Good Report About Air Arabia’s Marketing Mix
Air Arabia is the Middle East’s pioneering, biggest and publicly listed Low Cost Carrier (LCC) flying to 100 destinations across the Middle East, Africa, Europe and Asia. Premised on the need to provide comfort, reliability and value for money, the airline has thrived in part because of the expanding middle classes, travel/tourism, and the growing importance of the Middle East to the global economy and geopolitics. Air Arabia’s past success can be enhanced even further by positioning the company to capitalize on the expanding air passenger and freight demand across the world. This paper explores the strengths and difficulties of Air Arabia’s marketing mix, before putting forward recommendations to consolidate the company’s core competencies. The report draws on multiple strategic analysis frameworks, including the Porter’s Five Generic Strategy, the Ansoff’s Matrix and positioning maps to analyse Air Arabia’s internal and external strategic environments.
1.1 Segmentation Strategy
Geographical – The Air Arabia is segmented according to regions according to the routes destinations. The segments include the Middle East, North Africa, Europe, Central Asia and the Indian Sub-continent.
Demographic Segmentation- Demographic factors are also critical in segmentation, not least they affect affordability, potential and market demands. These include incomes, age, and gender.
Behavioural Segmentation – This market segment is categorized according to the flying frequency (can include heavy, medium and light flyers), the status of the passengers, loyalty status, occasion segmentation (work/business, visit and leisure travellers). Customers are also segmented according to the benefits that they look to gain from Air Arabia e.g. lower fares, discounts and use of airport lounges.
Psychographic Segmentation – Travel is a deeply personal experience with implications for the passengers’ mood and emotions. Effectively, the market is segmented according to the personality, attitudes, leadership, hobbies, and emotional factors including family (package tickets) and the choice of exotic destinations.
1.2 Target Market Segments
Air Arabia main target is the population (demographic group) that uses surface transport to travel long distances due to the high costs of flying. The company’s business model is founded on getting people to pay more to fly, save time and enjoy travel. According to Air Arabia (2014), by the time Air Asia was launched in 2003, upwards of 150,000 people travelled by road from the UAE to various destinations in the Middle East, including Egypt, Jordan and Lebanon. Secondly, the Air Arabia is a no-frills airline, which means that psychographic factors are not important in its market targeting, but instead, it focusses more on the passengers’ behavioural factors. It seeks to tap into the market for frequent, bargain-hunting flyers, with the intention of securing loyalty in exchange for even lower fares. The airline has also increased its destinations to tap into even more markets without stern LCC competition and growing middle classes (e.g. North Africa and the Indian sub-continent).
Air Arabia has positioned itself as a strictly no frills airline offering the lowest costs and more destinations than any other LCC that directly competes with. It offers low prices guarantees to its customers and manages its costs ruthlessly in order to achieve the lowest possible fares. Its competitors (Jazeera Air, FlyDubai, Fujairah’s Kang Pacific and Saudi Arabia’s Sama Airlines) have at least two classes in their aircrafts, which means that they have tiered fare systems depending on the demand. Air Arabia’s undifferentiated, mass marketing strategy is geared at achieving scale economies.
2.0 Marketing Mix
2.1 Product- Air Arabia seeks to be a no frills airline leveraging scale economies and standardized services to ensure the lowest costs, it is outdone by FlyDubai in several key markets.
Air Arabia has a single cabin class but does not provide free in-flight entertainment or meals, reduced legroom, lands in non-major airports, and few flight attendants. Air Arabia is also the largest LCC in the region, with more than 100 destinations, capable of leveraging scale economies to cut costs. The fights are scheduled with priority given to the main destinations (Air Arabia, 2015; Awan & Davidson, 2008). As against other LCCs that offer additional services and pass the costs on to the customers, Air Arabia is committed to ensuring the lowest possible fares. In addition, Air Arabia offers a huge range of customer services. These include luggage handling, online booking portal, assistance with unaccompanied infants, pregnant women and special needs travellers. Air Arabia also prides itself with being an innovative and secure air cargo transportation services, striving to become an industry leader.
