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Flybe Airline Company: Online Business Strategy

Business description

Flybe is a medium-sized airline based in the UK and operating in the European region. Rosedale Aviation Holdings Ltd is the largest shareholder with 69% of shares followed by staff’s 16% through an Employee Share Scheme and British Airways, the largest UK Airline owning 15% following the acquisition of its regional entity BA Connect in March 2007. It was focused that after acquisition, the airline would own 77 aircraft and operate in 12 countries, 30 European and 24 UK airports, 167 routes. It is currently the European largest low-cost airline with a 70% domestic route network, 20% European business and 10% European leisure destination. Flybe is a name that originated from British European in 2002, a name which also had been acquired by changing Jersey European in 2000, which was the name of the company since formation in 1979.

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Their Company business has bases in Glasgow, Edinburgh, Inverness, Manchester, Jersey, Birmingham, and Southampton among others. The company also offers online check-in facility called Q-Buster and a self-service check-in facility; both launched in 2006, to passengers carrying hands and hold baggage where seats can be pre-assigned. In addition to operating passenger services, the company also operates franchise services with a Scottish regional airline, Loganair as per the 2008 agreement (Flybe).

According to the 2007/2008 annual report for the company, a growth of 35% in the number of passengers carried to realize a total of about 7.0 million passengers, was realized.

The company runs 470 flights a day and the company had a total of 80 aircraft, both leased and owned as per the year ending March 2008. The company utilizes the global distribution system (GDS) to enable the travel agents and the potential customers to access its network. The company invested significant funds in the improvement of the Human Resources function and realized the need to make more investment after realizing a growth of staff from 1700 to 3000. The Q-Buster system allows passengers to avoid the queues at the airport save on the time used for physical check-in system and printing of the boarding card. Passengers can also spend more time in their offices before attending to their flights. The system allows passengers to even check in two or one hours before flight departure. The passengers carrying hand baggage go directly to security with the boarding card printed earlier on even at home, and those with bags are required to report to Q-Buster first bag drop (Flybe).

Online strategy

The online environment business has been changing as a result of various factors. These include changing customer preferences and behaviors, benefits of online business including reduction in cost and time such as check-in time, and compliance requirements. The environment is also turning out to be competitive because companies have realized the need to compete online. In addition to saving time-related with actual contact between the company agents and the customers, the online business has led to quick systems such as check-in system, has reduced the chances of inconveniences and related problems when more physical systems are used, and because the linkages with the company- i.e. the agents-are paid, their elimination has caused a reduction in the company cost through systems that ensure there is virtual contact between the selling company and the buyer. In addition, companies have been able to advertise operations and gain global outlook by increasing their market coverage.

Historically, airline companies in UK have been forced to rethink or device strategies for competitive reasons or market survival. For example, the 1992 establishment of Single Market in air transport in Europe led to increased competition.

Entry and expansion of other businesses that link to or with air transport have also influenced growth of this industry necessitating the need for strategies to make sure that the opportunities presented by these businesses are utilized effectively. For example, tourism is closely linked to the growth of airline industry because of those traveling for leisure. According to the European Commission (6) 14% of all long-distance trips above 100 kilometers in Europe include air travel. In addition, aircraft is the second most important mode of transport after the motor car (F.U.R, 2004). According to the author, 32.3% of the holiday trips in 2003 in Germany were by aircraft as compared to 49.2% by private car. Air travel had higher share as the distance went longer. In addition, ICAO (2002) in its conference paper indicated that air travel had become affordable as a result of rising “prices for air travel in the leisure segment at a lesser rate” than average cost of living and income rate.

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The airline business in Europe was described by Grant as entering maturity for those airlines following traditional business models like full service (mainline) and for the mainline segments (2000); and the market is characterized by the following according to the author:

  • Growth and diffusing of technical knowledge among producers-knowledge of running an industry for example the airline may no longer be secret, and slow down of innovation is experienced where any available (few) products innovation may be copied within few seasons.
  • The customers are more experienced-customers are aware of the commoditized mode of airline market and are aware of the products in the market. In this stage, there may be growth in the price sensibility.
  • Occupation of major market-The market in the airline industry is overcrowded and airlines are occupied with huge capacity and low prices
  • Slow growth in demand-both cargo and passengers

The above result leads to a number of factors; price sensitivity under influence of price differences, and they may switch classes for different purposes. The airlines are forced to concentrate on selected distribution channels, and because the internet is a popular channel, they may fill the web with airline seat offerings and more as a result of the price-sensitive customer who is screening the market carefully. Other outcomes are price competition and operation of many planes to realize economies of scale and maintain a dense network (Pompl, Schuckert & Möller, n.d.).

