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Continental Airlines

Continental Airlines

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Continental Airlines

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  1. Continental Airlines Customer Analysis Chris Dwyer, Meghan Murphy, Kassonga Mwamba

  2. Overview • Industry Trends • Product Markets • Domestic vs. International • Types of Passengers • Market Opportunities/Strategies • Potential Problems • Future

  3. Trends ~ Airline Industry • Rapid Growth in International Demand • Steady Growth in Domestic Demand • Increased On-Line Distribution • Decrease in Airline Capacity (due to bankruptcy) • Increase Price per Flight • Continued Pressure from LCCs in Domestic Market • Alliance Agreements

  4. PositiveGrowth2 • Continued Growth for 32 of the past 35 years • 1991 ~ Desert Storm • 2001-2002 ~ 9/11 Terrorist Attacks • Continued Economic Growth • Continued Increase in World Trade Boeing · Current Market Outlook · 2005 · Demand for Air Travel See Source 2

  5. Product Markets • Domestic • Point to Point Routes • Short-Haul Flights • Highly Price Sensitive customer segment • Increased Competition From LCCs • Lower RASM • International • Network-Hub Routes • Long-Haul Flights • Less Price Sensitive Customer Segment • Less Industry Competition • Higher RASM

  6. Domestic vs. International • 2004 International Growth Increased 13.9% vs. Domestic Growth 4.8%12 • “Majors” Shifting to More Profitable International Segments • Typically Less Competition for International Travel • Growing Demand in Latin American, Atlantic, & Pacific Segments • International Yields Higher RPSM Data taken from 05’-02’ 10K reports: See Sources #1,5,6,10,14 See Source 12

  7. Types of Passengers • Leisure Traveler Preferences • Lower Price • Willing to Sacrifice Service • Limited Route Needs • Business Traveler 34% of Domestic Revenue in 2000 (Only 10% of Capacity)11 Preferences • Price Sensitivity Driven by Economic Conditions • Higher Class of Service • Seeing Shift Towards LCCs See Source 11

  8. Frequent Flyer (FF) ~ Demographics3 A person that takes AT LEAST 4 flights per year (17 Million Americans) • Average FF takes 9 flights per year • Only 18% of Total Airline Travelers BUT Account for 58% of ALL Flights Taken • 68% of FF have College or Graduate Degree • 75% are Employed Full or Part-time • Majority are Male ~ Accounting for 58% of all FF • 61 % of those are between the ages of 25-54 years of age See Source 3

  9. Frequent Flyer Programs • American Airlines • AAdvantage Miles • Continental Airlines • OnePass • United Airlines • Mileage Plus • Southwest Airlines • Rapid Rewards

  10. Market Opportunities • International Segments • Pacific/Asia • Latin America • Atlantic/Europe • Frequent Flyer Programs • Travel Industry Alliances • Miles Auctions • Higher Level of Service • Concierge

  11. International Opportunities • Continental Has More International Exposure than any of the Other “Majors”13 • Current Hub and Spoke System Ideal for International Expansion • Houston – Latin America • Newark ~ Serving Richest DMA in the U.S. – Europe and Asia/Pacific • Purchasing Power Growth of U.S. Hispanic and Latin American Market Segment • International Revenues Grew 29% in 200513 See Source 13

  12. International Strategies • Continental Plans to Expand International Routes by 15% Over the Next Several Years ~ vs 2-4% Expansion in Domestic Market13 • European Routes to Lower-Traffic European Airports8 • Chinese Routes to Beijing and Hong Kong Serving Economically Expanding China Market • Launch of Spanish-Language Web Site See Source 13 See Source 8

  13. FF Opportunities11 • Frequent Flyers Make Up Significantly Large Portion of Flight Segments • Show High Level of Brand Loyalty • Focus on Online Booking See Source 11

  14. FF Strategies • Forming Alliances with Other Airlines • Increase Route Availability • Allow Usage of FF Miles in Network • Decreases Need for FF to Go Outside Network • Enhance Web Site Booking System for FF • Checking Points/Miles Status • Booking Capabilities • Miles Auctions

  15. Service Opportunities • Differentiation with High Service Levels • Adding Service When Other Airlines Cutting Service Costs • U.S. Economic Growth Trends Promising for Increased Service Requirements for Business Travelers • Segmentation of “Top-Tier” passengers

  16. Service Strategies • Additional Focus on “Top-Tier” Customers and Business Travelers • Enhancing In-Flight Reports for Flight Attendants4 • Corporate Hosting of Discussion Groups for Frequent Travelers • Gathering Complaints and Suggestions for Improved Service11 See Source 4 See Source 11

  17. Potential Problems • Increased Globalization • Liberalization of International Regulation • Domestic LCCs • Potential Terrorists Attacks

  18. Future Strategy • Enhance/Expand Transcontinental Routes • Continued Customer Service Focus • Strengthen Alliances for Customer Convenience • Focus on Top Revenue Producing Segments

  19. References • American Airlines, February 24, 2006. 2005 Annual Report. [on-line] http://www.shareholder.com/aa/edgar.cfm?DocType=Annual&SECYear=All ~ citg April 2, 2006.1 • Boeing, 2005. Current Market Outlook 2005. [on-line] http://www.boeing.com/commercial/cmo/pdf/cmo2005_OutlookReport.pdf ~ citg April 2, 2006. • Bouvard, Pierre and Williams, Diane. August 2005. The Arbitron Airport Advertising Study. [on-line] http://www.arbitron.com/downloads/Arbitron_Airport_Study.pdf ~ citg March 21, 2006. • CIO Magazine, February 15, 2004. Getting To Know Them. [on-line] http://www.cio.com/archive/021504/customers.html ~ citg April 3, 2006. • Continental Airlines, February 24, 2006. 2005 Annual Report. [on-line] http://www.continental.com/company/investor/reports.asp ~ citg April 2, 2006.2 • Delta Airlines, March 27, 2006. 2005 Annual Report. [on-line] http://investor.delta.com/edgar.cfm ~ citg April 2, 2006.3 1. Same site used for 2003 Annual Report 2. Same site used for 2003 Annual Report 3. Same site used for 2003 Annual Report

  20. References • Donofrio, Susan. Cathay Financial, January 27, 2006. Continental Airlines: Initialing with Outperform Due to Low Costs & Strong International Presence. • Keeton, Ann of Dow Jones Newswires. March 31, 2006. US Airlines Seek Revenue From More International Flights. [on-line] MorningStar.com. • Lindsay, Greg. “Airworld Part 7: The ‘Demon Customers’: Inside the “FlyerTalk” Community.” Ad Age Magazine, September 20, 2005. • Northwest Airlines, March 16, 2006. 2005 Annual Report. [on-line] http://ir.nwa.com/phoenix.zhtml?c=111021&p=irol-sec ~ citg April 2, 2006.4 • Standard & Poor’s Industry Survey’s: Airlines, March 28, 2002. Cited from The Center for Hospitality Research at Cornell University case study. Can Continental Airlines Continue to Work Hard, Fly Right & Fund the Future. • Standard & Poor’s Industry Survey’s: Airlines, May 19, 2005. • Standard & Poor’s Stock Report, April 1, 2006. Continental Airlines. The McGraw-Hill Companies. • United Arilines, March 31, 2006. 2005 Annual Report. [on-line] http://ir.united.com/phoenix.zhtml?c=83680&p=irol-sec ~ citg April 2, 2006.5 • Same site used for 2002 Annual Report • Same site used for 2003 Annual Report