively low, whereas the quality of services was high when the company entered the market. The prices were then increased as the company established a brand image. 3. Skimming Price skimming is a pricing strategy in which the marketer sets a relatively high price for a product or service at first, and then lowers the price over time. It is a temporal

version of price discrimination/yield management. Until a few years back, PIA was offering skimmed prices where the quality of services was not equivalent to the price being charged for the tickets. Most of the customers did not receive a value for the money they paid. Now, however, PIA has improved the quality of the services and is offering a premium price. 4. Economy Economy pricing is a pricing strategy in which a marketer follows low cost strategy. An airline is said to have set economical prices when they charge low, or almost lowest in the industry, for tickets and offer low quality services. In Pakistani airline industry, Aero Asia is following the low cost strategy where the ticket prices are the lowest and the quality of services is also meager.

III

Place :

Place refers to the location of service providers and their accessibility, which is not related to only physical place but it also relates to distribution channels and other means of contact and communications. for example, travel agents and other intermediaries e.t.c.

A.

Distribution channels:

A distribution channel is a set of inter dependent organization involved in the process of making a product or a service available for consumption by the final consumer. Like other organizations Air Blue also uses intermediaries (TRAVEL AGENTS) to bring their products to the market. Running an Airline is a kind of business which also needs a distribution channel.

B.

Number of Channel Levels:

A layer of intermediaries that performs some work in bringing the product closer to the final buyer. Air Blue is using direct Marketing Channels as well as Indirect Marketing Channels. Where direct marketing channel has no intermediary levels but direct relationship of customer and service provider, while indirect marketing channels containing one or more intermediary levels. AirBlue uses an indirect marketing channel to reach its customers. It sells its products to its consumer directly as well as through Travel Agents in all the major cities or towns that it is operating in and they expecting some prospects.

C.

Intermediary selling:

A firm should identify the types of channel members available to carry out its channel work. The following channel alternatives might emerge from management discussion;

Company Sales Force Manufacturers Agency Industrial Distributors Air Blue is a manufacturer s agency which is independent firms whose sales forces handle related products from many companies in different regions or industries. Because it is giving the travel agents the rights to sell their airline tickets as the travel agents are also selling other airline tickets. So the travel agents are independent firms.

1. 2. 3.

D.

Number of intermediaries:

Companies must also determine the number of channel members to use at each level. Three strategies are available: 1. Intensive Distribution 2. Exclusive Distribution 3. Selective Distribution Air Blue Uses Exclusive Distribution which is, Giving a limited number of dealers the exclusive rights to distribute the company s products in their territories. Air Blue is using Exclusive distribution by giving rights to only those travel agents who are certified by the International Agents Transport Association (IATA). They have also given rights only to IATA agents in other cities of Pakistan where Air Blue is operating. In this case other agents have to book tickets from IATA agents or they will have to contact Air Blue directly for their customer s ticket.

E. Air blue routes:


Air Blue is currently operating in Karachi, Islamabad, Peshawar and Lahore as frequent fleet and also daily fleet to Sukkur, Faisalabad, Quetta, Gwadar, and Multan and expecting to start its service to Chitral in near future. Excepting domestic fleet, they also have started their regular international fleets since various years to Dubai, Abu Dhabi, Sharjah, Muscat, Manchester, Oman and UK. And planning to start fleet to Saudi Arabia, Qatar e.t.c. The following are the different routes of air blue: Air blue Domestic Routes: Karachi Islamabad Karachi Lahore Karachi Peshawar Karachi Dubai Lahore Dubai Islamabad Dubai Peshawar Dubai Islamabad Manchester

Airblue International Routes: Islamabad - Abu Dhabi Islamabad Sharjah Lahore Sharjah Lahore - Abu Dhabi

Lahore Muscat

IV.

Promotion:

This includes various methods of communicating with markets. The major methods of promotion are: 1. 2. 3. 4. 5. Advertising Personal selling Sales promotion Publicity Public relations

Since, airblue uses the following two methods of promotions;

1.

Advertising:

Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor. There are three major objectives of advertising which are to inform, to persuade and to remind. AirBlue promoted its airline by showing commercials on major television channels like GEO TV, ARY TV which was for a very short time and extensive advertising in major newspapers like Dawn, The News, and Daily Jang.

2.