The Online Strategy

The entry into online business not only by small companies but also large ones as well has resulted in competition in the e-commerce arenas. The demand for an online strategy emanates from the idea that while competition exists, there is increased consumption of the internet service facilities. For example, it has been reported from a survey by the American Life Project that individuals in the United States who bought products online between 2000 and 2002 increased from 41 million to 73 million (Bharadwaj, Nagendra, Soni, & Ramesh, 2007). These numbers may indicate an underestimate of the current scenario with an increase in the number of companies entering e-commerce business. The Holiday Online Planning (2007) reported a 78% increase in the number of those seeking information on the web about holiday travels. In addition, change in customer behavior to favor usage of web 2.0 and social software may lead to the demand for more strategy in terms of technological innovation. With the present competition, it would be necessary that a company becomes innovative and develops an online strategy that will see it remain competitive or have a competing advantage over the rest. In addition, because internet is global, strategies will be aimed at countering global, other than only local competitors. E-commerce businesses not only cover selling but also internet researching, advertising, customer service, and data sharing services over the online network (Hamill & Gregory, 1997; Web & Sayer, 1998.; qtd. in Bharadwaj et al., 2007). In addition, eMarketer predicted a growth to about $126 million by 2009 for online sales, including unmanaged business travels with inclusion of airline business. Further, there has been an increased competition for students attending overseas education through aggressive ways like financial offers by British and Australian education institutions, for example, which present opportunities for growth of airline businesses in these regions (British Airways, 2008). The company can therefore invest in online strategies that try to influence the consumption pattern of young people as well as old people to use their services.

One strategy that would fit in Flybe Airline is the development of customer loyalty program for those using the online booking and online check-in system. The advantages of such a loyalty program would be the attachment of customers to the company service even on a long-term basis. The basis of loyalty programs is customer reward after usage of the company product or facilities to some level or after some time. In this case, it would be based on rewarding customers who used the online booking facility and online check-in system to some level or continued usage after a defined period of time. A program would be necessary to implement the idea. In addition to gaining more sales, the company would gain publicity because of the reward program and continue to enjoy benefits through increased advertisement.

Consider an example of a customer who has been using the internet booking facility for so long. Although he enjoys low costs at Flybe, other companies also offer cheaper flights and therefore the customer is really not bound by cheap offers to stick to buying Flybe services. If tracking this customer was possible, his consumption pattern may not be consistent unless other factors come into play. Dijk, Minocha and Laing (2006) have discussed such factors that may influence consumption, and indicated that consumers exhibit a multi-channel behavior in usage of internet options. They show that customer choice and the challenges posed by the system influence the consumption. In their study, customers were influenced by the availability of internet options, which were emails, phones, and high street options. Other factors influencing customer behavior that have been explored elsewhere include enjoyment brought by the system (Saeed, Hwang, & Yi, 2003), the system’s usability and ease-of-use (Nah, & Davies, 2002), among others (qtd. in Dijk, Minocha, & Laing, 2006). If these factors were held constant, the customer could be as well influenced to continue choosing Flybe services which have similar prices like other companies by having a reward program that serves as an incentive after usage of the products. Therefore, by making the customer aware of the reward program, the customer would be willing to enjoy these benefits rather than not and therefore would be influenced in the choice decision. Although Flybe has been proud of offering low-priced services according to their report, need to compete would force other entities to device cheap flights. Take the historical lesson of introduction of cheap travel arrangement Ryanair that led other airlines to introduce cheap flights like bmibaby by the British Midland Company in a strategy called spin-off (Han Tourism Congress, 2007). Therefore, price alone is not a retainer of customers as it may change overtime following other price strategies by other firms. The advantage of effective customer loyalty over price reduction is that if the earlier is introduced as a strategy before other companies, it may be hard to revert the consumption pattern of the aligned customers as the loyalty program lets them develop a culture to use the company products and services, even for long. On the other hand, a company may find it hard to continue having customers because a competitor reducing prices would gain the advantage.

