Airline Marketing and Business Models

This report analyses the operational attributes, financial performance and competitive situation of TAP Air Portugal. It includes a SWOT analysis, operational characteristics, financial performance, and product analysis. The report also covers the history of TAP Air Portugal and its route structure, traffic volume, and fleet size and type.

Airline Marketing and Business Models
1

Contents
Contents............................................................................................................................................2
INTRODUCTION.............................................................................................................................3
HISTORY..........................................................................................................................................3
SWOT Analysation of TAP on the basis of analysing operational, financial and competitive
attributes.......................................................................................................................................3
OPERATIONAL CHARACTERISTICS..........................................................................................4
Route structure.............................................................................................................................4
Traffic volume.............................................................................................................................5
Fleet size and type........................................................................................................................6
Product.........................................................................................................................................8
FINANCIAL PERFORMANCE.......................................................................................................8
Profitability..................................................................................................................................9
Costs...........................................................................................................................................13
COMPETITIVE SITUATION........................................................................................................15
Competitor airlines....................................................................................................................15
Alliance strategy........................................................................................................................15
Geographical position of TAP Air.............................................................................................16
CONCLUSION...............................................................................................................................17
REFERENCES................................................................................................................................17
2

INTRODUCTION
TAP AIR PORTUGAL is state-owned flag carrier airline in the Portugal. TAP refers to the
Transportes Aereos Portugueses. It has been determined as the member of star Alliance from
2005. The TAP air operates the average of the 2500 flights in a week in the 34 countries
worldwide. TAP Portugal has been certified as the 3-star Airline in context of its quality services
in the airport, product and staff services. The service rating has been assured for both of its cabin
and ground staff. (TAP AIR, travel technologies, 2020). The TAP Airlines have attracted the
customers within keeping the price of tickets low and assuring effective services. The TAP
Airlines offers passengers connection to the 965 destinations.
The present report will analyse the operational attributes, financial performance and
competitive situation which is being faced by the TAP Air. The critical analysation within
evaluating strengths and weakness of the of the selected airline will be covered in report.
HISTORY
In regard to Airline industry, it can be said that it encompasses a wide range of businesses
that are called airlines. This sector is specialised and known for qualitative transport services for
paying customers. Along with this, Tap Air Portugal is state owned flag carrier airline of Portugal
and headquarter is located at Lisbon Airport that known as company Hub. TAP has been flying
more than 26 million miles a year to 85 destinations on three continents for carrying average 3
million passengers. The organization have maintenance and repair facilities that work for other
airlines which is located at Lisbon Airport. It also provides additional maintenance facilities such
as Africa and Brazil as well it promotes tourism for Azores and Portugal as well as it has stoppage
of African and European Destinations (History of TAP , 2022). In addition to this, company was
founded in year 1975 on 14 march by secretariat of Portuguese and its mission was to provide
regular and quality air service between Portugal and neighbouring territories. Furthermore, airline
began commercial services on 19 September 1946 performing flight from Lisbon to Madrid by
caring out total 11 passengers on the aircraft like DC-3s. In July 1962 TAP entered the jet era
and have three batch of French build Sud Aviation Caravelle an early twin jet airline and it was
first operated in European routes.
SWOT Analysation of TAP on the basis of analysing operational, financial and competitive
attributes
Strengths Weaknesses Opportunities Threats
3

TAP Air assures
effective services in
the cheapest rate
which is the major
strength of the
company and helps
company to expand
and attract large
number of customers.
The major weakness
of the company is that
it does not increase
their tickets prices
which creates the
situation related to
low profitability.
Potential opportunities
for TAP are that, the
company can grow
within increasing their
destinations as the
analysation has shown
that company has
increased the number
of passengers.
The major threats for
TAP is that,
competitor have also
started approaching
low price strategy in
high quality services.
Therefore, TAP needs
to tale more strategies
in this context.
OPERATIONAL CHARACTERISTICS
Route structure
Before Covid-19 and after the year of 2013, TAP has increased its seats number on Newcastle by
14% and it is still considered as the largest airline with around 22% of seats.
It has increased its capacity by more than 50% over past 3 years and seats share has also grown to
the great extent.
Below are some data that can prove that TAP Airline has increased its seats number.
Top 1 route pairs of TAP Airline
Route Pair Number of Seats
London (LIS) Sao Paulo (CNF) 298
Lisbon Fortaleza 292
Rio de Janeiro Lisbon 150
Lisbon (LIS) Dakar (DSS) 216
Lisbon (LIS) London (LHR) 174
BCN ( Barcelona ) TLS (Toulouse) 106
Lisbon (LIS) Miami (MIA) 298 seats
Sources: (TAP Airlines details., 2022)
This above data shows route pairs of Tap Airlines along with number of seats and on the basis of
this, it can be said that TAP has taken an average 4000 passenger in each day. On this basis, it can
4

