1 Buyers segmentation:It is important to know who ourbuyers are, before you know their bargaining power. Airline industry dividesbuyers into different segments and each segment has different bargaining poweraccording to their level of need. We have discussed five of those segmentshere:2.1.1 TheBusiness traveller segment: Business travellers do not paytheir own fare, it is paid by companies. They cannot predict timing of theirtravel in advance and they have to travel more frequent. This is why they are themost valuable customer for airline industry.
And since companies are buyingtickets for them they prefer to travel in business class. They have lessbargained power as price is inelastic for this segment.12.1.2 Theleisure travel segment: Leisure travellers pay their ownfares and travel through economy class. They travels for vacations with theirfamily or alone. This segment is elastic to price, which gives them highbargaining power.
Any increase in fare may result in the negative.22.1.3 Thepersonal travel segment: This segment has one aspectsimilar to leisure travels segment in which they pay fare from their ownpockets. On the contrary they have tighter timing and route constraint’s whichrequires service like business travellers segment.
E.g. emergency travelsbrought up by some family matters. Bargaining power is low in this segment asquality of service require is high.32.1.
4 Thereligious travel segment (Hajj, Umrah, Christmas):This segment travels at specificdates, but it is huge in numbers4. They pay their own fareand travels with their families. Bargaining power is low in this segment5.2.
1.5 Theguest worker travel segment: Guest workers are expats workingoutside their country. They travel at work in different countries, companies’pays for their annual tickets fare. They travel using economy class. Bargainingpower in this segment is medium.6 2.1.6 Cargosegment: Air cargo accounts for only 1% ofwhole cargo industry, but the values it transports, is worth 35% of wholeindustry.
They are valuable customer for airline industry. Goods they aretransporting is valuable commodities and requires unique services e.g. Capacityconsiderations (volume, weight, hazmat, and dimensional), highly controlledtransport, direct routing and reliability. Since it requires premium service totransport such good, airlines are charging high price and customers have lessbargained power.7 1 (Kassem M.
S., 1989) 2 (Kassem M. S.
, 1989) (Alessandro Borgogna, 2016)3 (Kassem M. S., 1989)4 (Smith, 2017)5 (Kassem M.
S., 1989)6 (Kassem M. S., 1989)7 (Boeing, 2015)