Executive Summary
The main purpose of this report is to create a tactical marketing plan for KLM Royal Dutch Airlines. The report comprises the marketing initiatives of KLM for years especially recent years, which have been created through identifying and analyzing its own strengths, weaknesses, opportunities and threats. KLM Royal Dutch Airlines is the world’s oldest airline which is still operating under its original name. It also includes KLM cityhopper, transavia. om and Martinair.
KLM has three core businesses: passenger transportation (Passenger Business), cargo transportation (KLM Cargo), and aircraft maintenance (KLM Engineering & Maintenance). It offers customers global access at competitive prices with a good and varied product. In virtue of its merger with Air France, KLM is now part of the Europe’s leading airline group and one of the World’s most important airlines. However, the position of such renowned leader as the KLM Royal Dutch Airlines is also experiencing some difficulties and obstacles with its operation and management.
Due to the global economic crisis and cut-throat competition, KLM is facing a decline in profits and margins; it’s also under great pressure from the reduced demand in the market; its delayed or cancelled flights rate is high. In order to improve these issues and maintain its leading position in the aviation industry, this report also formulates some appropriate aims and objectives of KLM. Also, it identifies and discusses several marketing strategies for KLM to achieve these goals. According to the strategies, this report has designed an implemention and control aimed at ensuring that the desired results are achieved. In the end, this report discusses some potential issues and problems that KLM may face in the process of the implementation and control .
Introduction
KLM Royal Dutch Airlines was founded on 7 October, 1919. KLM’s headquarters are in Amstelveen near its hub at Amsterdam Airport Schiphol. It is today the oldest airline still operating under its initial name. KLM has been part of the Air France since the merger in 2004. It is the core of the KLM Group, which further includes the wholly-owned subsidiaries KLM Cityhopper, transavia. om and Martinair.
KLM operates worldwide scheduled passenger and cargo services to more than 90 destinations. With smart partnerships and pioneering new destinations, KLM offers global access through its extensive network. By responding to market opportunities and technological developments, KLM offers customers a contemporary product. Currently, it has about 33,000 employees ( KLM, n. d. ).
Situational Analaysis
Strengths to Build Upon Strong Route Network
KLM is the only carrier on 61 of the routes it operates, standing for 45% of its ASKs from the airport . With its offer of a a total of 119 non-stop scheduled destinations to 58 countries and almost 55% of all scheduled flights at Amsterdam Schiphol (AMS) airport KLM enjoys a dominant position at its home base as well as in the world market (“KLM still growing at Amsterdam; UK and Norwegian markets important; three new routes in 2008”, 2008). Besides, KLM is still expand its network in 2010-2011 by adding new destination Hangzhou, China. Engineering & Maintenance Support
KLM Engineering & Maintenance is the largest aircraft manufacturer in the Netherlands. It offers KLM service in terms of maintenance, repairs and modifications on aircraft, engines, and components for its fleet. Engineering & Maintenance also succeeds to perform other activities in the field of product and operational performance improvement. All these provide KLM with a position to influence its level of interest rates. Alliance with SkyTeam KLM is a member of SkyTeam, one of the global airline alliances and world’s second-largest alliance in terms of market share.
The membership in the airline alliance enables KLM to optimize its performance and minimize costs for the reason that members of the alliance have their own routes and schedules which do not intersect to avoid the competition. Competitive Joint Venture and Subsidiaries KLM has transavia. com and Martinair subsidiaries. It also has merged with Air France in 2004. They supplement and strengthen each other in important areas. In addition, the joint venture between Air France, KLM and Delta Air Lines also provides KLM with a strong position in the North Atlantic market. Taking the Lead in Sustainability
KLM has played a leading role in energy-efficient flight by fleet renewal and fleet adjustment which selects cleaner and quieter aircraft. KLM flies 25% more fuel efficiently than comparable European airlines. Almost all KLM’s ground vehicles run on red diesel, which is low in sulfur and is blended with biodiesel. These will therefore places KLM in an advantageous position to achieve sustainable growth which is so important for a company (KLM, n. d. ).
Weaknesses to Overcome Weak Management Effectiveness
The growing organizational hierarchy brings about the problem of the effective control over the performance of all units of KLM. Top executives of KLM cannot totally control the functioning of the entire company since they may focus on the development of the company. And it also raise the difficulty to control over its subsidiaries and units for they are located in different parts of the world.
The merger with Air France also generates a problem of the restructuring of the company and integration of new units into the organizational structure. At the same time, it can cause serious internal problems due to the difference in the managerial style and operations. Declining Profits and Margins
KLM recorded a weak in Passenger Business performance in fiscal year 2009/10 . The yield during the first and second quarters of the fiscal year was 14% lower than the same period of the previous fiscal year. In terms of Cargo Business, full year revenues per available freight kilometer experienced a 15% drop compared with the previous fiscal year ( KLM, n. d. ).