Sales promotion:

Sales promotions are rebates or discount of money during purchasing of services or products. Major sales promotion tools are;  Cash Refund Offer (Rebates): Offer to refund part of the purchase price of a product to consumers who send a proof of purchase to the manufacturer. AirBlue offers a complete cash refund on cancellation of tickets prior to 24 hours of departure; the refund will be shown in full as a separate item in passenger sales history report. And within 24 hours of flight departures, a penalty of Rs. 300 applies.  Advertising specialties: Useful article imprinted with an advertisers name, given as a gift to consumers. Airblue gives key chains and toys as souvenirs to their passengers during the flight.  Patronage rewards:

Cash or other award for the regular use of a certain companys products or services. Airblue offers its Blue Miles Frequent Flier programs, awarding points for miles traveled that can be turned in for free airline trips. For example, on every 10,000 miles traveled, a customer is eligible for a free domestic ticket to any city.

PEST ANALYSIS
The macro-environment includes all factors influencing a company that are not within its control. These include political social, economic and technological factors. These are known as PEST factors. A technique of analysis of the macro environment is PEST analysis. Environmental analysis should be continuous and precede all aspects of planning. Since the airline industry is very much influenced by changes taking place in the environment and has undergone rapid and dramatic changes during the last decade, this analysis is especially important for Air Blue. Political Factors Political factors always have a great influence, on the way businesses operate in the airline industry and the spending power of customers. Governments intervene in the airline industry for various reasons, including 1. It is a major employer and provider of livelihoods. 2. Transport systems are subject to legislation and regulation. 3. International tourism flows mean that governments benefit directly from incoming tourists. 4. Government still owns a significant stake in national carrier, Pakistan International Airlines (PIA) and gives it frequent subsidies in terms of financing and oil. However, in recent years it has been observed that government played an active role in increasing competition in the airline industry. A number of new airlines such as Air Blue and JS Air have been awarded licenses to enter the domestic market. Despite increasing competition, PIA has maintained a monopoly on International routes. Airline industry is significantly affected by political stability. Pakistan has achieved some political stability in recent years. If the management of Air Blue believes that the present government will perform well (consistently), then there will be more investment in the form of purchase of new airplanes and latest technology. The overall industry will grow resulting in more luxurious and comfortable flights. With the military takeover government policies have become more liberal. In the past, Pakistans Civil Aviation Authority (CAA) played a major role in discouraging new airlines to enter the industry. CAA had a Restriction that companies could not operate as airlines unless they own their aircrafts. This means that new firms will need humongous investment even to enter the market. Economical Factors Currently, Airlines industry has four major players: Pakistan International Airlines, Air Blue, Aero Asia and Shaheen Airlines. Their target market includes domestic travelers as well as Pakistanis living abroad particularly in the UK and USA. These countries have strong economies coupled with high purchasing power. Customers purchase behavior depends very much on prices of the competing airlines as well as services

offered. As inflation rate is stable in Pakistan, spending power of consumers is not affected in the long term. In fact growth in Pakistani economy has resulted in an increase in spending power and has positively impacted the airline industry. Economically, the new millennium has been highly volatile; the September 11 attacks revolutionized the whole world. Consequently, there was a global depression in the North America, South America, Australia and Europe. However, in Asia especially Pakistan the effect in the short term was otherwise. The economy began to boom because of greater remittances from abroad and whole- sum immigration by expatriates. As a result, demand for air travel in South Asia rose PIA because of its monopoly in the market had been dictating policies and prices. Economic conditions of Pakistan are however improving. The air travelers in Pakistan lie in four categories mentioned in the case study i.e. The Hustlers and Overloaded, The Frill Seekers, The Economizers The Habitual/Regular Fliers- The Frecuente fliers, The Well-to-do and The Content-able. These customers use the services of airline companies according to their needs. An increase in interest rates has negatively impacted the airline industry. Due to the devaluation of rupee, attractiveness of the Pakistani market has been reduced for foreign investors. PIA has cost advantage over its competitors because of its newly acquired, improved, long distance aircrafts from Boeing1 which give longer range and better fuel economy than any other jet currently produced. This cost advantage
is a barrier to entry for new firms. However, this cost advantage will not be significant on domestic routes.

Social Factors The social and cultural influences on business vary from country to country. The social structure of Pakistan is closely tied. The trend is now changing as the general public is educated and is pursuing professional goals. Customers are more aware of market conditions and available options and want to get best value for their money. They spend considerable time and money on entertainment hence increasing the need of inflight entertainment systems. Also, word of mouth has a significant impact in the use of airline services and that is one the reasons of Air Blues ever increasing popularity. Hajj attracts a huge number of customers; however acquiring a license to provide services to pilgrims is a major hurdle. The social environment of Pakistan is turning liberal with the new regime. The initiative to automate check-in and ticket booking process2 might not be very popular with the general public (even educated population) is still technology averse. E ticketing might also face significant challenges as consumers are generally reluctant to provide their credit cards information over the phone and the internet. The consumers, however, have a warm reaction to the prospect of less costly but quality service flights. Air Blue, however, has untapped market potential as consumers are unaware of its services because of ineffective and meager marketing efforts.

