The values it transports, is worth 35%

The airline industry is made up of different groups
of buyers therefore it is important to segment your customers properly, before
accessing their bargaining power. Airline industry divides buyers into
different segments and each segment has different bargaining power according to
their level of need. We have discussed five of these segments here:


The business
traveller segment: The business-class segment is the most important segment
of airline industry. In this segment, traveller doesn’t pay his own fare but it
is paid by employer for which he/she is travelling for. This segment requires
high quality service. They cannot predict the timing of their travel in advance
and they have to travel more frequent. Therefore price is inelastic for this
segment which means buyers have less bargaining power.1

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The leisure
travel segment: The leisure-travel segment consist of those customers who
have to pay their own fares and they travel through economy class. They travel
at vacations with their family or alone to tourist places. This segment is
elastic to price, which gives them high bargaining power. Any increase in fare
may result in the negative demand for airline services.2


The personal
travel segment: This segment has one aspect similar to leisure-travel
segment in which customer pays their own fare from their own pockets. On the contrary
customers have tighter timing and route constraints which requires service like
business travellers segment. E.g. emergency travels brought up by some family
matters. Bargaining power is considered to be low in this segment as quality of
required services is high.3


religious travel segment (Hajj, Umrah, Christmas): The religious-travel
segment consist of those customers who travel for purpose of religious
obligations. They travels in huge numbers and at specific dates. They can
travel through  economy and business
class and mostly they pay more than usual because of busy flights schedule for
those specific dates. Since they have no other substitute to travel on those
dates, they are vulnerable to higher prices which means their bargaining power is


The guest
worker travel segment: The Guest-workers segment consist of
those customers who are away from their homes and working in foreign countries.
Their employer pays for their travels but unlike business class they travel
through economy section of flight. They travel annually or at time of
emergency. Since this segment does not require high services they have moderate
bargaining power. 5

Cargo segment: The air-cargo industry consist of
customers who are sending their shipments from point A to point B via airlines.
The air-cargo industry accounts for only 1% of whole cargo industry, but the
values it transports, is worth 35% of whole industry. They are valuable
customers for airline industry and for growth prospect this is key segment.
Goods they are transporting is valuable commodities and requires unique
services e.g. Capacity considerations (volume, weight, hazmat, and
dimensional), highly controlled transport, direct routing and reliability.
Since it requires premium service to transport such good, airlines are charging
high price and the customers have less bargaining power.6