Delayed or Cancelled Flights A statistics of KLM’s on-time performing rates showed that there were only 71% on-time flights during Nov 01, 2010 and Dec 31, 2010 which means 29% flights were delayed or cancelled ( “KLM On-time Performance Rating”, n. . ). It may has a bad impact on the company due to the increased possibility of passengers’ cash compensation and customer lose.
Opportunities to Exploit Recent Acquisitions
KLM has made significant acquisitions in recent years. For instance in 2007, it introduced the Engine Water Wash as a means of aircraft engines self-clean using water. This cleaning method contributes to lower fuel consumption and lower CO2 emissions. Besides, KLM renewed part of Boeing 737 fleet and the last Fokker 50s were phased out during 2009-2010.
On November 23, 2009, KLM operated the world’s first demonstration flight which was partly powered by biofuel with a number of passengers. It also initiated a fuel awareness program designed for cockpit crew and ground handling staff , and an outstanding approach towards the careful use of fuel has been adopted. All these initiatives will have a profound impact on making KLM more sustainable in general terms. Furthermore, on March 29, 2010, KLM made a important and visible step forward by introducing new ladies’ uniform for all cabin and cockpit crew, and uniformed ground staff.
This new ladies’s uniform enhances KLM’s modern and professional image to a large degree. Moreover, KLM has successfully introduced Economy Comfort, a dedicated front section of Economy Class in 2009. In Economy Class, the pitch has been extended to 35 inches (instead of 30 or 31 inches) which gives important extra legroom at a slight increase in price. Another innovative action is the seat replacement program including audio video on demand. These improvement in service will contribute to the advance in customer appreciation rating.
It is believable that these acquisitions which the company made in these years will help KLM to upgrade its brand awareness and generate incremental revenues ( KLM, n. d. ). Global Expansion It is worth mentioning the merger of KLM with Air France in 2004 helps the company to accelerate its international market expansion. This merger provides KLM with a golden opportunity to improve its competitive position because of the increasing fleet, number of routes and, in turn, a number of passengers. KLM will also have access to new markets where the position of Air France was traditionally strong. In addition, as a member of the Sky Team alliance, KLM will stand a good chance of the penetration of other markets.
Positioning Strategies
Rise and Trout (1981) point out that positioning is an importnt strategy that helps to create a distinct image of the company’s offering in a customer’s mind. To this context, it is necessary for KLM to use this kind of strategy to improve its brand awareness. These following positioning strategies required for target audience are suggested in the form of positioning statements.
World Business Class is a smart choice for the customers who are on longhaul aircrafts and wish to obtain high-quality service because it offers a comfortable and excellent 176 degree angled lie-flat seat which is well equipped ( e. g. TV monitor with AVOD , email/text messaging, a privacy canopy, a massage function). It also includes a fully flexible reservation, lounge access, priority boarding and three course meal, beverages and snacks on board. For the customers who are pursuing cheap price and good service, KLM offers Economy Class that is more competitive than other airlines because it provides passengers with not only cheapest price but also higher quality, fresh food and free drink ( including alcohol ).
Economy Comfort Class, a dedicated front section of Economy Class is a best choice for the customers who wish to acheive a relatively low price but higher quality service because it offers a more comfortable seats and a quick disembarkation advantage compared to other competitors with a low price. 6. Food The food KLM offers is of superior quality for the use of sustainably sourced fish in its cuisine. KLM ensures that the fish it offers is from the green list of WWF or MSC (Marine Stewardship Council) certified and KLM also guarantees the fish purchased is not on the red list of WWF in case the fish of the green list is not available.
Conclusion
This report has considered the situation faced by KLM and its objectives. It has taken a critical look at both KLM’s external and internal environments by he “SWOT” analysis. Also, this report has identified and discussed various detailed marketing strategies for KLM to achieve the goals. With growing competition and some potential issues and threat that KLM may face for now and near future, it is suggested that KLM should update its strategies as necessary and work to implement successfully to hold a strong position in the airline market. 0. 0
Reference
- KLM, n. d. 2009-2010 Public Report http://corporate. klm. com/assets/files/publications/Publieksverslag_2009-2010_EN. pdf (Accessed January 9, 2010)
- KLM On-time Performance Rating n. d. http://www. flightstats. com/go/FlightRating/flightRatingByCarrier. do? airline=(KL)+KLM (Accessed January 11, 2010)
- KLM still growing at Amsterdam; UK and Norwegian markets important; three new routes in 2008 , 2008 http://www. anna. aero/2008/09/12/klm-still-growing-at-amsterdam/ (Accessed January 12, 2010)
- Ries, A. and Trout,J. (1981) Positioning, The battle for your mind, Warner Books – McGraw-Hill Inc. , New York, 1981, ISBN 0-446-34794-9