2.2 Place - Air Arabia has a homogeneous fleet of 39 Airbus A320 aircrafts. The Airbus A320 is a modern and best-selling commercial jetliner. It is equipped with comfortable seats and allows the highest seat pitch of all economy cabins in the world (32 inches). The company will soon take delivery of 44 new aircrafts to cater for the expanding market. In addition, the company runs well-equipped lounges at Sharjah Airport for paying customers to use, besides other services necessary to ensure a hassle-free and relaxing travel experience.
2.3 Pricing – Air Arabia success has been founded on ruthless cost management and providing the lowest possible prices (complete with lowest prices guarantees). Over the past six months, jet fuel prices across the region have fallen, following the reductions in crude oil prices. Since fuel costs represent a major component of any airline’s cost structure, the falling prices have allowed Air Arabia and other players in the industry more pricing flexibility. In addition, the lack of loyalty (or frequent flyer programs) saves administrative, and other costs, which are in turn ploughed into cutting prices. The fare is kept separate from any other “frills” that customers that can afford may choose to purchase.
2.4 Promotion – Air Arabia employs a range of product promotion strategies to remain ahead of its competition. To begin with, the company advertises directly in the media (television, magazines, billboards and the internet). Air Arabia also has a presence in social media (Facebook, Twitter and Instagram among others), which it uses to engage with its clients, besides maintaining a database of clients’ contacts to which it sends marketing and other communications directly (Air Arabia, 2015; CAPA, 2014). Relationship marketing strategies are particularly critical because it enhances customer loyalty and brand equity. Other promotion activities include hotel and taxi booking services, group booking requests and package offers.
2.5 Physical Evidence – Even without frills, Air Arabia provides high value for the customers’ services, including high seat pitches and legroom, modern fleet of aircrafts, excellent airport lounges. The company also has an excellent website and a call centre, which serve as physical evidences of their value proposition.
2.6 People – Air Arabia has a diverse, dynamic, well-trained and well-compensated staff to foster performance, motivation and the best customer satisfaction.
2.7 Process – Air travel can be a tedious and exhausting experience for travellers, especially for LCC passengers. The costs of frills may be inaccessible to some customers, which is why the airline has arranged to make the process smooth. To begin with, the internet and call centre allow online booking and check-in services automate key processes as against having to stand in long queues.
3.0 Porter’s Five Generic Strategies
3.1 Differentiation – The airline industry’s market structure is oligopolistic because it is dominated by a small number of competitors that are strategically interdependent. In such a market, product and price differentiation is critical for sustainable competitive advantages. However, Air Arabia’s business model is built on the lack of product differentiation because such differentiation involves more costs. Other than the larger legroom and seat pitch, great lounges at Sharjah Airport and relatively quality products compared to the competition, the company provides the barest travel amenities for the customers’ comfort.
3.2 Cost Leadership – Air Arabia’s business model is founded on cost leadership. As the largest low-cost carrier in the Middle East, with an established brand, the company has enough scale economies that it leverages to obtain lower costs and prices. With the falling jet fuel prices, the company has even more opportunities to further cut prices, and while its competitors are likely to cut prices too, lower industry-wide prices will mean increased demand and even more scale economies (Rugman & Collinson, 2012; Kotler, Bowen, & Makens, 2006).
3.3 Cost Focus – Air Arabia is designed for the mass market, as against a focused market area. Cost leadership is an important strategy, but the company cannot limit itself to limited market segments, because this reduces possible demand (Kotler, Bowen, & Makens, 2006; Yip & Hult, 2012; MarketLine, 2014). The cargo transportation sector does, however, provide one of the most important areas that Air Arabia could use a cost focus strategy in. According to MarketLine (2014), the global air freight market has expanded by 2% since 2008, and it is set to growth keep up in the future. Upwards of 70% of the expansion will occur in the emerging markets. Effectively, a cost leadership focussed on the air freight market can be a promising strategy for Air Arabia.
