Chapter 2

Market Study

Introduction

The market study tackles about the different properties of the products along with its use

as a market input. The main users and the areas of dispersion had also been described in this

chapter. This study aims to determine the total demand and supply for the product by analyzing

the data gathered from manufactures that is also producing the similar product. The products

selling price was also been determined in this study by taking into deep consideration the

demand and supply analysis. The price fluctuations also play a major role in determining the

products selling price. The objective of this study is to identify the appropriate marketing

program to be implemented in the business by identifying the existing marketing programs that

were being applied by different aircraft seating companies. To identify the marketing program,

the factors affecting the market of the product had also been foregathered.

A. Product Description

A.1 Name of the Product

The seat is named Juan seat because it symbolizes the ingenuity life of the Filipinos. A

reason for choosing the name Juan is because it presents the purest essence of a Filipino-made

seat compacted of its ability to transform from premium economy to business class. Also Juan

stands for a very common name in the Filipino culture.

 A.2 Properties of the product

Juan seat is an aircraft seat that has the capability to switch between premium economy

class and business class flatbed suite. The product was designed to be easily reconfigured by

onboard cabin crew without delaying the boarding procedures of the passengers. It will allow the

airline to adjust cabin configuration to increase the total number of the aircrafts seating capacity

base on real time passenger demand for each flight. To ensure the product does not decrease the

aircrafts performance and secure passenger safety, it is built from lightweight, strong and

fireproof materials. Juan seat was made to ensure that it does not only provide flexibility and

safety but it was also built to fulfill the local and foreign standards for quality and passenger

comfort.

A.3 Uses of the product

Juan seat aims to provide our flagship carrier the flexibility in terms of aircrafts seating

capacity. The concept of the product is to have a seat that can switch between premium economy

class and business class. Having the capability to reconfigure the business class into a premium

economy class will give our local carrier the opportunity to utilize cabin space more efficiently.

They will be able to have an option whether to increase or decrease the current number of seats

inside the aircraft. One of the goals of every airline is to fully utilize the space inside the cabin

without compromising the comfort of the passengers. Juan seat achieves that goal very well, and

it comes with many other positive results. The airlines profit benefits as well, for an increase in

the number of passengers is also an increase to the airlines profit.

 A.4 Users of the product

To support our national airline in meeting the standards set by different international

airlines, the primary aim is to place it in our flagship carrier. The aim of the product is to provide

our airlines the capacity to provide more comfortable seats to its customers. The airline will use

Juan seat as a type of service the passengers can use. Other targets of this product are the

passengers who are looking for more comfortable seats especially during long haul flights.

A.5 Geographical areas of dispersion

Juan seat brings a big step forward towards the innovation of the commercial aviation

industry. The product being an aircraft seat can be possibly located at any airline that is currently

providing business class and premium economy class seats. It was designed as an improvement

to business class and premium economy class seats. The product will concentrate in the Asia

pacific market. Airlines that operate within this region are considered the most potential

customers.

B. Demand

B.1 Market Segmentation

Market segmentation shows the possible markets of the product and can be broken down

into after all the research has been done and analysed. It also demonstrates how far you can break

down a particular segment, which is crucial to truly finding your target market and adapting a

marketing plan to align with it.

Airline Location has been considered in the demand segmentation because the

manufacturing of the Juan seats will be in the Philippines. Airlines main hub are at the Asia
pacific region will be more likely of acquiring Juan seats because these airline have more

accessibility to the Philippine country and possible lesser cost for deliveries. Airline type will

also be considered as a market segment, although most of the potential buyers will be from full

service airlines, other low cost carrier airline that features small premium cabin can also be seen

as potential customers. Aircraft type will be categorized to narrow body aircraft, wide body

aircraft, and regional transport aircraft. The size of the seat will depend on the size of the cabin.

B.2 Demand Historical Value

To be able to measure the prospective demand for the projects output the researchers had

gathered data from a company that is manufacturing the similar product.

Year Quantity of aircraft seats

2010 68000
2011 72000
2012 74000
2013 80000
2014 87000
2015 92000
Source: RECARO Aircraft Seating
Table 2.1 Shows the number of aircraft seats sold from year 2010 2015

B.3 Demand Projected Value

To determine the projected demand for aircraft seats, the researchers have applied the

arithmetic straight line method. This method of projection was chosen because both ways of
determining the right method of projection were done. Plotting the historical data along the

coordinates and visually determining the trend line shows that the likely way of projecting the

right values is through the arithmetic straight line method, to make sure that the first way is

correct the researchers have used all of the mathematical computations under each projection

method to compute for the least deviation. The deviation under the arithmetic straight line

method yielded the least deviation.

Year Quantity of aircraft seats

2016 96500
2017 101250
2018 106000
2019 110750
2020 115500
2021 120250
Table 2.2 Shows the number of projected aircraft seatsthat will be sold from year 2016 2021

C. Supply

C.1 Direct Competitors

Two aircraft seat manufactures had been considered as direct competitors, the criteria for

choosing these competitors are because of its close proximity to potential buyers and companies

that are currently supplying the aircrafts of PAL. One is RECARO aircraft seats, which is one of

the worlds premiere aircraft seat suppliers it has production sites located in Poland, United
states, south Africa, china and its main headquarters is located in Germany. RECARO aircraft

seating is also the current supplier of aircraft seats for the Philippine Airlines. Its products have

been considered one of the direct competitors of the proposed product. Another company that

was considered as a direct competitor is the B/E Aerospace because the company has another

branch in the Philippines. B/E Aerospace is based on the United States and the company belongs

to one of the top suppliers of aircraft seats around the world competing with RECARO aircraft

seating. Both of the companies are major providers of airline seats worldwide.