Technological Factors Technology is vital for competitive advantage and is a major driver of the airlines industry. Major technological changes are taking place in the airlines industry with innovations in the reservations and booking systems. In-flight entertainment systems and auto check in counters are two examples of such innovations. Internet plays a key role in e-ticketing as consumer can easily reserve tickets or check the status of the flight. A key issue will be the extent, to which technological advancements (such as Internet) impact distribution and cost synergies from industry consolidation, can offset upward pressures on costs. Air Blue has led the path of technological innovations by introducing new technologies ahead of its competitors such as its auto check-in counters which has helped it gain market share. It was the first airline in Pakistan to install Sabre system followed by the market leader, PIA. Pakistani Airlines have to be abreast of the technological developments in e-commerce and aircraft manufacturing technology in order to gain a competitive advantage.

PORTERS FIVE FORCE ANALYSIS: 1. Threats of new Entrants:


Initially, PIA enjoyed a complete monopoly in the domestic sector and preferential treatment in the overseas sector. Its interests were protected by laws which made it mandatory for a national traveling overseas to fly only with it at least once in case of several foreign trips a year. Its monopoly existed until early 1990s when the Nawaz Sharif government implemented the Open Sky policy. The Open Sky Policy encouraged private sector investment in the airline sector. The last decade witnessed the emergence of six private airlines (which are; Raji, Hajvery, Saif, Bhoja, Shaheen Airways and Aero Asia). Despite the fact that only two of these airlines are still operating, the ensuing competition was a decisive factor to keep the fares in check, particularly on the domestic sector where PIA did not face any competition previously. This situation significantly lowered entry barriers. Although the initial investment required for starting an airline is quite large, banks readily provide them credit but this is only in the case of established names or companies backed by well known groups. However, capital expenditure is very large and most new entrants come in the market with few leased air crafts. Economies of scale are mostly achieved through maximum utilization of these planes. While the private airlines did instill a competition benefiting domestic travelers in particular, their overall performance was marred by many problems. This resulted in suspension of services without any notice to the travelers and in many cases these suspensions lasted not only for days but for weeks and months. 2. Threat of Substitutes:

Likely substitutes for air travel include other transportation modes such as trains, buses and cars. Driving on shorter routes (e.g. Islamabad to Lahore) provides a cheaper substitute. Buyers may thus, be inclined to use personal cars or buses for such trips. This however, will vary for from person to person3. A vacationing traveler has the option of choosing a train, enjoying the scenery and its leisurely pace. Air travel can, however, save both time and money for longer routes. Flying from Islamabad to Karachi is often cheaper, safer and less time consuming than chugging along in a train or car. The threat of substitutes in the air travel industry will vary for each customer segment depending upon time, money, preference, and convenience. 3. Bargaining Power of Supplier: The price of jet fuel is directly related to the cost of oil. This price is determined by international markets and an individual company does not have the power to influence it. The airline supply chain is dominated by Boeing, Airbus, Aircraft Parts Suppliers and Reservation System Providers. There is cut throat competition among suppliers and they are very likely to integrate vertically. Oil is an integral input of the airline industry and has the power to directly influence air fares. Hence, the oil suppliers have high bargaining power. 4. Bargaining Power of Buyer: Buyers now have a number of options when choosing an airline. Due to technology advancements, pricing information is less fragmented and easier to compare. Travelers can easily compare prices and can find price variations for the same flight4. One seat is hardly any better than the next, since the arrival time is same for everyone. Vacationers will want the best deals, whereas business travels are frequently more pressed to time and are less price sensitive. Despite intense competition, air travel is not cheap and command substantial finances of a vacation. Hence, for vacationers the demand is highly elastic (as the price drops demand increases) and for business travelers it is less elastic or inelastic. However, airlines may move their prices in tandem with competition and force buyers to pay market price until a price war breaks out. 5. Intensity of Rivalry: The Pakistani airline industry is fiercely competitive. Industry growth is moderate, and carriers are struggling to increase their market share. There are substantial exit barriers in the industry. Due to this high rivalry airlines generally earn low returns because competition drives down prices. This can spell disaster for the economy in tough times according to Managing Director of Shaheen Air International (SAI), Air Vice Marshal (Retd) Syed Ataur Rahman; The passenger load has dropped substantially amidst the global recession which like elsewhere has also taken a heavy toll on our economy. The sluggish economic and industrial activities and drying of foreign investment have resulted in substantial reduction in foreign air traffic into the country which has taken a heavy toll on the domestic airlines. In addition, the airline

