Skip to content

4 Recovery Strategies: Revenue Management Lessons from China

Field of wheat

The current environment makes it tough for airline revenue managers to adjust their plans and offers effectively, due mostly to the massive shifts in customers’ booking behaviour. Let’s look at China, a region that was first hit by COVID (in January), and also the first to head on the path of recovery. China saw a 70% drop in capacity by February 2020. However, the load factor went up to 70% in July. The airlines there definitely did something right. What can we learn from them about recovery marketing strategies?

In this blog, we will explore 4 marketing strategies that airlines in China adopted, to manage their revenues more effectively and gain their share of the market.

1. Launching new offers to protect against COVID

In the early stages of recovery, domestic-focused carriers such as China Express Airlines and Spring Airlines, were growing faster than the full-service carriers. What was the reason behind this?

First, of course, the domestic market was opening up. So, airlines with a high proportion of their volumes coming from domestic operations, were able to recover faster.

Second, these airlines were launching innovative marketing plans to get passengers back. For example, China Express started its ‘Fly at Ease’ campaign at the peak of the pandemic. It highlighted 4 new features to their passengers – COVID-19 insurance, guaranteed vacant middle seat, temperature check and disinfected cabins.

One could argue – “Doesn’t the vacant middle seat policy dilute revenue?” Well, when this offer was launched, the airline was barely running at 50% load factor. So, there was no question of revenue loss. On the contrary, it gave passengers much-needed confidence to start booking again.

One could also argue – “What about social distancing during recovery, when more passengers start flying? Will you still keep the middle seat vacant and bleed revenue?”

That brings us to the second marketing tactic we would like to highlight.

2. Multiple seats per passenger

Once the load factor is up, a ‘free’, vacant middle seat is no longer a profitable option. To address this, China Express launched another plan that allowed a single passenger the option to buy an extra seat or an entire row, at a discounted price. This helped the airline protect more revenue, while ensuring social distancing.

We looked at the above two examples of operational innovation. What about capturing and stimulating market demand?

3. Capturing business demand via charter flights

In initial stages of the pandemic, there was a surge in demand for business travel. These were the passengers who wanted to fly back and resume work, after the Chinese New Year holidays. Many airlines recognized this market and offered Charter flights to facilitate the transfer. China Eastern received 60 charter service requests in just one day. China Southern operated more than 100 charter flights during the early stages of the pandemic.

4. Capturing leisure demand

With leisure travel demand on the rise, especially due to the peak summer season, airlines are trying to capture this market.

China Eastern announced its ‘Weekend-Unlimited Travel Pass’ in June. The offer was available only on the airline app, to promote their direct distribution channel. It sold passes like hotcakes. The 100,000 passes sold out and brought the airline more than $40 million in revenue in just a couple of days.

China Express followed this strategy with their ‘Domestic Unlimited Pass’ launch, and Hainan Airlines launched their own ‘Unlimited Travel Pass to Hainan Free Trade Port’ program.

Now, many airlines are adopting this method to cater to leisure travelers.

What is your marketing strategy?

Your recovery marketing strategy will be driven by the balance you want to achieve between your demand, revenue and brand loyalty. This will again change as per the recovery phase in your region. Overall, we have seen cases of revenue management best practices globally, including the ones we have outlined above for China. what is your marketing strategy? We would like to hear from you.