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Hong Kong Budget Airline Analysis

4127 words - 17 pages

Hong Kong
Budget Airline Industry Analysis

By Jaeyeong Ahn 1155032046
Xie Jianting 1155001899
Shi Weiran 1155002072
Tan Jiayi 1009609441
Gao Jingya 1155001997

TABLE OF CONTENTS

1. Introduction

2. Budget Airline Industry
2.1 Definition & Pricing Model
2.2 Common Practices to Lower Overall Costs
2.3 Development of Budget Airline in America, Europe and Asia

3. Hong Kong Market Analysis
3.1 Competitive Landscape
3.2 Major Budget Airlines in Hong Kong
3.3 Market Analysis
3.4 Target Customer Analysis

4. SWOT Analysis of Budget Airlines
4.1 Strengths
4.2 Weaknesses
4. 3 Opportunities
4.4 ...view middle of the document...

We also compared the experience of both successful and unsuccessful budget airlines to determine the critical factors in the prosperity of budget airline industry.

2. Budget Airline Industry

2.1 Definition & Pricing Model
A budget airline (also known as low-cost carrier) is an airline that offers generally low fares in exchange for eliminating many traditional passenger services.

To attract more customers, budget airlines usually offer lower prices than full-service airlines. Some flights are even advertised as free, plus any fuel taxes, airport construction fees and so on. The tickets of lowest price only make up certain percentage (usually up to 20%) of total seats in a flight, and are always first to sell. The price steadily goes up as more tickets are sold, finally up to a point where it is comparable to that of full-service airlines.

2.2 Common Practices to Lower Overall Costs

2.2.1Choosing suitable aircrafts
Most budget airlines operate aircraft configured with a single passenger class, and most operate just a single type of aircraft. Currently the most popular types of aircraft are Airbus 320 and Boeing 737. Not only do these aircrafts hold more passengers, but also they are efficient in in terms of fuel, training, maintenance and crew costs per passenger.

2.2.2 Using the aircraft more frequently
To maximize the utilization of aircraft and thus to break even sooner, the airlines tend to offload and re-load the aircraft in shorter time periods.

2.2.3 Landing at smaller and less congested airports or at big airports during off-peak hours
This will help to reduce air traffic delays and save landing costs.

2.2.4 Providing less or charged services
Firstly, free catering service may be cancelled. Profits can be generated by selling food and drinks on the plane. Secondly, passengers are encouraged to carry lighter baggage, which can save administration costs. Also, the consumption of fuels are less because lighter baggage result in lighter planes. Thirdly, entertainment is limited on the plane. Free newspapers and magazines are no longer provided. The individual seat-back TVs may be replaced by large LCDs.

2.3 Development of Budget Airline in America, Europe and Asia
The first budget airline is generally considered to be a American company Southwest Airlines which launched in 1971. The idea was to offer flights for prices which are attractive compared to car and train and much lower than those of competing airlines. In 2012, the market share of budget airlines in North America has increased to 30.2 percents of total seats. The market share in Europe was even higher, which was 38 percents. However, the market share in Asia was only 18.6 percents.

With steady development, the budget airlines in western countries have reached a mature stage characterized as large market penetration and slow or even no growth. The case is different in Asia. The history of budget airlines in Asia is relatively short....

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