industry has also been hurt by a drastic increase in jet fuel prices which soared by 350 percent in last three years. This has put an enormous pressure on the airlines, to remain profitable. According to global standards aircraft, crew, maintenance, insurance and fuel make up 68 percent of an airlines operating costs. The massive increase in the international prices of jet fuel is taken a far heavier toll on small airlines which dont have the resources and business base to cushion the blow. The cut throat competition on the domestic sector is unethical as well as uneconomical and yet we have accepted it as part of the game. It has helped us push the seat occupancy ratio to 95 percent which is way over the globally accepted breakeven standard of 65 percent. The primary y beneficiaries of the price war are the domestic travelers as the prices of domestic airfares have been substantially reduced. Mr. Rahman said the absence of level playing fields, unethical competition and rising costs of operations are all taking a heavy toll on the private sector airlines. He urged the government to allow private airlines duty free import of aircraft at par with PIA instead of charging them 5 percent duty.

ANSOFF MATRIX:
Ansoff Matrix allows marketers to consider ways to grow the business via Existing and/or new products, in existing and/or new markets. There are four Possible product/market combinations: y Market penetration (existing markets, existing products) y Product development (existing markets, new products) y Market development (new markets, existing products) y Diversification (new markets, new products) Keeping in view the airline industry of Pakistan, AirBlue is in the Market Penetration Matrix. Market penetration occurs when a company adopts a low cost strategy to induce customers to try its product or service. It is important to note here that market penetration strategy begins with existing customers of the organization. This strategy is used airlines to increase sales and market share without drifting from the original product/market strategy. AirBlue penetrated the Pakistan market employing a three pronged strategy; by attracting competitors customers, providing superior services, and targeting non-user segments. AirBlue also tried to entice its current customers to use more of the companys services by offering various discounts and schemes such as student and old citizen discounts and Blue Miles. AirBlue has used a rare but attractive combination of low-cost, all-frills strategy which is rarely used in the air lines industry. It has managed to successfully attract and retain customers by superior services at the same or lower fares. This gives it a competitive advantage of having strong brand equity and has helped it attract new and retain old customers.

COMPETITORS ANALYSIS
Analyzing an organizations competitors helps it decide the strategies it will follow in both the short and long term. By looking at competitors, a firm can determine the industry trends and make decisions on crucial issues such as discounts to be offered, quality of services provided, and channel of distribution and promotion strategy. A firm can improve its operations and is in a better position to compete by taking into account all these aspects. The airline industry in Pakistan currently has cut throat competition. Passengers, today, are time conscious since time is the only rare commodity in todays world. The offering of the airlines are continuously changing with changing customer needs. The airlines are deploying more efforts to meet customer requirements and provide superior quality of services. Every organization faces competition and so does Air Blue. Its competitors include PIA, Aero Asia and Shaken Airways.

Pakistan International Airlines (PIA): PIA is the flag carrier of Pakistan and the national airline operating passenger and cargo services around the world. It is the oldest airline in Pakistan, (dating back to the IndoPak subcontinent) and has the first movers advantage. Its main hubs include Jinnah International Airport, Karachi, Allama Iqbal International Airport, Lahore and Islamabad International Airport, Islamabad. Its current fleet size is 40 and it flies to 82 destinations. PIA has a rich history and made through various ups and downs of the economy. It still claims percent market share and is the largest airline in the country by all standards (i.e. fleet size, number of passengers per month, income etc). In December 2003, PIA introduced a revamped its corporate image from changing the outlook of its planes to its logo. The new image was also applied to their first 777200ER and another newly leased A310- 300. Under the new style, the tail was painted beige and a flowing Pakistan flag placed on it, PIA acronym was enlarged and moved onto the fuselage. In early 2006, PIA unveiled four designs representing the four provinces of Pakistan to be Applied throughout their fleet, these will replace the present flag. International Aero Asia: Aero Asia is a private Pakistani airline based at Jinnah International Airport, Karachi and Dubai International Airport, Dubai. Aero Asia was previously owned and operated by the Tabani Group, which sold it to the UK based Regal Group, following the temporary suspension of its flights in the summer of 2006. It was the first low cost airline in Pakistan and operates to destinations in Pakistan and the Gulf states. The fleet size is 10, and it has total of 11 destinations, 7 domestic and 4 international. Aero Asia has already covers the Middle-East and has been granted permission to fly to the United Kingdom and United States from December 2005 by the CAA. However, because of its current restructuring, international flights are expected to commence in 2007. It will start from Manchester, London and Birmingham gradually including New York, Singapore, Copenhagen, Oslo and Bahrain. The latest Boeing and Airbus aircraft are being inducted in the fleet. Within Pakistan it currently provides services at Karachi, Lahore, Islamabad, Peshawar, Multan, Faisalabad and Sukkur. Internationally, it covers Abu Dhabi, Dubai, Doha, Manchester and Muscat Shaheen Airways: Shaheen Airways is the second national airline after PIA. It mainly covers Karachi, Lahore and Islamabad and the Gulf. Its base is Jinnah International Airport, Karachi, with a hub at Islamabad International Airport, Islamabad. Its fleet size is 10 and destinations are 11 which are further divided into 5 domestic and 6 international. This depicts that it is mainly focusing international customers. It currently operates in Islamabad, Karachi, Lahore, Peshawar, Quetta, Abu Dhabi, UAE, Doha, UK, Kuwait and Oman.