also be said that it has earned profit and revenue to the great extent. Before covid-19 and in the
year of 2016, it has made tremendous growth. Per days’ seats of this airline was to the great
extent (Herring, 2022).
In addition, it can also be said that TAP is the biggest airline by seats on 9 of its top 10 routes
excepting one single route Lisbon- Spain. But it can also be said that all these routes are highly
competitive. Ryanair is the one who competes on nine of Tap top 10 routes. British Airways is
other main competitor of TAP Airlines majority of routes (Manning, 2020).
Figure 1: TAP Airlines Route Map.
(Sources: TAP Air ways route map., 2022)
Traffic volume
It is found from secondary data that TAP Airline has established itself as
5

Figure 2 Number of passengers travelling through TAP
Source: Number of passengers travelling with TAP (2000-2020)., 2022
Interpretation
The above bar graph present details regarding the passengers carried by TAP Portugal form
year 2000- 2020. It is one of the famous and flag carrier airlines of Portugal and its headquarter is
located at Lisbon. It can be depicted from the graph that from year 2000 to 2007 there has been
moderate result in number of customer travel as the company was dealing more in domestic areas
and neighboring territories. However, from year 2008 to 2019 there has been increase in the
number of traveler as it expanded in various countries like Spain, USA and etc. which has given
rise in the customer base. Moreover, highest peak of traveler is seen in year 2019 but a major
downfall in 2020 has been recorded due to threat of pandemic as airline was shut for several
months. The figure dropped by 17 million passengers to only 5 million in 2020 due to hit of
coronavirus pandemic hit.
Fleet size and type
TAP airline has flown and cover the area of more than 80 destinations in over 30 countries and it
has been the most modern aircraft that is ready to travel. Along with this, company make use of
Airbus for long and medium trip as well Embraer and ATR for keeping the organization on
shorter flights. Although the Airbus A330-900 neo is very spacious and it provide customer with
entertainment and connectivity s system as well flat chair features in executive class and spacious
6

chair in economy class. It has Rolls Royce engines which consumer lower oil that lead in
reduction of Co2 emission and noise. The company is operating 96 aircraft including TAP express
as subsidiary and it has 8 A321LRs along with 10 A321 neo and 11 A320 neo aircraft. Although
Tap is trying to increase their regional area of fleet with the support of second hand Embraer
E190/195 E1s for Portugal Airlines that operates under Tap express brand. The company have 8
ATR 72-600s that are working properly. Moreover, Tap need to maintain some flexibility and in
some of its routes as most of them are not able to support big aircraft the size of A320 like
Embraer Jet. The company has also state that one of the major limitation which has been faced by
Tap regarding fleet is that they are flying a lot of aircraft and they are looking for reinforcing
company setup so that it can make use of the aircraft when it is not in the operations. Thus, it
essential for the company to increase their maintenance area for maintaining their aircraft working
and attracting customer. In addition, it is also known that it offers low cost flights with high class
service which contributing in the success and its growth.
Although TAP has added about 100 aircraft to its fleet such as Airbus A330 neo, A321 LR for
flying between US, Newark and Porto. The company has maintained their fleet record for over 74
years and by end of 2025 it will be adding 71 new aircraft such as 21 A330neos, 19 A320 Neso,
14 A321 Long Range Jets. TAP will be making first commercial flights with Airbus A321 Long
Range which will depart from Porto for Newark Liberty International. It will first small aircraft
that will operates only at mid-range routes and it will be flying over the Atlantic and offer their
customer with premium long haul plane comfort area.
Figure 3 Fleet details of TAp Airlines
7

Sources: (TAP Portugal Fleet Details .2022)
 The parked status means plan has not been flown for 20 days
 Status Stored depict that plans have no longer fly operator such as destroyed or stored.
Product
TAP Air offers the major fares for the passengers under the economy class and another two
fares for the passengers of the business class. TAP Air is mainly famous for its effective services
in the cheap price which leads to attract the numerous customers.
The cheap fare in the economy light provides the services in which one hand baggage
which is up-to 10 kg can be taken. In this passengers needs to pay for the additional services
which includes- Checked luggage, priority boarding. Thus, the services which is being provided
in the fare economy classic are efficient enough in satisfying the customers (Mcconnell, 2021).
The business classic offers the services in which the two pieces of the luggage which has the
weight up-to 35 kg can be taken within inclusion of additional services. Also, in this there is
facility of bookings changes and tickets refunds which leads to attract numerous of customers.
Table 1-Fare comparison
Airline Cheapest ticket Flexible ticket
TAP Air £115 £190
British Airways £121 £204
Ryanair £20 £88
(Source- TAP Portugal, 2021)
The upper table is showing the comparison among the Airlines in context of the tickets price
of fares. Ryanair provides the cheapest ticket rate. In comparison of the British Airways, TAP Air
provides the cheap ticket rate. However,
.
FINANCIAL PERFORMANCE
Financial performance indicates the success of the company as it shows that company how much
profitability is being earned by the company. Thus, in order to know the performance of the
business the financial performance needs to be analysed (Fatihudin, 2018). Here is the analysation
8

