Effective Business Strategies in European Corporate

Travel MarketYasemin Erdemir

107604039

Corporate Travel Market

In $929 billion corporate travel market

Air travel is the largest pool in all travel expenses.

Europe has 35.2 % of all business travel market with $327.000 billion business travel spending.

Attractive Market for Airlines

Because;- The market is expanding despite of economic downturn- Willingness by travelers to pay more forservices as compared to leisure travelers.- Predictibility of demand- Bulk sales opportunity- and dissimilarity from leisure travel in that it does not have

a peak season make this market

Challenging Market for Airlines

Because;- Corporates becomes more cost concious

- Declining demand for premium class competition

Table 3.4 Usual Class of Travel for Short Haul (trend split %)

Source: IATA Survey On Business Travel (2007)

Challenging Market for Airlines

- Travel Policing stricts than ever- Competition within the airline industry is also intense. Legacy

versus Low Cost CarriersTable 4.2 Share of “Low-cost” seats on domestic and intra European routes in each country (2008)

Source: OAG Data ( 2008)

Major Challenges and Trends in Airlines Industry

- Recent downturn in economy creating structural instability, - Accelerating liberalization of international air services (open sky aggr.)- Low-cost revolution undermining short haul markets, - Economic pressures to consolidate through mergers and alliances, - New pricing strategies cause of declining yields, and continued cost reduction is critical with high fuel prices

Passenger RPKs

Total Freight Tonne-Kms

-25

-20

-15

-10

-5

0

5

10

15

Ju

l-0

5

Se

p-0

5

No

v-0

5

Ja

n-0

6

Ma

r-0

6

Ma

y-0

6

Ju

l-0

6

Se

p-0

6

No

v-0

6

Ja

n-0

7

Ma

r-0

7

Ma

y-0

7

Ju

l-0

7

Se

p-0

7

No

v-0

7

Ja

n-0

8

Ma

r-0

8

Ma

y-0

8

Ju

l-0

8

Se

p-0

8

No

v-0

8

Ja

n-0

9

% g

row

th

Source: AEA

Traffic Volumes Are in Free FallAEA Total Scheduled Services

Source: AEA Air Traffic Statistic

MAJOR AIRLINES IN EUROPE AND THEIR BUSINESS TRAVEL SOLUTIONS

LufthansaLufthansa serves 206 destination in 78 countries with a fleet of534 aircrafts. Corporate packages of Lufthansa;- AirPlus- PerkPlus- Premium Products- Connection Newsletter- Star Alliance Programs

MAJOR AIRLINES IN EUROPE AND THEIR BUSINESS TRAVEL SOLUTIONS

Air France - KLMThe group fleet consists of 543 passenger aircraft, and operates2,500 daily flights to 258 destinations of which 134 are mediumhaul and 124 are long haul

Corporate packages of Air France - KLM;- One Travel Solutions- Sky Teams Projects

MAJOR AIRLINES IN EUROPE AND THEIR BUSINESS TRAVEL SOLUTIONS

British AirwaysThe company's airline route network comprises around 300destinations all over the world. In FY2008, the company carriedmore than 33 million passengers.Corporate packages of Bristish Airways;- On Business Programs- Executive Club- BA Amex Card- Air Plus Program- One World Programs

Corporate Travel Strategies in Airline Industry

• Alliances and Loyalty Programs• Social Responsibility and Green Movement• Hub and Network Design Strategies• Effects on Open Sky Aggrement• Low Cost Carriers of Network Carriers• Premium Class Strategies• New Business Models of Low Cost Carriers

Alliances and Loyalty Programs

According to IATA 2009 corporate air travel survey, frequent flyerprograms are the number one factor for airline choice for longhaul flights.

Airline Alliance MarketshareAirline alliances with which companies hold a contract*

  2007 2006Star Alliance 75% 54%

Skyteam 50% 25%Oneworld 29% 21%

None of these 25% 42%*Respondents allowed to choose more than one

answer    

Many travel managers prefer to work with a specific alliance in order to get special bargain prices and to accumulate points for their air travel arrangements.

Social Responsibility and Green Movement

According to 2009 IATA Corporate Air Travel Survey, 80% of air travelers have a concern, in some degree, about the environmental impact of flying.

An example:Lufthansa focuses on two areas in particular:

environmental care and nature conservation

Hub and Network Design Strategies

Turkish Airlines was to make Istanbul a natural hub, as the city is perfectly situated for connecting flights between Europe and the Middle East, reaching the Asia Pacific eastward. The airlines strategically designed its network to expand the transit market.

Open Sky Aggrement

With this agreement, Air France, Delta, Northwest, and Continental Airlines launched new routes within days of Open Skies coming into effect. Agreement is estimated to generate 26 million additional passengers in the first five years of implementation.

This agreement will also provide opportunities for budget carriers that will be able to fly to cheaper regional airports in the US. Threat of low cost carriers towards network carriers will not be limited to short haul travel.

LCC Brands of Legacy Airlines

In the battle for domination in the skies, network carriers adopt a new strategy to beat low-cost rivals at their own game by establishing own low-cost carriers

Premium Class Strategies

Upgrading business class serviceandPremium Economy Class

New Business Models of Low Cost Carriers

- Changes on distribution channel- More anchillary service- LCC alliances- Long haul flights

Thank You

Effective Business Strategies in European Corporate

Travel Market