PERCEPTUAL MAPPING
Perceptual mapping is a technique used to determine positioning of brands Relative to their competitors. We have used this technique to analyze the Positioning strategies of Air Blue. For plotting the perceptual mapping we have compared positioning of Air Blue with Shaheen Airlines, Aero Asia and PIA using the following attributes. y Destinations y Punctuality y Quality of Food y Value for money y Economy y Services y Technological Advancements Aero Asia international: Aero Asia is a private Pakistani airline based at Jinnah International Airport, Karachi and Dubai International Airport, Dubai. Aero Asia was previously owned and operated by the Tabani Group, which sold it to the UK based Regal Group, following the temporary suspension of its flights in the summer of 2006. It was the first low cost airline in Pakistan and operates to destinations in Pakistan and the Gulf states. The fleet size is 10, and it has total of 11 destinations, 7 domestic and 4 international. Aero Asia has already covers the Middle-East and has been granted permission to fly to the United Kingdom and United States from December 2005 by the CAA. However, because of its current restructuring, international flights are expected to commence in 2007. It will start from Manchester, London and Birmingham gradually including New York, Singapore, Copenhagen, Oslo and Bahrain. The latest Boeing and Airbus aircraft are being inducted in the fleet. Within Pakistan it currently provides services at Karachi, Lahore, Islamabad, Peshawar, Multan, Faisalabad and Sukkur. Internationally, it covers Abu Dhabi, Dubai, Doha, Manchester and Muscat. Destinations/coverage: The first attribute is the number of destinations (locations) that the airline covers domestically as well as internationally. PIA covers 24 cities within Pakistan and has flights in all continents and major countries of the world. Air Blue internationally flies to only Dubai and to seven cities within Pakistan touches six cities nationally and Dubai internationally Airways. Aero Asia has a total of 11 destinations out of which seven are domestic and 4 destinations are in. We have ranked PIA, the highest as they cover the maximum destinations Dubai whereas the other three airlines internationally fly only to Dubai and domestically to a limited number of routes. PUNCTUALITY: An important consideration for airline travelers is the punctuality of schedule. PIA overall punctuality of 89 percent, which is the official figure has a

passengers of PIA; however, think that the actual percentage is lower. The flights for PIA are usually delayed for considerable durations. Air Blue flights are on time and their punctuality is more than 90 percent, much higher than PIA Shaheen Airways claims to be very punctual and scheduled whereas a few years Aero Asia had some issues regarding consistent the delays of their flight back . So we have ranked Air Blue the highest, followed by Shaheen, PIA and Aero Asia respectively. Food quality: Air Blue serves an exquisite cuisine, a choice of local and Chinese, consisting of Sweet and Sour Chicken with Vegetable Rice, accompanied by a Cucumber a traditional Pakistani dessert made and Tomato Salad with a wedge of Lemon, milk and vermicelli called Sawai followed by tea best part of the. The with meal is that it is served in china utensils (the main dish, the tea cup, desert and salad bowls are all made of china). One of the Air Blue passengers rated the food the taste was amazing. The juicy tender pieces of 9 out of ten and commented, meat along with rice mixed together blended in the mouth in such a way that it Aero Asia is a low cost, no frill airline, its . Since surely made you say yum. In most domestic flights, passengers are food quality is inferior to competitors half a glass of cold drink and a packet of chips served food quality of PIA is The also good; the typical menu includes Biryani, liked by both the local and . The breakfast and snacks have a lower ranking, which is on foreign passengers average 4 out of 10 whereas the lunch and dinner have a ranking of around 7.5 out of 10.