of the financial performance of TAP Air. The financial performance can be analysed with the
help of profitability and cost attribute.
Profitability
Total operating profit of TAP Air from year 2012-2020 has been stated below in the chart
which clearly stated that company has improved the in increasing the number of passengers
whereas, in terms of profitability the company has faced the loss. It has bene found from various
studies that, TAP is the virtually bankrupt. 72% of the part of the TAP Air is owned by the
Portuguese government. However, it is done with the official approval but it is impacting the
profitability rate of the company.
9

Figure 4-Increment in the passengers
(Source- TAP AIR PORTUGAL, 2021)
10

Figure 5Profitability of TAP
(Source- TAP AIR PORTUGAL, 2021)
The chart is clearly depicting that in year 2020 the TAP Air operating profit was amounted
to the loss. There was the decrease of 509 million of the British pounds as comparison of the
previous years.
Table 2-Gross profit margin and operating profit & loss margin
2017 2018 2019 2020
Gross profit
margin
12.06% 13.06% 13.76% 14.04%
Operating profit
and loss margin
4.46% 5.46% 6.47% 8.17%
(Source- TAP AIR PORTUGAL, 2021)
11

The gross profit margin indicates the actual makings of business after paying all the cost. Thus
TAP Air gross profit margin is indicating that company has increased its gross profit margin
within increasing the profit. However, the increment is minor no major increment is being made
that sates slow and steady financial stability. Operating profit and loss margin indicates that the
margin has been increased within past years. In the longer period, the organization has not
succeed in making higher profit. TAP Air has the slow and steady growth in regards to financial
performance.
Table 3- Financial position statement of TAP
(Source- TAP AIR PORTUGAL, 2021)
The statement of financial position of TAP Air is clearly stating the non-current assets of firm
which has shown 11% change within decreasing. Net-current assets and liabilities has been
witnesses within showing 102% of change, cash and cash equivalents has shown the change of
1%. All the financial attributes that have been changed from the year 2020 has been shown in the
upper table. Net asset held for sale has shown the 100% change which states the company has
faced the loss. Thus, on the basis of this it can be stated that the company has faced the loss in
recent year.
12

Costs
In accordance with the annual report of the TAP Air under the period of consideration, the
total operating cost of the TAP Air was decreased until the 2021. However, in that particular year
the organization’s operating cost has been amounted up-to only 758.5 million of the British pound
(Suhadak, Rahayu and Handayani, 2019). The company has faced the period of unparalleled
operational and the financial challenges. Currently, company is in trouble due to this. Here is the
operating cost of subsequent year in which company have shown growth
Table 4-Operating cost of TAP Air between 2013-2015
Year Operating cost
2013 4,313,201
2014 4,221, 500
2015 5,421,171
(Source- The History Of TAP, 2022)
13

Table 5- Number of Aircraft in Services
(Source- The History Of TAP, 2022)
TAP Air total fleer ranks within the second tier of the Portuguese LCCs. The number of
aircraft services was inactive in the end of Jan 2020 to Aug-2020.
Thus, the final conclusion that comes from the analysing of financial performance of TAP
Air indicates that from the period 2012-2019 the company has effectively grown in increasing the
number of passengers and aircraft services. However, the profitability has not been increased due
to low prices. Also, in the year 2021 the heavy loss has been occurred for the TAP Air that has
affected the operation of the organization. This has impacted the bookings capacity of the
company as well. However, the company has planned some strategies but it is not revealed what
will be these strategies. TAP air has planned to recover all losses till the year 2023. So, the
company can be further expanded.
14

