Song Airlines Business Case

Song Airlines Case

Song airline was a low cost carrier subsidiary of Delta airlines that started in 2003. It was formed to compete with JetBlue and other low cost airlines for the Florida market. The market environment at the time of the case was extremely difficult with the rising costs of fuel, increasing security requirements after 9/11 and customers' expectations of lower fares. It has forced many big players in the airline industry into bankruptcy. The operational costs which include gate fees, ground operational costs etc. were increasing causing even more problems for the airlines. The fares in the Florida route were decreasing while the costs were ever increasing making it difficult to remain operational in that space.

The basic marketing strategy of Song Airlines was to reduce cost and increase volume through operational efficiencies and hence increase profits.

The company's main market strategy included:

1. Reducing unit costs and increasing the volume of units. By changing the airplane fleet to have bigger planes they increased the volume of seats by 70%.

2. Increase the utilization of the resources (planes, employees, gate space). They optimized the operational logistics and activities to give more operational hours and hence increasing the volume again. Employee working hour policies were changed to reduce overheads by eliminating hotel stays for flight attendants

3. Value pricing strategy with fares that are simple and transparent

4. Create new marketing segment and customer targets. Song realized based on extensive market research that women are the key decision makers in leisure travel initiative. And hence the created a marketing campaign that heavily targeted women by offering healthy food, vibrant colors for the plane interiors, leather seats, personable flight attendants and great in flight entertainment.

5. Extensive use of low cost channels of distribution - primarily internet.

6. Better customer service by employing personable flight attendants in designer clothing. Song wanted to present an image of a high end airline so that the customers are not compromised on service while paying lower fares.

7. Used novel techniques by opening concept stores in Boston and New York to attract customers.

Song Airlines spent a lot of time analyzing the past data and did a lot of market research to come up these various strategy points. And I think, it clearly shows that they used experience curve techniques to analyze and use the data like gate utilization, flight attendant working times, seat usage, and flight route scheduling etc. to optimize the operational aspects of running the overall operations. It was stated that based on these initiatives they achieved 20 - 25% lower operational costs in running the airline as compared to running it in a Delta configuration.

By using the various main concepts like low fares, great services and targeted marketing they were able to achieve good success. By focusing on the main strategy aspects simultaneously like lowering operational costs, optimizing logistics, increasing the service level and perceive value by portraying a high end service, Song was able to integrate these various aspects nicely.

Some of the key opportunities in the current market environment for airline industry are:

1. Increasing Customer service levels. Consumers are generally expecting more fro airlines and Song has already addressed this in original strategy which was very customer satisfaction based.

2. Understanding the responding to changing consumer behavior