Hospitality/customer services: Hospitality here means the way passengers are treated by the airline staff Friendliness of the crew is important in keeping customers satisfied. Hospitality will entail all passenger encounters right from the airport until check-out, including; treatment of staff at the counter, crew in the flight, the in flight services which include the entertainment and food services, the baggage handling and the comfortable seats. As far as the hospitability and friendliness of the staff is concerned, Aero Asia is the best which is followed by PIA and Shaheen airways. As one of the passenger commented about Air Blue, Check in unusual, with the female check-in agent managing to process me without a greeting, a smile or a the female staff were young but . Another customer mentioned that thank you looked too casual and unprofessional, not right for the type of image the airline. The PIA airhostesses and staff is considered to be friendlier wants to portray. Than the staff of Air Blue and the way PIA now handles its passengers at important international routes is great. Economy In order to attract the price conscious consumers, airlines offer different packages for target markets. Aero Asia is the lowest cost airline in Pakistan; it does not Air Blue again is a low cost airline provide any frills. , but it offers all frills. Air Blue offers special discounts if the seats are booked online. They also have . Air Blue fares are a bit closer to students discount and old aged citizen discounts Aero Asia but PIA fares are higher than all competitors on domestic routes. Services: The unique services being offered by PIA include; its cargo; Speedex and other best inflight entertainment; a wide variety . PIA also offers the baggage services of movies, over a dozen audio channels, duty free shopping, games (arcade style games, playing cards, crosswords and strategy games) maps and tourist Aero Asia offers an international cargo and courier service information affiliation with top notch airlines including Emirates and Qatar Airlines. Aviation, a sister traveling agency of Aero Asia, operates one of the largest tours in Pakistan and organizes local and foreign packages for tourists . Aero Asia does not offer entertainment services except for magazines, newspapers and games for unique services offered by Air Blue include its e-ticketing and self. The kids check-in systems along with new, spacious aircrafts and better in flight services Air Blue offers 2 channels; one audio which plays the recitation of Holy Quran and the other is video. After privatization, the Shaheen Air Cargo Division was set up under Shaheen Airways Technological advancements: Air Blue was the first airline in Pakistan to introduce e-ticketing bringing about a revolutionary way of buying tickets. It is also a member of Sabre system that is used by over a hundred airlines to help it with ticket automation services. Air first airline in

Pakistan that has made use of IT as a strategic tool for Blue is the disintermediation of the middle agent and reaching out directly to customers PIA, Aero Asia and Shaheen Airways followed its foot steps and introduced e- ticketing. Leading the way with innovative new technology, Air Blue became the first airline in South Asia and only the second in the region after Emirates to introduce the latest self-check-in facilities at the Karachi airport. It was also the first private airline of Pakistan to operate the airbus A320. Corporate image: For the purpose of positioning Air Blue and its competitors, corporate image means if the brand advertises a corporate image. PIA, the national carrier of Pakistan was a favorite of corporate before the introduction of Air Blue. PIA regularly sponsors sports such as a first-class cricket team that plays in the ABN AMRO Patrons Trophy in Pakistan. PIA is also sponsoring the A1 Team Pakistan for the A1 Grand Prix, recently being introduced in over 25 nations around the. The sport is very similar to the Formula One races and is held during the world Northern Hemisphere winter offseason of the FIA Formula 1 Grand Prix series. Sponsors cricket matches aired on TV Aero Asia cricket grounds are usually The Air Blue and Shaheen Airways, however, are not as branded with Aero Asia logo active in sponsoring sports events.

PRODUCT LIFE CYCLE

The figure above shows the phases that a new product/service goes through from Inception to decline; (1) introduction, (2) growth, (3) maturity, and (4) decline. Because of rapid changes in consumer lifestyles and technological changes, life cycles

of products and services are becoming shorter. It, however, remains a useful concept for strategic planning. Each stage of the product life cycle has certain marketing requirements. Introduction: The introductory phase of the life cycle requires high promotional expenditures and visibility. The most productive time to advertise a service is when it is new. Operations in this period are characterized by high cost, relatively low sales volume, and an advertising program aimed at stimulating primary demand. Most companies in the market fail in this stage. Growth: In the growth period, the service is being accepted by consumers Market acceptance means that both sales and profits rise at a rapid rate, frequently making the market attractive to competitors. Promotional expenditures remain high, but emphasis is on selective buying by trade name rather than on primary motive i.e. to try the product. During the growth stage, the number of outlets providing the service usually increases. More competitors enter the marketplace; economies of scale are realized and prices experience a decline. Launched in 2004, AirBlue has passed the introductory stage is in the early growth stage of the life cycle. Customers have now endorsed it and are even starting to prefer it to its competitors. It is also evident from the fact that AirBlue has massive expansion plans for future both for its network and its fleet. AirBlue has ordered ten brand new Airbus long haul and short haul aircrafts to facilitate international expansion to the UK and strengthen domestic routes. The $ 790 million order includes eight Airbus A320 aircrafts for the Gulf and domestic routes and two Airbus A330 aircrafts for the European routes with deliveries commencing in 2008 . Airblue has plans to start services to many cities 12 including; Nawabshah, Sukkur and Turbat. Its international expansion plans include flights to Jordan, the UK, the US, and Saudi Arabia. Maturity: A mature service is well established in the marketplace. Sales may still be increasing but at a much slower rate; they are leveling off. At this stage of the life cycle, many outlets are selling the service, and are very competitive, especially with respect to price, and firms are trying to determine ways to hold on to their market share. Decline: Many services remain in the maturity and saturation stage for years . However, for most, obsolescence sets in, and new products are introduced to replace old ones . In the decline stage, demand obviously drops, advertising expenditures are lower, and there

are usually a smaller number of competitors. While it is possible for a product to do very well in this stage of the life cycle, there is not a great deal of comfort in getting a larger share of a declining market.

