Competitive Strategy for Low Cost Airlines

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Proceedings of the 13th Asia Pacific Management Conference, Melbourne, Australia, 2007, 431-436 Competitive Strategy for Low Cost Airlines Hongwei Jiang RMIT University, Australia Abstract The aim of this paper is to identify challenge faced to Low-Cost Carriers (LCCs) or Low-Cost Airlines and provide new insights into the development and competitive strategy for LCCs. LCCs are still a relatively new phenomenon in Australia since Virgin Blue and Jetstar came to the market. There are over 30 LCCs have been launched since 2002 worldwide. In fact, LCCs have been very successful in the USA and Europe since 1990s. For example, in 1994 less than 3 million passengers flew on LCCs. In 1999, five years later, this figure had risen to about 17.5…show more content…
Today, Southwest Airlines operates more than 3,100 daily flights to 62 cities across the United States, and registers yearly more than 80 million passengers. What began as a small Texas airline, Southwest now has grown to become one of the largest airlines in the United States1. European history of low-cost airlines is much younger, but those airlines are for sure trendsetters of the 1990s. The expansion of LCCs in Europe coincided with the final deregulation of the market during the 1990s. Genuine lowcost operations began in Great Britain in the 1990s with the Irish company Ryanair (founded in 1985 and started operating flights in 1986), which was patterned on American Southwest Airlines. Following Great Britain, LCCs have successfully developed on the Continent (Grotte, 2005). In the year 2005, there are 60 low-cost airlines operating in Europe2. Prior to 2002, there were no significant low cost scheduled carriers operating in the Asia Pacific rim. The initial slow development was in part due to the perception that the low cost model adopted in the United States and Europe could not be replicated in Asia, because of the longer aircraft stage lengths, lack of secondary airports and regulatory restrictions preventing access to international markets. The latter being particularly relevant given
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