This website uses cookies to ensure you have the best experience. Learn more

Low Cost Airline Essay

2540 words - 11 pages

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 ...view middle of the document...

Ryanair’s average ticket price is about $63 [3], whilea ticket for a high speed train connection between for example Munich and Berlin is often way above $100 [17]. These days increasing fuel prices are affecting the whole airline industry and LCCs in particular. Fuel markets are volatile and influenced by geopolitical factors. Therefore efficient financial management of fuel reserves including trading with options and futures is getting more and more important to keep cost down and be competitive in the market place. Another factor promoting the rapid growth of the airline industry in general is the ever increasing demand for mobility. Being limited to business travelers in the past, a great majority of private persons now travels frequently via airplane to holiday destinations or weekend trips. For the majority of private travelers, price is the primary decision factor. This spurs on the tough competition in the LCC market since loyalty to a particular carrier is no longer found in most travelers – the cheapest price wins. There also were numerous technological advances in the past few years that facilitate low-cost air transportation. For example the “turn-around time”, the time required for a plane from arrival to next departure at an airport was reduced from roughly one hour in the past to less than half an hour. This is made possible through advanced methods like aircraft fueling simultaneously with passengers boarding. Since low turn-around times are essential for higher margins, this is a crucial factor for LCCs’ capability to offer lower fares. As the number of passengers increases steadily and more people can afford flights for leisure activities, environmental groups warn that the impact on the environment will be severe [3]. Comparing the CO2 2

MGT 6753

Industry Analysis

Low-cost carriers in Europe

emission of a traditional driving vacation inside England with today’s increasingly common vacation via plane for example to Murcia, Spain, shows the tremendous difference: for two persons, 20kg of CO 2 are emitted on the car trip as opposed to 1.4 tons of CO 2 emitted on the air plane trip [3]. Easyjet recently started the initiative of carbon offsetting, offering customers the opportunity to contribute to UN certified emission reduction projects in proportion to the CO 2 emission caused by their individual air travel [4].

Porter’s Five Forces
Bargaining Power of Suppliers
The market for airplanes is very restricted worldwide. Only two suppliers can satisfy the average requirements of today’s commercial airliners, Airbus and Boeing. These two suppliers control the market for planes with a capacity of more than 130 seats and stand in high competition to each other. This allows LCCs to get lower prices and good services when purchasing new aircraft. However, once a LCC has made the decision for a certain model, the costs of switching to another model of the same supplier are very high and are even higher when switching to...

Other assignments on Low Cost Airline

Marketing Essay

305 words - 2 pages Compare the applicability of the easyGroup business model in the airline industry and the cinema industry (examine Exhibits 8 and 18, among others). What problems do you see for the cinema business? The business model of easyGroup, a concept embodying low costs, no-frills, maximization of the capacity and utilization rate, and price yield management was taken from easyJet and applied to easyCinema. Despite the fact that in the airline industry

Airasia Essay

3376 words - 14 pages The Low Cost Airline: AirAsia A study of opportunities, challenges and critical success factors LGT 3007 Air Transport Logistics [pic] Introduction History of low cost airlines The low-cost concept became a moneymaker in the United States, where it was pioneered in the 1970s by Southwest Airlines, the model for budget carriers elsewhere like Ryanair and easyJet in Europe. Definition of low cost airlines A low

Mgnt Case(Song Airline)

339 words - 2 pages competitive in the high-class airline segment and low-cost environment, so the management has tried to avoid too much competition and focus on new segments. Theoretically, I think it is a good strategy. However, it turns out to a unstatisfactory result. One of the reason is that the promotion is not good enough. Although Song has spent $12 million on promotion and advertising, it does not help Song to build up a clear image. Travelling public are

Strategic Alliance

3793 words - 16 pages , nor cut costs the way low cost carriers did. Under these circumstances, most of the traditional airline carriers were willing to form strategic alliances just to avoid bankrupcy. Once allied, they would be able to fight with weapons as powerful as code sharing procedures, marketing arrangements, procurement policies, system commonality, interchange of flight crew personnel and aircraft, and last but not least, antitrust immunity (i. e. allowing