COMPETITIVE SITUATION
Competitor airlines
As it is known that TAP Airline is a well-known Portugal airline company that offers passenger,
cargo as well as freight transportation services. There is a high intensity of competition in this
industry. There are number of other airlines that are striving hard and have become successful in
attracting customers and improving performance. Some main competitors that are creating
barriers in the path of its success include: Air France- KLM SA, IB Pop Holding SL, Aero VI SA,
Eurotlantic Airways – Transportese Aereos SA, Lufthansa.
It has been found that Tap Airline have major competitors but in international market Lufthansa
has been big competitor such as overall company culture of TAP is very poor and Lufthansa is
good and it make use of innovative ideas and services in order to attract their customer.
Moreover, due to high competition in the market area company has to invest in expanding their
business in new countries as well to improve their brand name in global market. Although
Lufthansa employees have rate their perks and benefit score an 81/100 on other hand TAP
employees rate was 52/100. Hence, TAP has to improve their relation with employees as the key
source which contributes in success of firm. Along with this, it need to start appreciating
employees by giving them good monetary perks in order to reduce competition by keeping
employee turnover rate low (Bakır, Akan and Durmaz, 2019). The culture rate of Lufthansa has
rates higher than TAP so it is necessary for the company to adopt for appropriate leadership and
management style in gain positive outcomes out of it. If organizational structure of TAP will not
be proper than it will create negative environment within company and there will be delay in
achieving the set objective. However, TAP has good environmental culture rating which has
helped the company sustaining in the competitive market area.
In addition, it is found that TAP Airlines is providing training to its employees and it is
expanding its business by increasing route pair where there is no competition or less competition.
Its growth and marketing strategy can help it out in improving its overall performance and
ranking in the market.
Alliance strategy
The alliance strategy has been referred as the arrangements between the two companies that
has been undertaken mutually in order to assure benefits to the project within retaining each
independence (Migdadi, 2022). The agreement is less mainly less complex and less binding than
the joint venture under which the business pool their resources for creating the separate business
entity. Thus, there are three types of alliance strategy that is being used in the Airlines and those
are star alliance, sky ream and One-world. Airlines companies join these global alliances and
15

forms alliance strategies in terms of getting success. The major strategy of TAP Air is aligned
with the growing business with the help of the combination of the organic expansion with the help
of the provision of the high quality services.
TAP Air is completely owned by the Atlantic Gateway Consortium which is the holding
company. Currently, the TAP Air is member of star alliance from the three global airlines
alliances. There is no partnership have bene established in terms of implementing alliance
strategy. However, company is often considering to join the one-world, SkyTeam. (Gomes-
Casseres, 2021). Thus, TAP Air is the flag carrier in the Portugal within the hub under the capital
of Lisbon. TAP is the part of Star alliance and assures services in several US cities which allows
them for connections from the Lisbon to the rest of the Europe and Africa.
Travel agency partnership mainly accounts for the all of TAP Air holiday businesses. The
trade sales team has been appointed by the organization which is basically works with the travel
agents and helps them to expand their business in effective manner. Thus, the TAP Air has made
arrangements with the travel agents in order to provide best holiday packages for the customers
which is being proven beneficial for the company as well and also enable organization to defeat
their competitors within ensuring effective services to their customers. Thus, with this TAP Air
perform the market initiatives which are effective for the performance of company.
Geographical position of TAP Air
In regard to its position and strategy, it can be said that it is committed to the future and for this, it
will launch sustainable strategy with the main aim of becoming one of the leading brands in
sustainable air travel and package holidays. It is found that this airline company operates in
around 21 countries, 71 overseas destinations and 453 routes (TUCKI and et.al., 2019).
In addition, it is known that jet2.com operates flights to around 70 destinations across Europe
with main focus on Spain and the Mediterranean Sea, Greece, Italy, Turkey and France. Biggest
bases of this airline that can show its geographical position include: Manchester 65 destinations,
Bristol: 38 destinations, Birmingham: 63 destinations, Bradford: 56, London Stansted: 49 and
East Midlands 37. On the basis of this, it can be said that it covers number of destinations and
majority of destinations are in Manchester and this geographical selection has made it able in
increasing revenue and increasing customers’ satisfaction.
16

CONCLUSION
The TAP airlines have the effective long history that shows the organization has expanded in
efficient manner. However, in some cases the company has not been operated in successful
manner. During the period of COVID, loss has been bear by the Airline Industry which has
affected the growth of TAP Air as well. The report has highlighted the major attributes of the
operational features of TAP Air. Also, the financial performance has been reviewed in effective
manner that is showing that company has managed effectively growing in terms of financial field.
Furthermore, it has been analysed that there is high level of competition in Airline Industry and
which is being faced by TAP Air. Also, the report has shown that, within past years the TAP Air
organization have shown the effective growth however, in the year 2021 higher loss has been
arise for the organization that has impacted the operations of TAP Air.
REFERENCES
Books and journals
Bakır, M., Akan, Ş. and Durmaz, E., 2019. Exploring service quality of low-cost airlines in
Europe: An integrated MCDM approach 1. Economics and Business Review, 5(2),
pp.109-130.
Fatihudin, D., 2018. How measuring financial performance. International Journal of Civil
Engineering and Technology (IJCIET). 9(6). pp.553-557.
Galea, P.J., 2022. Legal professional Privilege—what do we make of it in jurisdiction Malta? The
anchors: Part 2. Trusts & Trustees, 28(3), pp.223-237.
Gomes-Casseres, B., 2021. Star Alliance in 2020.
Hermoso Traba, R., Latorre, M.P. and Martínez Núñez, M., 2019. Multivariate data envelopment
17

