Independence Air Project
Independence air was not the original name of the airline.It was formerly known as the Atlantic Coast Airlines.The airline originally operated in collaboration with United Airlines and Delta Airlines Inc.
It was a contract carrier for the two older companies.
However, Atlantic Coast decided to operate independently when United attempted to reduce Atlantic’s fee under the new contract. After the first flight to Atlanta was fully booked, Independence Air expanded the business into most states of the East Coast. In the West Coast the company operated only in a few major cities.
I.2. Target Market, Strengths and Weaknesses
The company is a Low Cost Carrier, which means that the target market is from the segment with price oriented perspectives. The company started by expanding the service into the eastern cost of the continent because the managers believed that the locations possess more opportunities for Independence Air (Laura, 2005).
However, the company also maintained existence in the west coast of the continent by providing routes for major airports in the region. The original business model of the company was based on two core qualities: rock bottom fares and internet marketing services. It was originally a success because most of the 600 daily flights to 37 destinations were fully booked (Laura, 2005).
Nevertheless, as the months go by, the number of flights was slashed down to only 200 a day (‘Flyi’, 2006; ‘Final Boarding Call, 2006).
The strengths of the model mentioned above were no match for the problems within the LCC industry at the time. Increasing fuel cost and continued competition from many airlines including the former partner, United Airlines, stripped the company from its profits (Downfall, 2006).
I.3. Marketing Mix
The company is a Low Cost Carrier airline, which generally means that the company provided air travel services with the cheapest prices possible. In case of the Independence Air, managers and employees of the company are dedicated to creating a low-fare airline based on these six philosophies:
1) I am about the customer first;
2) I am genuine;
3) I am about integrity;
4) I am about operational excellence;
5) I am innovative;
6) I am enthusiastic. The six philosophies have a core purpose of creating the corporate image as ‘the official airline of fast, easy and less expensive’
(‘Independence Air’, 2005)
Articles from various writers who wrote about the company stated that it has ‘rock-bottom fares’. The company offers one of the cheapest fares in the continent. In terms of price, the company has the philosophy of ensuring customers to feel that ‘I can fly on my budget’.
In order to reach such goal, besides providing cheap flights, the airline also simplified their fare structure into four fare types. The purpose is to create an easy to understand fare system and easy to book (‘Independence Air’, 2005).
In order to promote quality of its flight services, the company operated based on two philosophies, which is to ensure the consumer believed that: 1) they can fly on their own schedule and 2) they can fly their own way (‘Independence Air’, 2005).
In order to support the implementation of these philosophies, the company established hundreds of non-stop flights to 37 destinations. The company also order planes with new seat designs and new cabin designs the will provide customers with the most convenient flight in the industry of air travel (‘Independence Air’, 2005).
It was recorded that the CEO spent significant amount of corporate money on advertising and community sponsorships. The CEO hired people from various media-related professions to promote the birth of the company. Some of these people are: political consultant Carville and his wife, the comedian Dennis Miller, soccer star Mia Hamm and musician Chuck Berry.
The company preferred electronic means to promote their services rather than traditional means. The most prominent promotional and the sales channel is the internet, along with an 800 number which makes it easier for people to book flights with the airline.
I. Causes of Bankruptcy
There are several analyses on what causes the bankruptcy of the low cost carrier. This particular case study is deemed interesting for many scholars because of its peculiarity. Low Cost Carriers are deemed as the future of the airline industry.
However, the case of independence air revealed the fact that there are other factors in the airline business than just price. According to an article by the Boyd Group, people are often unable to separate between facts and myths in the airline business. Here are several examples:
· Despite the popular opinion that the LCC model introduced by the famous Southwest airline is very much profitable, analysts believed that the mode is actually not profitable once the fuel price exceeds $2 per gallon
· As mentioned previously, many considered that LCC is the future of the airline industry for modern countries. Nevertheless, further analysis revealed that the picture looks worsen as the airline industry goes forward.
The most prominent theory is the ‘over-capacity theory. The LCC model has very low margin, which means it requires each airline to have sufficiently large market share in order to remain profitable.
Nevertheless, with the appearance of new airlines and new competitors, many predicted that their planes should have bumped into each other, in the sense that they will soon run out of sources of revenue.
· Another misperception of the condition in the airline industry is the notion that LCC will always outlast a legacy airline. It as reported that in the second quarter of 2005, Americana and Continental Airlines, two of the largest legacy airlines in the United States declared considerable profit.
The fundamentals are revealed, the issue is not only cost, but also revenues. Well after the September 11th tragedy, customers have regain their trust to the airline industry and some of them return to their consuming routine of searching for ‘convenience’ in flying.
If the LCC do not enhance its ability in providing higher quality services, some legacy airlines will take away their customers easily.
(The Boyd group, 2005)
In the particular case of the Independence airline, it is stated that the main cause of their failure is because there are already too many competing airlines offering routes on similar routes and racing to offer passengers with the lowest possible fares.
The market system caused prices to go even lower every time a new airline is entering the industry (Nance, 2006; ‘Independence Air’, 2006).