Southwest Case Study

814 words - 4 pages travel tickets? They have always had the lowest price in any market they serve. Because of the cost structure that was developed, Southwest did the opposite of what every other airline was doing. They don’t offer assigned seats or meals. They only fly one type of airplane, the Boeing 737. This gave Southwest a distinct cost advantage. Even when their competitors lowered their prices, they still could not make the same profit as Southwest. Some

Airasia Case Study

2197 words - 9 pages AirAsia Case Study Abstract—This paper focuses on the company AirAsia. We will be talking about their strategy through out this paper and will also discuss their position in the global market. AirAsia’s strategy is to become the largest low cost airline in Asia; however, their coverage stays within south east Asia, which with our consultation and data presented in this paper we can analyze and seek a path towards a much larger coverage and

Airasia Strategic

6436 words - 26 pages present and than they have the greatest strategy which is can make AirAsia to be a leader in the world’s low cost carrier in airline industry. And than, AirAsia is one of the companies with good company strategic management and has a successful story in the airplane industry in the world. AirAsia now becoming the leading low cost carrier airline in the world and the achievement that AirAsia received to ascertain that AirAsia is one of the best

China Airlines Swot Analysis

956 words - 4 pages pressure of competing with low cost airlines. 2. Decline in cargo: China Airlines has been suffering from falling cargo demands and has sent 3 Boeing 747 to an aircraft boneyard for storage. 3. Increased competition from LCC’s: LCC airlines emerging in Taiwan are taking up the point to point market nationally of China Airlines, lowering their profit margin as they cannot compete on the same scale. 4. Collapse in Taiwan China Relations

South West Airlines

1467 words - 6 pages to eliminate the weakest competitor in the industry, which would free up the market held by that company. Conclusion First and foremost, Southwest Airline has developed a great low cost model for the past thirty seven years that fits today's economy the best. It has expanded from a tiny company with merely three aircrafts to one of today's major airliners that flies between 58 cities carrying over 60 million customers each year. Southwest

5forces Competition

439 words - 2 pages entering airline sector that include economies of scale capital requirements, access to distribution channels etc. Some barriers are: 1. Commission for aviation regulation 2. Irish aviation authority 3. Department of transportation Bargaining power of customer: high Ryanair is follow low price strategic .they provide service in low cost. For this reason customer have no choice if they travel low price. Substitute product: A substitute is a

Jetblue Case Study

1448 words - 6 pages -fare airline is an airline that generally with a lower operating cost structure. In many people’s view, low-are airline also with has low ticket prices and limited services. However, JetBlue is a low-fare airline corporation with a goal of fixing everything that “sucked” about airline travel. Its passengers could get unique flying experience by providing new aircraft, simple and low fare, leather seats, free LiveTV at every seat, preassigned

Similar Documents

Low Cost Airline Five Forces Essay

287 words - 2 pages 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

Porters Essay

334 words - 2 pages industries, due to the cost of buying and leasing aircrafts, safety and security measures, customer service and manpower. Another major barrier to entry is the brand name of existing airlines and it is really difficult to lure customers out of their existing brands. On the other hand, a newcomer could enter this saturated market easier with a completely new concept and/or technology. This was the case when Southwest entered the airline industry, with the new concept of budget or low cost travelling. The new concept was appealing to whole new universe of customers who previously would have thought multiple times before deciding to fly instead of driving or...

Hong Kong Budget Airline Analysis

4127 words - 17 pages information to analyze the budget airline industry and market in Hong Kong, followed by a SWOT analysis of the Hong Kong budget airline industry. 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

The Airline Industry Essay

5166 words - 21 pages differentiation, overall low cost, and niche strategies. The Airline Industry Introduction: The airline industry (SIC Code 4512) is one of the key sectors in the US economy; contributing close to 5% of the country’s overall GDP, employing more than ten million people, and generating more than half a trillion in annual revenues (ATA, 2009). Products and services: According to First Research (2010), the main products or service