...Low Cost Carriers An analysis of the Low Cost Carriers and its model with implications for the future of the industry segment. 2/23/2014 [Student ID Number] [Name] Low Cost Carriers Has there been too much hype about the Low Cost Carrier concept? Characterize the LCC business model, assess their reasons for success and failure, is it a sustainable business model, or is it in transition? Can you provide an outlook for the future of this industry? Before delving into the topic, it is necessary to explain what Low Cost Carriers actually entail and what the underlying concept behind it is. There are different names for the low cost carriers which include budget airlines, discount airlines and even no-frill airlines. The concept behind LCC is to present the customer with a low cost air travel but with fewer benefits (Dresner and Lin, 1996). Since the ticket price is low, the airlines puts a price tag for extras in the flight in order to generate more revenue for the revenue lost through decreased prices on tickets. The airline companies are able to generate a low cost operating structure which allows them to charge a lower price and hence maintain a reasonable amount of profitability. In order to analyze the topic, it will be needed to trace the history of the pioneering Low Cost Carriers in the world and how their model started off and how it has evolved over time to accommodate the changing market trends. Various case studies will be looked upon related to different...
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...MGT 6753 Industry Analysis Low-Cost Carriers in Europe Julian Geiger, Michael Schlottke, Marcus Schrade MGT 6753 Industry Analysis Low-cost carriers in Europe Industry Overview The market for low-cost carriers first emerged in the US with Pacific Southwest Airlines, pioneering the concept in 1949. The European market did not really develop until aviation deregulation came into effect in the 1990’s, making flights affordable for a wider range of customers. Building on the inclining demand for cheap flights mainly by private individuals (average annual growth of 9.4% for leisure travelers between 1996 and 2003 [11], Figure 2), the industry has experienced rapid growth since then. Most notably, Irish airline Ryanair, formed in 1990, and British company EasyJet, formed in 1995, were able to shape the European market (Figure 3). Germanwings and Air Berlin are additional major players in the low-cost carriers (LCC) market throughout Europe. PEST Analysis The evolvement of the LCC industry in Europe was only possible through one major political decision in 1997 – the deregulation of the European flight market. Before, the market for flights was largely controlled by the governments of European countries, trying to secure their respective national carrier’s market share. This led to high prices for European flights – airfares were roughly twice as much as those for comparable distances in the U.S. [1]. After lifting most restrictions and enabling European carriers...
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...Title: Low Cost airlines Industry in India An overview of the Indian aircraft industry The Indian economy has grown at an average rate of around 8% in the last decade. The rise in business and leisure travel (both domestic & international) due to this growth, India emerging as a major origin and destination for international travel have all had a significant impact on commercial aviation in India. According to the airports authority of India (AAI), the passenger traffic is expected to grow at over 20% in the next five years. On the supply side, since 2003, when low fare travel in India was ushered in, a number of low cost carriers (LCC) have entered this fast growing market. However, all of the LCC carriers and - with rare exceptions – even the full service carriers (FSC) charging higher fares have been making losses. By and large, operating a commercial airline in India so far has not been a profitable business. In 2007, the industry witnessed a wave of consolidations primarily to stem the tide of red ink. Boom and bust in Indian aviation industry Air India and Indian Airlines retained a monopoly over civil aviation in India till 1992. The deregulation of the Indian economy that started in the mid-1980s, and proceeded more aggressively after the New Economic Policy in 1991, led to calls for opening up of the airline sector. Over the following years, several new airlines including Damania, EastWest, Jet, Sahara, Modiluft and NEPC started operations. However, high...
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...Low cost airlines Definition of low cost airlines Ryanair is a low cost carrier, well-known in Europe which started in 1991 as a ‘no-frills’ service airline between Ireland and the UK. By 1995, Ryanair spread to more European countries. Nine years later it carried 20 million passengers and 10 years after that, in 2010, the number of passengers doubled to 45 million. This low-fare short-haul airline was no\t the first airline was not the first airline with these characteristics. It was Southwest Airlines, an American airline which was introduced in 1967 and still going strong in 2016. (Quintano, 2015) Low cost airlines can be defined as being practical in a way that different low cost airlines offer different services. Some low cost airlines...