3.4 Differentiation Focus – For a company with a strict no frills policy, it takes a massive investment of time, human and physical capital to differentiate its products to cater to a focused market segment(s). The additional costs will inevitably lead to a burgeoning cost structure, which will destroy Air Arabia’s value proposition i.e. low prices (Awan & Davidson, 2008; Yip & Hult, 2012). Further, adopting a differentiated focus strategy would push Air Arabia into market segments that are already being served by other airlines such as Emirates Airlines and Virgin Atlantic.
4.0 Ansoff’s Matrix
Old Products New Products
While the no frills product and standardization is excellent for keeping costs down, the company’s use of homogeneous aircraft fleet can be limiting to the optimal route coverage. Since flights are scheduled according to the demand, Air Arabia should invest in aircraft fleets with different capacities (but efficient) so that even smaller routes can be served by smaller aircrafts than the Airbus A320. Given the fact that the company is expecting a large delivery in the coming years, it should use this opportunity to ensure it has capacity flexibility.
In addition, opportunities exist in the market for Air Arabia to increase its services both in the markets that it already has operations in (because market penetration remains low), but perhaps most importantly, into markets with a low concentration of LCC. Markets in greater Asia and Sub-Saharan Africa are particularly promising given their proximity to Air Asia’s current destinations (Air Arabia, 2015; CAPA, 2014; MarketLine, 2014).
Expand of the Air Asia Cargo division to tap into the expanding demand in the short and long term. Unlike passenger traffic, cargo transport is indifferent to class, only speed, safety and efficiency. Effectively, the company should leverage its cost leadership to create core advantages in this sector.
It is important to notice that while Air Arabia is largest LCC in the Middle East, it is still a relatively small Airline. True industry giants such as Air France-KLM have up to 700 aircrafts at their disposal. Luckily, innovations in the airline industry have seen the rise of code-sharing relationships, which allow smaller airlines to collaborate and create a network of airlines that acts like one large airline, achieving scale economies. Air Arabia should identify mutually beneficial partnerships and enter into code-sharing relationships, allowing it to reach markets that cannot reach due to capacity limitations.
The falling fuel prices offer opportunities for Air Arabia to cut prices and increase sales. However, since price reduction will attract retaliatory actions by competitors, Air Arabia should use the windfall to invest in non-price aspects of the marketing mix. Price reductions should only be used when direct competitors cut prices below Air Arabia’s prices for months
There is no evidence of Air Arabia’s promotion campaigns aimed at building the brand loyalty and equity. Effectively, the company should launch a promotion campaign geared at building brand loyalty and equity. These should include event sponsorships (e.g. sports teams) and product placements
Air Arabia, 2014. Air Arabia Annual Report 2013, Sharjah: Air Arabia.
Air Arabia, 2015. About Us. [Online] Available at: http://www.airarabia.com/en/about-us[Accessed 27 Jan 2015].
Awan, H. & Davidson, B., 2008. Air Arabia: Growth and Turbulence in the Desert, Doha: The National Investor.
Brassington, F. & Pettitt, S., 2006. Principles of Marketing. 4 th Ed ed. New York: Financial Times/ Prentice Hall.
CAPA, 2014. Air Arabia lags flydubai in the battle for Middle East LCC supremacy, but opportunities abound. [Online] Available at: http://centreforaviation.com/analysis/air-arabia-lags-flydubai-in-the-battle-for-middle-east-lcc-supremacy-but-opportunities-abound-166205[Accessed 27 Jan 2015].
Kotler, P., Bowen, J. & Makens, J., 2006. Marketing for Hospitality and Tourism. Upper Saddle River: Pearson Prentice Hall.
MarketLine, 2014. Virgin Atlantic, New York: MarketLine.
Rugman, A. M. & Collinson, S., 2012. International Business (6th Ed). London: Pearson Education.
Yip, G. & Hult, T., 2012. Total Global Strategy. New York: Pearson Education..
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