Marketing Plan for Virgin Blue 1

Table of contents

3. Introduction

4. Current Marketing Situation
4.1. Macro Environment
- Political / Legal
- Economic
- Social culture
- Technology

5. SWOT Analysis

6. Issue Analysis...

7. Objectives.
7.1 Financial Objective
7.2 Marketing Objective

8. Marketing Strategy

9. Action Programs.
9 .1 Customer Connection Program
9.2 Communication outside
9 . 3 Communication Inside
9.4 Connections, Alliances, Partnerships

10. Controls

11. References.

12. Appendix

3. Introduction

Virgin Blue Airlines is the Brisbane-based subsidiary of the Virgin Group and began operation in Australia in the year 2000.

They began with 280 members and 2 planes flying the routes from Brisbane base to Sydney and return.¹

From the success of running a student magazine in London, Sir Richard Branson founded Virgin s a small mail order company in 1970 at the age of 20.

In 1984 Virgin Atlantic Airways has been established as a British International Airline.

2002 Virgin Blue counts 1300 team members flying 17 aircraft servicing and 18 different routes.

Today, the Virgin Group has expanded into international music retailing, book and software publishing, film and editing facilities, clubs, travel, hotels and cinemas through 300 companies worldwide in 25 countries, employing over 35,000 staff.

Virgin Blue strives to be an innovative and vibrant Australian airline with a focus on delivering low fare travel to flight guests. Virgin Blue achieves this end through a managed reduction of operating costs that are in turn passed onto flight guests in the form of cheaper airfares.^[1]

“Virgin Blue is based on the idea that people would fly a lot more if it cost a lot less”.^[2]

4. Current Marketing Situation

In 2000 when Virgin Blue began operation, they had 3 competitors, Qantas, Impulse and Ansett. Two of them dominated the domestic routes: Qantas and Ansett.

In 2001 Qantas took Impulse over and in September 2001 Ansett Group collapsed.

Upheavals like the terrorist attacks in the United States, Bali-Bombing, the war in Iraq and severe acute Respiratory syndrome SARS resulted in a decline in international tourism.

These upheavals carried over to regional airline sector, where the numbers of domestic travels increased.

Whole this international happenings including the Ansett collapse, offered Virgin Blue contingency for success.

Currently Virgin Blue shares 30 per cent of the Australian aviation market.

Virgin Group owns 46 per cent of the equity in Virgin Blue company, while Patrick Corporation- the large, diversified Australian transport and logistics company acquired 50 per cent of the airline in 2001-02. Senior staffs of Virgin Blue hold the remaining 4 per cent.

Virgin Blue recorded a net profit of $ 35 million and it has been reported that its 2002-03 net profit result could be between $ 100 million and $ 120 million.

(see Diagram 1.0 in Appendix)

As its route network and service frequencies have expanded, it has shown an increasing marketing orientation towards leisure travellers. This specific target group is more concerned about travel times and service frequencies and less concerned about levels, such as business travellers.

Revenue for domestic operators derives chiefly from the business sector and domestic and inbound tourism. It has been estimated that domestic tourism contributes 40 per cent of revenue, with the business sector contributing 35 per cent and inbound tourism 25 per cent.

4.1. Macro Environment

Political / Legal factors:

By denying a request from Qantas and Air New Zealand at the ACCC (Australian Competition and Consumer Commission), the government wants to maintain domestic market competition. They want to become them an alliance and deregulate the aviation industry.

Economical factors:

Aviation war-risk insurance has become a significant issue since the September 11 terrorist events in the United States in 2001. War-risk insurance offers cover losses arising from acts of war, including acts of terrorism, strikes, riots and sabotage. Because existing aviation third-party war-risk insurance was withdrawn from the global marketplace after the September 11 attacks, the Australian Government, like those of many countries, agreed to provide third-party war, terrorist and hijacking indemnity cover for damage on the ground airlines, airports and other service and facilities providers.