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...Asian Low Cost Airlines A Strategic Management Analysis Analysis is made from Strategic Alliances between Batch 20 and Batch 21 of SGU MBA Program Written by YopieRissa Pahlawan Arfianto RiaHutari RonyHariadi If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. Rollin King and Herb Kelleher, founder of Southwest Airlines in 1971 SECTION 1 – Budget and Low Cost Airlines 1.1. Budget Airlines The original concept of budget airlines is basically outsourced business. It puts together other businesses into and integrates those separate businesses into a form of operation and put effort to create a brand. Basically, it will try to minimize capital investments and cover it with operational expenses. And by nature of its business model, the cost structures are all variable costs, or very minimum fixed costs. With this business model, the company is not only rent the aircraft, but also outsourced its pilots, flight attendants, and other employees. It will sell tickets through agents and use service from company doing aircraft maintenance and services. And to ensure the profitability, it is critical that the operational costs, which is the main source of expenses, to be as low as possible. Therefore, it is typical that companies using this business model to use old airplanes which are close to end of the service-life...
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...Pricing strategies of low cost airlines Keith J Mason Air Transport Group Cranfield University K.Mason@Cranfield.ac.uk 1. Introduction Low cost airlines such as EasyJet, and Ryanair have developed quickly in the European market in the last five years. The UK market has seen the most dramatic development where by the summer of 2001, these carriers accounted for over 22% of the short haul capacity from London and were present in 58% of the 128 short haul routes operated from this city (source: OAG, 2001). During a five-year period from 1997, the seat capacity offered from London has risen by 17%, and virtually all of this rise (95.4%) was attributable to the low cost carriers. The low cost carriers have both penetrated and grown these markets, principally by garnering a consumer perception that the fares offered are very low. This perception has been developed in no small part by extensive advertising and effective use of public relations. For example, Ryanair has offered fares as low as one penny (plus taxes), and therefore it is not surprising that there is great media coverage of these carriers, which in turn generates more interest in the services. Both Ryanair and EasyJet have been very effective in using media coverage of their legal wrangles with traditional carriers such as British Airways and Lufthansa to promote their services and low fares. While the media has helped these airlines communicate their message of low fares to the public...
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...Five Forces: Analysis of the Low – Cost Airline Industry Bargaining Power of Suppliers • The supplier of airline companies is the fuel supplier, foods supplier, and aircraft supplier. There are few suppliers in the market •Only 2 possible suppliers of planes – Boeing and Airbus •Switching costs from one supplier to the other is high because all mechanics and pilots would have to be retrained. •Price of aviation fuel is directly related to the cost of oil . •Regional Airports have little bargaining power as they are heavily dependent on one airline Bargaining Power of Customers •Customers are price sensitive •Switching to another airline is relatively simple and is not related to high costs (Internet-all airlines are online) •Customers know about the cost of supplying the service •No loyalty New Entrants •Some barriers to entry •High capital investment •Restricted slot availability makes it more difficult to find suitable airports. •Immediate price war if encroaching on existing LCC route. •Need for low cost base •Flight Authorizations Threat of Substitutes •No brand loyalty of customers •No ‘close customer relationship’ •No switching costs for the customer •Other modes of transport Competitive Rivalry •The low-cost carrier market is highly competitive •Most cost advantages can be copied immediately •Low levels of existing rivalry as the two major low-cost airlines have avoided direct head to head competition by choosing different routes...
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...Low-cost carriers are also known as the LCCs or budget airlines. The first LCCs business was established at 1971 in the Southwest of US. LCCs had become a common business model in present time. It was stated by (HKEXPRESS n.d.) that LCCs is maintaining a safety flight journey with the lowest air ticket price to travel between destinations, in the arrival time and paid fee for the customer service as you desire. For the reason of LCCs is providing the cut-price airfares sending you to the destination on time. This is the main impact of reasons why most travellers choose LCCs rather than FSCs airline. The phenomenon of low-cost carriers of lower fare makes the impossible dream possible for people to enjoy traveling for the first time in their life. This has become the captivating selling point to the passengers that may not be concerned regarding the in-flight service or luggage...