C.2 Supply Historical Value

To evaluate the existing supply conditions towards bridging the gap between the level of

supply and the level of demand for the proposed projects output the researchers had also

gathered data from the same company that is manufacturing similar products.

Year Quantity of aircraft seats

2010 70000
2011 85000
 2012 86500
2013 88000
2014 90000
2015 92000
Table 2.3 Table shows manufactured aircraft seat from year 2010 - 2015

C.4 Supply Projected Value

The method that had been used to determine the projected supply was the statistical

straight line method. The reasons for choosing this method was also the same as what had been

to find the correct way of projecting demand.

Year Quantity of aircraft seats

2016 94888
2017 98472
2018 102533
2019 107072
2020 111953
2021 116123
Table 2.4 Table shows projected manufactured aircraft seat from year 2016 2021
D. Demand supply analysis

DEMAND SUPPLY
HISTORICAL HISTORICAL
Year Q Year Q
2010 68000 2010 70000
2011 72000 2011 85000
2012 74000 2012 86500
2013 80000 2013 88000
2014 87000 2014 90000
2015 91750 2015 91783
PROJECTED PROJECTED
Year Q Year Q
2016 96500 2016 94888
2017 101250 2017 98472
2018 106000 2018 102533
2019 110750 2019 107072
2020 115500 2020 111953
2021 120250 2021 116123
Table 2.5 Table shows the comparison between the projected supply and demand
 Demand and supply increases every year. The data shows a slight excess in

demand over supply. This induced the seat manufacturers to reduce their price in order to

make the product more attractive for the buyers. In response to the reduction in the price

of the product, consumers will increase their quantity demanded and producers will not

produce as many as before. The market will eventually become balanced as the market is

transitioning to an equilibrium price and quantity.

E. Factors affecting the market

The demand for air transport has grown steadily over the years. The strong growth

in aircraft seating market is driven by the surging demand for air transport with new

emerging markets in developing regions. Rise in passenger traffic as well as increase in

aircraft orders and deliveries are the major factors affecting the growth aircraft seating

market. According to the data gathered by the world bank about air traffic, there have

been an increase of passenger traffic from 2010 there are about 2.6 billion passengers and

in 2015 it increase to 3.4 billion passengers. A press release from Airbus said that the

company had achieved new record 635 aircraft deliveries from the year 2015 surpassing

its previous record of 629 aircraft from 2014. Other factors that influence market growth

as stated from an article from businessinsider.com are free movement of goods, high
 investments, skilled and low cost labor, open flow of capital, growing population, rising

income levels, and government support for foreign direct investments.

G. Price Study
To determine the products selling price the researcher had conducted both a

company survey and market study. According to the company survey there is no

definitive price for a single aircraft seat, and prices may vary from each different airline.

Airliners are setting numerous criteria and requirements for their purchase of aircraft

seats. These criteria include the size of the aircraft for it will determine the number of

aircraft seats to be bought. Cost of delivery also plays a factor on setting the prices. The

manufacturers are also doing their own analysis within the different departments of their

company to determine the right price of seats for their customers. To determine the price

range of these products, the researchers had conducted a market survey. According to the

market survey a single business class aircraft seat range from $20,000 to $30,000 and a

single premium economy class seat range from $10,000 to $22,000. The researchers have

considered both of these prices because the product is a combination of the above both

cabin class seats. The prices respond to different factors, such as the price of raw

materials. An increase in the prices of raw materials affects the price of the product.

Another factor also include the increase of aircraft seat manufactures globally, an increase

in the overall supply can affect the price and also affects the market. Inflation is always

considered a factor in the continuous change of prices. To determine the selling price of

the product, the demand and supply analysis done on the previous part of the study had
 been considered with the determined price fluctuations through the market survey, the

researchers had graph the quantity of demand supply and demand with the price

fluctuations. The intersection between the demand supply curves had been accurately

pinpointed to project the selling price of $20,000.

H. Marketing program

To create a marketing program suitable for the aircraft seating market, it was

needed to identify the various marketing programs that manufacturers use in the industry.

The use of portfolios and brochure are one of the main strategies that many companies

use to show airliners their products. Designing also an interactive website is one effective

way to highlight the features and main uses of your product. To become a long term

supplier is also one of the goals of every marketing program. Manufacturers achieve this

by entering to partnerships and agreements with the airline. An article on thedesignair.net

featured Delta Air Lines with its new international Suite business class. Delta Air Lines

in close partnership with Thompson Aero seating and an industrial design consultancy

develop a new seating solution just for the specific airline. Juan seats will be utilizing all

these effective existing marketing programs. As a new product on the market, the product

will have its own interactive website wherein potentials buyers can fully see its appealing

look, innovative design and its major function, to change cabin class configuration. The

website will also have its inquiry form where questions from buyers can be

accommodated. Entering into partnerships with the national flag carrier is also a part of

the marketing program, as one of the objectives of this product is to improve the national

carrier.