Porters Generic Strategies


Generic strategies were first presented in two books by Professor Michael Porter of the Harvard Business School (Porter, 1980, 1985). Porter (1980, 1985) suggested that some of the most basic choices faced by companies are essentially the scope of the markets they would serve and how they would compete in the selected markets. Competitive strategies focus on ways in which a company can achieve the most advantageous position that it possibly can in its industry (Pearson, 1999). A firms relative position within its industry determines whether its profitability is above or below the industry average. The profit of a company is essentially the difference between its revenues and costs. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost or differentiation. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus . The focus strategy has two variants, cost focus and differentiation focus. We will briefly overviews these generic strategies because;

1. Cost leadership: In cost leadership, a firm sets out to become the lowest cost producer in its industry . The sources of cost advantage are varied and depend on the industry structure. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. If a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average. 2. Differentiation In a differentiation strategy, a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers . It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions it to meet those needs. It is rewarded for its uniqueness with a premium price. 3. Focus The generic strategy of focus rests on the choice of a narrow competitive scope within an industry or a niche. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others. The focus strategy has two variants. (a)In cost focus a firm s Weeks a cost advantage in its target segment, while in (b) Differentiation focus a firm seeks differentiation in its target segment. Both Variants of the focus strategy rest on differences between a focusers target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behavior in some segments, while differentiation focus exploits the special needs of buyers in certain segments.

AIRS BLUE GENERIC STRATEGY DIFFERENATION


Air Blue has employed a strategy that is unusual for the airline industr y i.e. differentiation . This means that AirBlue is an all-frills provider and has carved a special place in the consumers minds . This has been a successful penetration strategy but it remains to be seen if the company will be able to sustain in the longer run and also especially since it is planning to enter the international market. Air Blues operational efficiency, a major factor in contributing to its low cost also has to be maintained. Air Blues business model has been based of the business model of Southwest Airlines that emphasizes superior quality of service at all

customer encounters to ensure a memorable experience. Only time will as certain the success of this model in Pakistani companies. A point to be noted here is that despite having lower cost packages (such as yield management, children and old citizen discounts), AirBlue is not the lowest cost provider in Pakistan. As Mr. Abbasi pointed out at the launch of AirBlue; Though Airblue would have a flexible fare structure, the fares in general would not be cheap. We are focused on service, which we believe matters in the airline business. AirBlue is expected to perform superbly in the market which is evident from the comment made by Prime Minister Shaukat Aziz, at its launch; Airblue can earn a lot of profit through promoting tourism in the country. He also praised the company for its plans to make an initial public offering (IPO) soon.

Air Blue Positioning Strategy


A cordial and reliable escort, Air Blue provides through state-of-the-art technology at very low cost. Personality Statement An ambitious man of 28, AirBlue is a CEO by profession. He has a track record of setting high objectives and meeting or exceeding them with hard work and determination. He is exceptionally punctual and has a professional image. He has friends in all walks of life and is always on the outlook for making new ones. He is very caring and can do anything to see his loved ones happy. He does not hesitate in buying cheaper products that provide value. He is mesmerized by technology and likes to keep up with changing trends. He owns various high technology products such as a PDA, a laptop, an iPod and a digital camera. world class services

PIA Positioning Statement:


Like a responsible ally, PIA provides convenience, dependability and a sense of closeness to home, anywhere in the world. Personality statement : Dressed in green and white, PIA is a professional woman of 35 who works from home. Juggling work and family at the same time, she has managed to create an intricate balance between the two. She has a history of being tardy, because of her multiple responsibilities. She is a bit moody and is known for her temper tantrums. Despite these flaws, she is a Proud Pakistani and represents Pakistan everywhere in the world. She adores Pakistani food and does not like other cuisine.

Aero Asia Positioning strategy:


Aero Asia provides an interesting blend of average quality services at the lowest possible cost. It has recently revitalized its personality and now gives a younger and energetic look. Personality statement: Aero Asia, a charming girl of 25, is price sensitive. Her philosophy is saving for the rainy day. She is simple and straightforward and doesnt like to indulge in luxuries. She is on a strict diet and only eats healthy snacks throughout the day. She recently acquired a new wardrobe giving her a younger and energetic feel.