Social factors:

Coincided with the sharp decline in international air travel the initial Ansett group collapsed after the terrorist attacks in the US in September 2001. As a result of this and other environmental crisis, the Australians feel safer to travel in their own country. That’s among other things why numbers of domestic flights increased.

Technological factors:

- Simple and safe flight reservations via the Internet
- Fast check-in at the counters through efficient processing
- One type of aircraft

Virgin Blue passengers book their flights themselves via the Internet, by telephone or directly over the counter. That way, they save on travel agency fees, the costs for commissions and reservation systems and are able to pass these savings on to passengers.

Compared with Qantas (25%), 60% of Virgin Blue’s tickets are sold on the internet.

Virgin Blue concentrates on one type of aircraft (Boeing 737 jets), which are fuel efficient and are quiet and environmentally-friendly.

5. SWOT Analysis

Virgin Blue

Strengths:

- Low fare travel prices
- No frills on the flights (no meals and drinks)
- Virgin Blue operates mainly new generation aircraft that are very fuel and cost efficient
- Positive brand and company image & feedback gained by Australian publicity
- Ticket less flying (online booking or by phone)
- Cheap landing slots (through operating out of smaller airfields and infrequent travel times )
- Domestic market share of 30 per cent within 3years
- Non conservative

Weaknesses:

- Virgin Blue focuses mainly on leisure travel
- limited number of high-density routes and not operating a more traditional route
- Virgin Blue offers only one-class service
- relatively infrequent flights (bad time slots)
- Lack of alliances
- No Full in-flight service
- Low cash flow and high costs to expand the market
- No “Package” or “Bonus” Programmes
- Brand name “Virgin Blue” can be used only in Australia

Opportunities:

- Through the crisis of September 11, Iraq and SARS Australians prefer and find it safer to travel within their country than travelling to overseas
- The significant growth in the real average incomes of Australians over the past decade combined with the fall in real air fares, means that air fare affordability has improved quite markedly. Today more Australians can afford to fly because incomes are higher relative to the level of fares.
- Patrick Corporation acquires 50 per cent of Virgin Blue
- Population and Economic Growth
- Expansion into Trans-Tasman markets

Threats:

- The Australian airline industry is heavily import-dependent, especially, in relation to purchases of fuel, aircraft and spare parts.
- The depreciation of the Australian Dollar over the past two to three years increased costs in the aviation industry. The more recent appreciation of the Australian Dollar, especially against the US Dollar will ease these pressures. The market of Virgin Blue is entirely domestic so all of their revenues are in Australian dollars.
- If Qantas is going to build an alliance with Air New Zealand, low-cost carriers from New Zealand could operate on Australian routes.
- Unpredictable factors

Qantas

Strengths:

- One of the oldest international flight companies with strong brand
- Good alliances and contacts
- Stable financial background
- Internationally very good image
- Are focussing on many target groups
- Charity and Loyalty Programmes
- Qantas is able to offset the cost of import-dependence to an extent because of its earnings are in foreign currencies.
- Qantas has highly developed corporate links- across the regional, domestic and international sectors- and scheduling to its non-regional services gives it a considerable advantage over potential competitors.

Weaknesses:

- Qantas decreases in market share
- High fares to leisure travellers
- Qantas has progressively withdrawn new generation aircraft types that are less fuel efficient. This causes higher costs especially due to age of fleet of aircrafts

Opportunities:

- Qantas has acquired additional terminal space

Threats:

- The Australian airline industry is heavily import-dependent, especially, in relation to purchases of fuel, aircraft and spare parts.
- Adverse effects on Qantas of the September 11, Iraq and SARS crises
- Qantas is monitored by ACCC who keeps Qantas competitive
- Unpredictable factors

[...]

¹ According to Kotler page 106

^[1] see www.aph.gov.au/library/pubs/RP/2002-03/

^[2] According to www.virginblue.com.au