January 19, 2012
Mr Olive Yue, CEO
135- 5980 Miller Rd
Richmond, BC V7B 1K2
Dear Mr. Yue,
Report on Changes and Trends in the Airline Industry
I am writing this report in response to your recent request to Sage Consulting to advise Air Canada on the emerging changes and trends in the airline industry. This report will address major issues rather than trivial ones.
Currently, the fierce rivalry between the different airlines means that Air Canada must continue to innovate in the ever-changing market place in order to stay relevant. Given that the airline industry is highly sensitive to changes in the wider economy, our company has ...view middle of the document...
In fact, the entire Asian passenger market is forecasted to grow at a rate of 10% per year. The rising middle class in China means that the number of tourists travelling to Canada, which according to a recent study is Chinese tourists’ third favourite travel destination, will continue to increase, having already exceeded 250,000 in 2012.
Traditionally, Air Canada had not fared well on pacific routes compared to companies such as Cathay Pacific and Air China, who already have an established loyal customer base. We believe Air Canada should implement new strategies to attract more traffic from and to Asia, as the growing Asian market presents an opportunity to offset the weak demand in Europe.
Fresh food and Catering
In light of the global financial crisis, passengers have taken a thriftier attitude toward airline travel as they demand more at a lesser cost. Recently, WestJet has joined up with local restaurants to prepare fresh sandwiches onboard. For example, it offers Tandoor Chicken from the Bread Garden Express for flights departing from Vancouver and the Alberta Double Beef from Krave Catering for flights departing from Edmonton. All of these items on the catering menu only cost $6.50 each, which is quite affordable even for people who travel in economy class.
These fresh sandwiches serve as excellent alternatives for passengers who are tired of the frozen food prepared by traditional catering companies that are only reheated moments before they are served onboard. This new catering model would add diversity to the in-flight menu option and provides an enhanced experience for its loyal customer base. At the same time, it can help generate extra ancillary revenue for the airline Having an innovative menu design and lightweight packaging solutions could be crucial in assisting airliners with their marketing efforts, as the quality of the airline food could make the difference for Canadians choosing between Air Canada and WestJet, the two largest Canadian airline companies.
Low Cost Carrier
In recent years, legacy carriers have been facing stiff competition from low cost carriers. Low cost carriers have taken advantage of the weak global economy by cutting customer service interface and offering lower fares to cost- conscious travellers. For example, Ryanair, an Irish low cost carrier, has specified to Boeing that its seats be non-adjustable and have no headrest covers, which lowers the costs needed for replacement parts and leads to shorter cleaning time. The decrease in cleaning time translates into less turnaround time, which reduces Ryanair’s opportunity cost.
Ryanair also charges extra fees for checked in luggage and offers food and drink as part of the buy-on-board program. By offering these extra charges, Ryanair is able to cut back on the price of its fares and attract those passengers who do travel lightly and do not mind not eating during their flights. In effect, it is capturing the...