The weak macroeconomic environment in South America, as well as the devaluation of its currencies, has impacted passenger demand and the region’s financial standing. To face this challenge, Aerolíneas Argentinas has developed a successful methodology, applying revenue-management segmentation combined with social media to generate promotions that stimulate demand without revenue dilution.
Last year proved to be a challenging one for Latin America’s airline industry. The economy has been suffering since 2014, followed by further contracting in 2016. Emerging markets faced a substantial currency depreciation due to the drop in commodity prices, as well as the flow of capital to the United States.
Because international fares are established in U.S. dollars, the same fare in U.S. currency became more expensive for Latin American consumers in their local currency. Moreover, domestic market fares are established in local currency; however, when they are converted to U.S. dollars, they convert to less money for the airline than in previous years.
According to a recent Harvard Business Review article titled “Global Companies Need to Adapt Agile Pricing in Emerging Markets,” multi-national companies fall short on how to set the pricing on emerging markets and adapt to currency volatility.
This, in part, is because their processes for determining and changing prices are too rigid or too centralized, or they do not involve the right people, priorities or incentives. This also applies to the airline industry since that type of volatility generates a lot of pressure to yields.
Economic uncertainty and currency devaluation has had a sizeable impact on Latin America’s travel demand, forcing airlines to lower their fares.
To address this issue, Aerolíneas Argentinas developed a successful methodology, applying revenue-management segmentation with the power of social media. The goal was to create a disruptive promotion methodology to stimulate demand without revenue dilution.
During the second quarter of 2016, the airline launched a marketing campaign called “#NocheAerolineas,” meaning Aerolíneas nights.
The campaign offered attractive fares that were available for a few hours during the night on routes and dates that needed demand stimulation. The campaign was communicated to consumers via Facebook, Twitter, YouTube and Google.
The promotion became a trending topic on social media and generated a word-of-mouth effect that reached millions of people in Aerolíneas Argentinas’ home market and generated sales on low-demand seats.
To ensure campaign success, Aerolíneas Argentinas combined strategy, marketing, revenue-management segmentation and technology, which resulted in a fruitful outcome.