Bmi, the UK's second-biggest full-service airline, has traditionally been favoured by business travellers. However, more recently it has become stuck in a dangerous middle ground between the budget and full-service sector and is now embarking on a radical change of direction in its service offering and pricing structure.
After spending six months surveying 10,000 customers, bmi claims that while more than half of its customers are business travellers, most sit in economy. Last week it introduced an overhauled business plan. This consists of a 'pick 'n' mix' budget/business service on short-haul flights from Heathrow, with business-class seats being dropped on all routes, except those to its four core business destinations of Glasgow, Edinburgh, Belfast City and Brussels.
This one-class model, meaning passengers must now pay for in-flight food and drink, offers a choice between three fare types: Tiny, Standard and Premium. These are based on levels of ticket flexibility and service, such as admission to bmi's business lounges. Tiny, which is the cheapest option, applies to flights on its low-cost carrier bmibaby. The tickets, which can only be booked online, start at £25 one-way.
The initiative is expected to deliver annual savings of more than £30m through lower catering costs, an online check-in system and fewer staff on flights. This is sorely needed, given that the carrier only recently returned to profitability and is facing competition for business travellers from the low-cost airlines, with easyJet recently launching its first ad campaign targeting the market.
We asked David Perkins, a former marketing director at British Midland, who is now chief executive of data intelligence firm Wegener DM, and Greig McCallum, who worked with the airline as a senior planner at Faulds Advertising, and is now planning partner of direct agency Personal, whether the new ticketing structure is enough to lure travellers away from its rivals.
DIAGNOSIS 1 - DAVID PERKINS CHIEF EXECUTIVE, WEGENER DM
Bmi is nothing if not pragmatic, and it is typical of its chairman Sir Michael Bishop to offer straightforward solutions to its passengers.
The airline is suffering from being stuck in the middle. As the second-biggest 'slot' holder at Heathrow, it has been able to pitch itself against flagcarriers such as BA. When these airlines offered business and economy cabins, bmi followed suit, but positioned itself as offering better prices.
Now it faces a dilemma. Costs at Heathrow are higher than the airports from which budget airlines fly, and with most of its flights lasting about an hour, business passengers are questioning the point of paying £300 for a seat.
Bmi's three-tier pricing may be practical, but what sort of airline is it now: a budget carrier with expensive frills or a business airline with no business class? I would hate to be its ad agency.
There is added confusion in that four of bmi's routes will continue to offer business class. This has resulted in a difficult set of messages to communicate and an ambiguous brand positioning.
- Adopt a consistent, simple marketing message for the airline's service and pricing.
- Make the level of service and price the same across all routes.
- Challenge the business market to think differently by repositioning the airline as neither business class nor budget.
- Instead, position bmi as having a real emotional understanding of business travellers' needs.
DIAGNOSIS 2 - GREIG MCCALLUM PLANNING PARTNER, PERSONAL
Bmi's decision to overhaul its business model is a sad reflection of the reality of the airline business. I have always been a fan of its service, ever since the days when it was 'The airline for Europe' and I worked on its account at the late Faulds Advertising.
Today's reality is starkly different and bmi is having to chase the customer to the budget sector. I worry that the competition it will encounter at this end of the market is very different from the national carriers with which it is familiar.
The challenge the airline faces is how to retain its core values while engineering a lower price. It will need to be brutal in its marketing; this sector is dirty and bloody, and only the brave survive.
It will also need to manage the brand skilfully to balance the creeping schizophrenia of a brand straddling both business and budget sectors.
The stakes are high and the changes it has implemented have the whiff of 'join 'em cos we can't beat 'em'.
If they don't work, I am not sure where the brand can go from here.
- Distil bmi's core essence and create a translation of it that the airline can afford to deliver at the right price.
- Protect its remaining business travel offering by strengthening premium sub-branding to differentiate it.
- Forget any sense of decorum; it pays to fight nasty in this neighbourhood.
- If this is the new permanent battlefield, go on the offensive: add routes, boost slots and leverage the airports bmi serves so it can flex its muscles.
This article was first published on Marketing