MASLOWS HIREARCHY OF NEEDS THEORY


Consumer purchases products and services to satisfy various needs. According to Maslows hierarchy of needs, presented by Abraham Maslow, air travel satisfies needs of the fifth order, which is self actualization needs. Travel, always is an enriching experience, let it be vacationing families or business executives on an official tour. A person can obviously afford to travel by air only if he has already fulfilled his basic physiological and safety needs. This is because air travel is a high involvement service requiring an extensive decision making approach due to high fares.

THE CUSTOMER BUYING PROCESS


There are multiple decision parameters which the consumer keeps in mind while purchasing the tickets. Out of these parameters, price is the foremost for a nonfrequent flyer. People who frequently travel through air usually belong to the business class who travel for business and official purposes. These people care more about the total travel time and the date/time of departure and arrival because they are always on the move, and they have a much busy schedule to meet with. They do bother about the prices also, but they prefer comfort and convenience over fares. On the other hand, people who very seldom travel by air, mostly for vacations, weddings and to meet their relatives in other cities/countries, are usually price- conscious and go for the most economical deals. These people prefer low price or discounted fares over travel time and convenience. 1. Problem Recognition In the first stage of the buying process, consumers will identify the need which is this case of a travel mode. Air travel is considered a luxury and is affordable for the elite and upper middle tiers of the society. This situation has, however, been altered with the introduction of low-cost airlines such as Aero Asia and Air Blue in the Pakistani market. This situation has altered the industry scenario and has included the middle

class in the airlines target market. The need for air travel can be categorized into two categories i.e., for business and for pleasure. Officials from both the government and private sectors have to travel both within the country and overseas to attend workshops, seminars, meetings and other events. For pleasure, people travel individually as well as in families both for vacations, and tours, to meet relatives, attend weddings and even for educational purposes. 2. Information Search: Seeking Value Air travel is a high involvement service and that is why a typical consumer goes through a complex purchasing process. In this phase, the customer will obtain schedules and fares for different air lines. The customers will use both the company sources including the airline websites and official sales center for getting this information. The customers will then contact a traveling agent and will inquire about the available options. The customer will also obtain information from personal sources such as family and friends. This will include word of mouth of ones relatives and colleagues who have firsthand experience with the airline. As it is said, one satisfied customer produces 9 more customers, and one dissatisfied customer looses 100 potential customers. Like any other service industry, word of mouth plays a pivotal role in the airline industry. After internal and external information search the consumers will have a clearly defined set of criteria on the basis of which he will make the purchase decision. 3. Evaluation of Alternatives: In light of the criteria, the customer has set during the information gathering phase will establish a set of alternatives which are up to the mark. In this phase, every step is analyzed in terms of the value a customer will obtain from the airline service and the price of the service. Value is perceived in terms of product 45 promotion, place, people, physical evidence, and processes, whereas money is considered in terms of price. The image of the service, its availability, functionality, customer care, user-friendly booking system and attractive environment all contribute to customer satisfaction from a service experience. The customer by now has collected the schedules, routes, fares and travel time offered by different airlines. She will now compare the fares and services offered by each airline. Information search clarifies the problem for the consumer by: a. Suggesting criteria to use for the purchase such as Fares, Travel Time, Services, Connecting Cities and Rewards b. Yielding brand names that might meet the criteria Air Blue, PIA, Aero Asia, Shaheen Air etc. c. Developing consumer value perception i.e. how consumers perceive each brand and how it rates on each criteria decided by the consumers. A consumers evaluative criteria represent both:

y y

Objective attributes of a brand (such as Quality of Services, Safety, Punctuality, Fares etc) Subjective factors (such as Prestige, Brand Image, Status etc.) These criteria establish a consumers evoked set viz. a group of brands that the consumer would consider acceptable from all brands in a product class of which she is aware.

4. Purchase Decision: The customers buying decision is influenced by the range, style, and presentation of the service. In this stage, the customer undertakes the cost benefit analysis of the product. People from the upper class might not be price conscious and will go choose the airline that provides the maximum luxury and comfort. They will choose airlines such as PIA or AirBlue and might not even consider Aero Asia or Shaheen Air. On the other hand, a price conscious consumer might settle with the basic services and choose Aero Asia or Shaheen Airlines. AirBlue is currently targeting the price conscious consumers 46 who want to get the maximum value and quality services for the price they pay. Purchase decision is also affected by the perceived risks associated with the airline service. These risks may include the quality of services which the customer is expecting from the airline. 5. Post Purchase Behavior : Post purchase behavior of the consumer is very important since she spreads the good or bad word about the airline to other potential customers. A good word from consumers will promote the airline and will ensure greater loyalty and recognition. For this reason, the airlines need to ensure that they produce satisfied customers.