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...The aim of this paper is to discuss how low cost carriers will continue to impact the airline industry in 2012 and beyond. We will look at the history of the budget airline industry and their consumer targets. As well as analyse what marketing strategies they use that have allowed them to grow so much. A low cost carrier is an airline category defined primarily by low fares but also by a focus on reducing operating costs by eliminating complexity and charge for product elements which go beyond the basic product: the flight. The first budget airline company Southwest Airlines was launched in 1971 in Dallas Texas and turned profitable in 1973. According to the e-magazine Airline Business (2012) research, Southwest Airlines is the biggest domestic airline in USA and is the biggest budget airline in the world by revenue. Ryanair is the second largest low cost carrier with its launch in 1990 In the UK followed by EasyJet and Virgin. In 2001 Ryanair and Easyjet started to offer connections between two airports outside their home which was only possible due to a political decision allowing airlines to turn from more governmentally controlled transport providers to private companies on a free market. LCC became popular since the 1990s because of the low-fares and no-frills service. Compared to the full cost carriers (FCC), more people chose to fly with low cost carriers because they can fly domestically and to more countries. Furthermore, LCC tend to have scheduled flights and...
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...Purchasing The Low-cost Learning curve t might not be the best habit, but people have a tendency to categorize everything. The same often happens with low-cost country sourcing, which lumps totally diverse countries scattered all over the world into the same category of inexpensive procurement opportunities. Many still debate whether the process itself actually varies that much from country to country. Is the strategy for sourcing from China really any different than it is from India, Turkey or Brazil? For David Hoover, vice president of strategic procurement for HNI Corp., the answer is, “No, it’s not.” Of course, there’s a little more to it than that. “In the end, human beings are always the ones doing the business. And everyone has an interest,” notes Hoover. “The challenge, in any supplier relationship, is to understand what the other party’s interests are, so that you can help satisfy them. When you do that, they will be compelled to help satisfy yours.” A few years ago when HNI, a global office furniture manufacturer, started evaluating the potential cost benefits of sourcing in China, the company took an approach that utilized its decentralized business model called “split and focus.” However, while the model proved very effective on the customer side of the business to accommodate different product markets and consumer bases, the company quickly learned that the approach needed a few minor adjustments to be as successful on the supply side. “[Initially] we were sending...
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...The future and significance of CRM for low cost operators of South Asia: The increasingly competitive nature of the aviation industry from a global perspective in todays context has brought about the need to sustain profitability of ones venture in an environment that deems both competitive and economically demanding. Besides the emphasis on cost leadership and operational strategies, the requirements of managing customer relations addresses upon a new agenda of business strategy formation around this essential core element; customer value. With reference to successful “tried and tested” methods by major industry leaders in the globe today, the paper seeks to address the value of customer relations management as a major competitive strategy for low cost carriers such as Indigo Airlines within the southern regions of Asia. RESEARCH PROPOSAL Executive Summary The emergence of low cost carriers within the southern regions of Asia have brought about major success and reshaped the aviation industry within these regions. Though recent success have come about with the exploration of mass segments and low cost structures, this innovative business model is bound to mature with the external markets and consumers. With focus on India and Indigo Airlines, the issue of differentiation in a relatively highly matured market with relatively lower international barriers to entry have brought about the need to explore alternatives which create customer value. Customer relations management...