analysis to measure airline efficiency in european airspace: a network-based
approach (No. ART-2019-115691).
Herring, T., 2022. The Multidisciplinary, Interdisciplinary, and International Global Policy
Outlook of the Optional Protocol on the Sale of Children, Child Prostitution and Child
Pornography. In Discourses of Globalisation, Ideology, and Human Rights (pp. 149-
167). Springer, Cham.
Jimenez, E. and Suau-Sanchez, P., 2020. Reinterpreting the role of primary and secondary
airports in low-cost carrier expansion in Europe. Journal of transport geography, 88,
p.102847.
Maertens, S., 2018. A metric to assess the competitive position of airlines and airline groups in the intra-
European air transport market. Research in Transportation Economics, 72, pp.65-73.
Manning, B.J., 2020. Does Jet Fuel Hedging Impact the Firm Value in the Aviation
Industry? (Doctoral dissertation, Erasmus School of Economics).
Mcconnell, I., 2021. Airline extends suspension of flights and holidays. The Herald (Glasgow,
Scotland).
Migdadi, Y.K.A.A., 2022. The impact of airline alliance strategy on the perceived service quality:
A global survey. Journal of Quality Assurance in Hospitality & Tourism. 23(2). pp.415-
446.
Soliman, A., O’Connell, J.F. and Tamaddoni-Nezhad, A., 2022. A data-driven approach for
characterising revenues of South-Asian long-haul low-cost carriers per equivalent flight
capacity per block hour. Journal of Air Transport Management, 103, p.102242.
Suhadak, S., Rahayu, S.M. and Handayani, S.R., 2019. GCG, financial architecture on stock
return, financial performance and corporate value. International Journal of Productivity
and Performance Management.
TUCKI, A. and et.al., 2019. Problems and Perspectives of LCC in Europe. Case Study: Poland
and Portugal. Annales UMCS, Geographia, Geologia, Mineralogia et Petrographia, 74.
Online
History of TAP , 2022. [Online] ( Accessed Through
)https://www.referenceforbusiness.com/history2/36/TRANSPORTES-AEREOS-
PORTUGUESES-S-A.html
Jet2 Fleet Details. 2020. [Online] (Accessed through) <
https://www.airfleets.net/flottecie/Jet2.html>
Number of Passenger Uplifted by Jet2.com From 2008 to 2020. 2020. [Online] (Accessed
18

through) <https://www.statista.com/statistics/309376/jet2coms-uk-passenger-numbers/.>.
Number of passengers travelling with TAP (2000-2022)., 2022 [Online] <
https://www.statista.com/statistics/734448/tap-portugal-passenger-figures/>
TAP AIR PORTUGAL, 2021 [Online] (Accessed through)
<https://www.flytap.com/en-st/support/about-tap>
TAP Air ways route map., 2022. [Online] (Accessed Through) < https://maps-portugal.com/maps-
portugal-transports/tap-portugal-route-map>
TAP AIR, 2020. [Online] (Accessed through) < https://thepointsguy.com/news/the-ultimate-guide-
to-earning-and-redeeming-tap-milesgo//>.
TAP Airlines details., 2022 [Online] (Accessed through)
<https://www.seatguru.com/airlines/TAP_Portugal/information.php >.
TAP Portugal Fleet Details .2022 [Online] <https://www.airfleets.net/flottecie/TAP%20Air
%20Portugal.htm>
TAP Portugal, 2021 [Online] (Accessed through) < https://www.independent.co.uk/travel/tap-
airlines-review-passenger-how-good-handsome-crew-portugal-a8306726.html >.
The History Of TAP, 2022 [Online] (Accessed through)
<https://www.flight-delayed.co.uk/blog/2020/05/08/history-and-fun-facts-tap-air-
portugal#:~:text=%2D%20Back%20in%201976%2C%20TAP%20Air,Janeiro%20firstly
%20operated%20in%201960. >.
19