Harvard Case - Disruption in the Air: Surf Air's All-You-Can Fly Business Model
"Disruption in the Air: Surf Air's All-You-Can Fly Business Model" Harvard business case study is written by Srinivas K. Reddy, Joyce Low, Adina Wong. It deals with the challenges in the field of Marketing. The case study is 20 page(s) long and it was first published on : Apr 17, 2015
At Fern Fort University, we recommend Surf Air adopt a multi-pronged strategy to address its challenges and achieve sustainable growth. This involves refining its marketing strategy to target specific customer segments, leveraging technology and analytics to optimize operations, and expanding its business model to include new revenue streams.
2. Background
Surf Air, founded in 2011, disrupted the traditional airline industry with its all-you-can-fly subscription model. The company offered unlimited flights on its fleet of small planes to members within a defined network of airports. This innovative approach appealed to time-pressed business travelers and frequent flyers seeking a more convenient and personalized travel experience.
However, Surf Air faced challenges including high operating costs, limited network coverage, and fierce competition from traditional airlines and emerging rivals like JetSuiteX. The case study highlights the company's struggle to achieve profitability and its need for a strategic pivot to ensure long-term success.
3. Analysis of the Case Study
To analyze Surf Air's situation, we employ a SWOT analysis framework:
Strengths:
- Unique value proposition: Surf Air offered a convenient and time-saving alternative to traditional air travel, appealing to a niche market of frequent flyers.
- Strong brand recognition: Surf Air established a recognizable brand synonymous with premium, hassle-free air travel.
- Focus on customer experience: The company prioritized customer satisfaction with personalized service and a comfortable travel experience.
Weaknesses:
- High operating costs: The all-you-can-fly model led to significant operational expenses, particularly with fuel costs and aircraft maintenance.
- Limited network coverage: Surf Air's network of airports was geographically restricted, limiting its appeal to a narrow customer base.
- Lack of price flexibility: The fixed subscription model lacked price flexibility to attract price-sensitive customers.
Opportunities:
- Expanding network: Expanding the network of airports to include major metropolitan areas would significantly increase market reach and customer base.
- Developing partnerships: Collaborating with other airlines, hotels, and travel companies could offer bundled services and enhance customer value.
- Leveraging technology: Implementing advanced technology like AI and machine learning for route optimization, pricing, and customer service could improve efficiency and reduce costs.
Threats:
- Competition from established airlines: Traditional airlines were increasingly offering competitive fares and premium services, posing a significant threat to Surf Air's market share.
- Emerging competitors: New entrants like JetSuiteX were offering similar all-you-can-fly models with more competitive pricing and wider network coverage.
- Economic fluctuations: Economic downturns could negatively impact customer demand for premium air travel services.
4. Recommendations
1. Refine Marketing Strategy:
- Market Segmentation: Identify and target specific customer segments, such as business travelers, frequent leisure travelers, and affluent individuals seeking a premium travel experience.
- Brand Positioning: Reposition Surf Air as a premium, personalized air travel solution for discerning travelers, emphasizing convenience, efficiency, and a superior customer experience.
- Marketing Communications: Utilize a mix of digital marketing strategies, including social media marketing, content marketing, and influencer marketing, to reach target audiences and build brand awareness.
- Product Launches: Introduce new membership tiers with varying levels of access and benefits to cater to different customer needs and price sensitivities.
2. Leverage Technology and Analytics:
- Route Optimization: Implement AI-powered route optimization algorithms to maximize efficiency, reduce flight times, and minimize fuel consumption.
- Dynamic Pricing: Utilize data analytics to implement dynamic pricing strategies that adjust fares based on demand, competition, and other factors.
- Customer Relationship Management (CRM): Use CRM software to personalize customer interactions, provide tailored offers, and enhance customer loyalty.
3. Expand Business Model:
- Partner with Airlines: Form strategic partnerships with traditional airlines to offer seamless connections and access to a wider network of airports.
- Develop Corporate Solutions: Offer tailored corporate membership packages with dedicated service and support for business travelers.
- Introduce Add-on Services: Expand service offerings to include airport lounge access, ground transportation, and other premium travel amenities.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Surf Air's strengths, weaknesses, opportunities, and threats, as well as a consideration of the following:
- Core competencies and consistency with mission: The recommendations align with Surf Air's core competency of providing a premium, convenient air travel experience and its mission to disrupt the traditional airline industry.
- External customers and internal clients: The recommendations address the needs and preferences of target customer segments while considering the operational requirements and financial constraints of the company.
- Competitors: The recommendations aim to differentiate Surf Air from competitors by focusing on its unique value proposition, leveraging technology, and expanding its business model.
- Attractiveness: The recommendations are expected to enhance customer acquisition and retention, increase revenue, and improve profitability.
6. Conclusion
By implementing these recommendations, Surf Air can overcome its challenges and achieve sustainable growth. By refining its marketing strategy, leveraging technology, and expanding its business model, the company can solidify its position as a leading provider of premium, personalized air travel solutions.
7. Discussion
Alternatives:
- Merging with a larger airline: This could provide access to a wider network and resources, but it might compromise the company's unique brand identity and customer experience.
- Focusing solely on a niche market: This could lead to limited growth potential and vulnerability to market fluctuations.
Risks:
- Increased competition: The airline industry is highly competitive, and new entrants could pose a significant threat to Surf Air's market share.
- Economic downturn: A recession could negatively impact customer demand for premium air travel services.
- Technological disruptions: Emerging technologies could disrupt the airline industry and require Surf Air to adapt quickly.
Key Assumptions:
- Customers are willing to pay a premium for convenience and a personalized travel experience.
- Technology advancements will continue to improve efficiency and reduce costs.
- Partnerships with other airlines and travel companies will be successful.
8. Next Steps
Timeline:
- Months 1-3: Implement refined marketing strategy, including targeted advertising campaigns and social media engagement.
- Months 4-6: Partner with airlines to expand network coverage and introduce new membership tiers.
- Months 7-9: Leverage technology to optimize routes, implement dynamic pricing, and enhance customer service.
- Months 10-12: Introduce add-on services and develop corporate solutions.
Key Milestones:
- Increase in customer acquisition and retention rates.
- Improved revenue and profitability.
- Expansion of network coverage and service offerings.
- Enhanced brand awareness and customer loyalty.
By taking these steps, Surf Air can navigate the challenges of the airline industry and achieve sustainable growth by embracing innovation, leveraging technology, and focusing on its unique value proposition.
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Case Description
This case is set in July 2013, shortly after the launch of Surf Air, an all-you-can-fly subscription airline based in California. Wade Eyerly, the CEO of Surf Air, has to decide if the business model is sustainable, and also if Surf Air could be expanded to other locations. Three directional trends are predominant in the domestic airline industry in the US - consolidation of airlines, operational discipline and cost-cutting, and an unbundling of services to create ancillary revenue streams. Customers are struggling as shrinking hubs or cancelled point-to-point routes result in more flight connections, and higher costs to reach their destinations. Surf Air is introduced in the California region to address the above issues, by providing frequent business travellers an affordable option through a monthly subscription. The airline commences operations with six-seater Pilatus PC-12 jets serving two secondary airports in Los Angeles and the San Francisco Bay area; and this is shortly followed by another service to Santa Barbara. Eyerly notes that the months leading up to the launch of Surf Air have brought about high expectations from his investors and the media. Would the all-you-can-fly model of Surf Air prove to be sustainable? Where could Surf Air expand to next?
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