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...Introduction This paper explains the strategic marketing planning process illustrating the discussion with examples from the low cost airline, Easyjet. The paper proceeds in five parts. In the next section of the paper, the concept of market segmentation is described and discussed. Next, the concept is located in the overall positioning, segmentation, targeting (PST) organisational strategy. Porters’ Generic Strategy is then outlined, as a supplementary paradigm to market segmentation. The concept of the marketing mix is discussed and applied to the case study company. A brief conclusion closes the paper. Before examining the marketing process, however, it is necessary to provide an overview of the case study company. Easyjet is an airline company that has been operating in the United Kingdom since 1995 (Easyjet, 2014). Like many other low-cost carriers, the company initially modeled itself on the business model of a successful American carrier, Southwestern Airlines (Yip, 2004). That airline had experienced unprecedented success by cultivating and exploiting a low cost operating model – Easyjet sought to implement this model in the European context, launching a flight between London and Amsterdam that was half the cost of the fare at the time offered by national carrier British Airways (Sull, 1999). In the years that followed, Easyjet rapidly expanded its route network to include hubs in some of the major British cities: Glasgow, Manchester and Liverpool, and routes to...
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...Every other low cost project management system must have started with the spreadsheets, then the era of the MS project. This helped a lot until managers realized that they required something more batter. Looking at the project management systems, a well established procedure has to be there to be able to select the right one. They include the fact that they should be intuitive and flexible, they should also be web based. Online systems will provide managers with real time abilities of collaboration and the possibility of staying up to date with the progress of the project. There are many free management systems, all that one need is to search for “free management system”. Although there are many low cost management systems, it is a bad idea to use online one system. This is due to the fact that they offer limited features. The system may seem perfect initially but as the number of projects increases the limitation of the system become completely obvious. It is important to stick to the best as it will be hard to switch to a more robust one. It will take too much time to transfer all the data from one old system to a new one. It is highly advisable that every highly esteemed manager should conduct test before venturing into using any low cost project management systems. This will help in choosing the one that best suits them and help in reducing the possibility of suffering from a severe headache when transferring files from one system to another at the middle of projects. ...
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...Low-cost Airline Tax - Model Answer Over recent years there has been an enormous increase in the amount of air traffic around the world resulting in various problems, and a major cause of this has been the growth of low-cost airlines. Although some people believe that taxes should be increased for air travel, I disagree. Those that support taxing airlines believe that this will result in a reduction in this type of travel and thus solve the problems of pollution, noise and construction. This is because a tax would make the cost of travelling more expensive, which will, they claim, lead to a decrease in demand. Proponents of this solution believe that taxes are fair because everyone has to pay them and it is a workable solution that will have the additional bonus of providing an income for the government. However, there are a number of reasons why this is not the right course of action. Firstly, a tax is not fair because it will adversely affect people on lower incomes. Such a tax would have to be a fixed amount paid equally whether you are rich or poor, which means that those on lower incomes would find it more difficult to travel, but it would likely have little effect on the lives of those with a higher income. In addition, such a tax would not work. For example, we have seen taxes increase in most countries on cars, but this has had little affect, with car use continuing to grow. To sum up, it is evident that introducing heavy taxes on air travel is not fair or...
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...| | A "Low cost “ Supermarket | Claire David, P113979 23/01/2012 | Table of Contents Executive summary 3 Introduction 4 Business level strategy 4 Competitive advantage 5 Competitive strategy 6 Strategy clock 7 Hybrid strategy 8 Porters five forces 10 Advantages to using a Hybrid strategy 11 Threat of new entrants: 11 Bargaining power of suppliers: 11 Bargaining power of buyer: 11 Disadvantages to using a Hybrid strategy 12 Threat of substitutes: 12 Threat of rivalry with competitors: 12 Difficulty in sustaining: 12 Conclusion 13 Recommendations 14 Cost reduction that don’t affect quality 14 Deter from price wars 14 Differentiate 14 References 15 Executive summary This report aims to discuss the Hybrid strategy utilised by Asda, this report will be based on the following objectives: * Identify the strategy employed by ASDA in order to achieve competitive advantage * Critically evaluate the strategy identified * Provide recommendations for continued success and sustainability A collection of secondary information and data was gathered in order to obtain appropriate and information. Asda are a subsidiary of Wal-Mart, therefore it is assumed that the strategies used by Wal-Mart are also used by Asda in the same way. Introduction Asda are a well known organisation which started to operate in the 1920’s In June 1999, now a successful company once more, Asda was bought by Wal-Mart Stores Inc. and became...
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