As companies continue to adopt internet strategies of selling, advertisement and competition, the more they have been faced with challenges relating to legal obligations on data handling, types and level of technologies to adopt, and security issues as a result of hacking and data breaches. Adoption of e-commerce technology in an organization is also a process that would see a company realize delays, losses and even complete abandonment of the project, if not carefully considered. The benefits must weigh out the costs of the venture in order to be viable. It is therefore important to consider the following as guiding principles in the online strategy business of the Flybe Company:

  • Since customers will be required to avail personal and private information, security concerns for customers will be top priority in handling data and personal information to ensure privacy and security for individuals.
  • Loyalty program will be in form of a reward program based on the amount of revenue earned from usage of the services provided through online facility by the customer over six months period. The customer who uses the services and generates individual revenue over six months will be rewarded. This will also make sure that usage of the service generated some revenue.
  • Tracking of the business transactions through the necessary technology and software will be required for accurate analysis and recording. The company will therefore invest in this project and weigh the benefit after every six months to determine viability. This is to ensure that the company does not engage in projects that let it suffer financial losses.
  • The program will entail customers from all over the world i.e. any person using the facility.

Usage of technology

Effective adoption of technology may be boosted by an understanding that the literature on technological adoption of technology takes place in three stages according to Sheldon; Karl; & Daniel (2001). The initial (substitution) stages entail the usage of simple technology forms that solve simple problems and achieving efficiency is the main target. In this stage, adopters do not reap the maximum benefits of technology and minimal change is achieved because technology is partially used (Thorp, 1998). Maximum benefits are not gained because technology is not being used Lack of information systems, organization’s culture and systems, its management and innovation mean that maximum benefits cannot be ripped in the initial stages. Adoption of technology then moves to the second stage-the enlargement level, then to the final stage, the reconfiguration stage. Adoption of this type of technology would not strictly follow the stages because there is a system already in place in Flybe, i.e. online booking and check-in system that is already in place. However a number of additions and modifications may be required to incorporate the proposed strategy.

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Among the factors to consider in adoption of technology are the current level of technology, ability to learn and use the new technology, security of the system and the benefits versus the costs of the technology. In this case, the level of technology already in use may be in its first or subsequent stages, and this means that we will not adopt from the first level-what is required as seen earlier is a modification of the existing technology, or addition to incorporate the proposed idea or to boost its benefits. For example, in this case, the system to be included would be a computation system that accesses all the records available from the company database and compiles individual entries in terms of adding together the amounts paid for every transaction, and updating this figure. The system for recording transactions is already available. In order to be able to promote travels and the company activities throughout the market coverage, the company can also consider having the reward scheme divided into a number of regions. In this case, compilation of data may be more complex than the first case, but the system can be set to compile as much individual transaction information as possible in terms of revenues earned and the region of residence, then the company can select the best from each region. In addition, the system will need to determine whether it was a genuine transaction that sailed through or not.

Continual updates and development of the program would require more facilities to be added to the system. Because it is possible to estimate the benefits brought about through this kind of business promotion strategy, it is necessary to ensure that the costs are also monitored and weighed against the benefits. In addition, customer awareness through intensive advertisement would be necessary to ensure that the company benefits more. Such a program may be expected to reap benefits after customers agree to the adoption and become users of this good. Indeed, literature on technological adoption of e-commerce payment innovations holds that technology is more welcome by customers at mature stage of adoption, although again this is the stage where competition may have increased. The company may have to wait a little longer before reaping the total benefits from the project as more people become aware of the service and its benefits. In the initial stages, investments in the project may be much, as the company seeks to implement the changes to its current system. Change in technological adoption may also be influenced by other factors like the internal organization of a firm and the type of management. These must be aligned to the current needs of the organization in order to be able to adopt technologies that suit the company’s needs and not the needs of individuals or the management.

References

British Airways. 2007/08 Annual Report and Accounts. CTD. 2008. Web.

Flybe. Company information. 2009. Web.

F. U. R. Die 34. Reiseanalyse RA 2004 – erste Ergebnisse. Web.

Han Tourism Congress. Trends in the Airline Industry. 2007. Web.

International Civil Aviation Organization (ICAO) (2002), European Experience of Air Transport Liberalization, Conference paper ATConf/5-WP/61, Montreal

Pompl Wilhelm, Markus Schuckert & Claudia Möller. The Future of Small and Medium Sized Airlines in Europe. 2009. Web.

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