The airlines covering the Cologne to London route are facing a competitive threat from a new rail tunnel connecting Britain and Germany by train.
Which all factors do you think the airlines should consider before reacting to this threat?
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The airlines should evaluate the following factors -
I. Service Differentiation
Along with looking at the journey duration, the carriers should also evaluate passenger's comfort in both means of transportation and the frequency of trains/airplanes to have.
II. Customer Convenience
Factors such as ease of reaching station/airport, boarding should be considered. The airlines should also analyze how much would different customer segments be affected by this new rail tunnel.
III. Price &Cost
It is important to analyze the price sensitivity of different customer segments and the price advantage of one form of transport over another.
Implications of a price war should also be analyzed.
IV. Operations efficiency
The airlines should also focus on the efficiency of their operations. (Example - Would the firm be able to shift to a smaller airplane in case the market share decreases?)
A great answer would also include the following factors:
- Relationship marketing or customer loyalty
- Europe regulatory structure
- Effects of change in fuel prices
If the interviewee solves the case very quickly, you can come up with more challenging questions.