What Challenges Lucky Air China Face Before It Became Successful?

China’s Aviation sector witnessed rapid growth with its middle class. The civil aviation authority in China expects the air passenger to go by 15% through 2020. Chinese Airlines industry is regulated, and they cannot reduce price as much as they want, but to win over customers, the Airlines adopted strategies like discounted tour packages. Lucky Air has near monopoly in Yunnan province where passengers are projected to grow from 21 million to 24 million.

In a regulated environment, Lucky Air had paid their fuel bill upfront and the fuel charge was higher in the Yunnan region. And there was no way to hedge fuel price, hence the airlines were vulnerable to a fuel price hike. In China, most cities have only one airport. Wherever they have 2, the landing fee is the same in both the places. In the case of Airplane leasing, the capacity expansion is capped at 35% per year. And the airlines have to go through one central body, smaller airlines have less priority to get new aircraft, sometimes it takes 5 years to get a jet for airlines like Lucky Air. The ticket price is regulated and controlled by travel agents, on top of that government imposes anywhere between 2 – 10% tax. Due to immature e-commerce ecosystem, other airlines have to depend on GDS or the offline travel agents who take a commission for a ticket sale or the call centers to book travel. While Lucky Air leverages it’s parent company’s internet capabilities and offers great incentives to customers to use their website to book a ticket.

Ticket prices have been falling throughout the history of airlines. As the aircraft sizes became bigger, they became more fuel-efficient and with newer technology cost of running, airlines came down. Consumers are habituated of the cost going down, hence winning companies will have to have a granular understanding of cost drivers and keep them low(Saxon,2017).

Lucky Air is in a regulated industry where the fuel cost, landing costs, and taxes are government-controlled and non-negotiable. Hence the firm has to look for opportunities elsewhere where there is no or fewer regulations.

Lucky Air’s strength is definitely there IT infrastructure which they got from their parent company Hainan Airlines. They offer ticket booking, refund online. Tickets are available on their website for 5 – 20% cheaper price. Luck Air website is SEO optimized and ranks well on Google. They offer points to returning customers which can be redeemed for gifts. On their website, customer can blog and share the experience. Here are some ideas Lucky Air should implement -

·       Now, Lucky Air can make this ecosystem stronger. They can add chat assistance to the customer on their website, if any customer needs help, they can simply chat with a customer care officer who can solve the problem.

·       Create an app for android and iOS, provide all the features available on the website

·       Offer Airmiles/ reward points to even first-time travelers, and make them redeemable for travel. This might make some people loyal to the airline.

·       Create a small call center to help customers who are above 35 years of age or not comfortable with the internet. Monitor the ROI, in case this does not help with load factor, then we can shut this down.

·       Offer CRM on its website and app. Customers can share why they chose Lucky Air, what they liked or if they any suggestion for improvement and get those monitored by customer care officers to address if any customer expresses any concern. If many customers complain about the same things, those will need to be addressed ASAP.

·       Offer feature on App and website to leave review/testimonials. If the customer leaves any negative review address it ASAP.

·       Offer feature to web check-in from website and app. In Airport offer Kiosks, to self-check-in. We need to have officers to educate customers, and gradually we can bring down the number of people helping the customer using kiosks.

·       Luck Air can offer first check-in luggage for free, then charge the other check-in luggage. It can offer a student discount to a full-time student based on their ID card, and let them carry one cabin luggage and charge for check-in bags. For business travelers, the airline can offer on-air internet and charge for it.

·       Do not overbook flights during holidays, so nobody is left behind unhappy.

What Spring Airline has done by partnering up with travel website is already taken, they have the first-mover advantage. If Lucky Air wants to do the same they will have to offer cheaper packages which will make less profit for them. Instead of doing that they should focus on exceptional customer service and focus on China’s ever-growing internet population. Market themselves of radio, TV local newspaper, so people come to know about their website and App and what they offer there. Lucky Air should do what Amazon or south West did, excellent customer service and make customers self-sufficient so they do not need help. So Lucky Air needs to spend less on customer care. Along with these tactics, Lucky Air should try to lease more air crafts to increase its capacity by 35% or whatever maximum amount is permissible by regulatory bodies.

As China is building more airports, they can try to more profitable routes, especially where the businessmen and women are traveling. Because chances are they will be efficient with the internet, and can book, check-in online. They might travel light too, and they might pay for inflight meals or internet. There is no need to target students specifically, as they do not have that much disposable income.

References-

Berenguer, I., Shijun, C., Liang, L., Jing, L., Wang,N.(2008). E-commerce at Yunnan Lucky Air. Retrieved from https://my.uopeople.edu/pluginfile.php/515763/mod_workshop/instructauthors/U5%20E-commerce%20Yunnan%20AIr.pdf

Saxon,S.(July,2017). A better approach to Airlines cost. Retrieved from https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/a-better-approach-to-airline-costs