Low Cost Airline Impacts

Low-cost carriers pose a serious threat to traditional "full service" airlines, since the high cost structure of full-service carriers prevents them from competing

Focus on utilizing secondary airports and older terminals should reduce airport fees and also up to a certain point it is possible to avoid head-on competition with or any of the high end airline services.

The main reason for the low-cost subsidiaries’ failure is the airlines’ corporate strategy. By launching a LCC as a unit inside the same corporate structure (e.g., single scheduling and pricing centre for United Airlines’ and Shuttle’s low–cost flights), traditional airlines limited the LCC’s flexibility and independence. By building a low-cost carrier on top of a traditional carrier cost-structure, the parent company was also tempted to think low-cost when setting ticket prices, but not trying (or being able) to reduce traditionally high costs: the airline had now two unsustainable business models instead of one!

Today the hub and spoke concept is used at most major airports throughout the United States such as Atlanta, Chicago, and Dallas. The new system allows air travelers two key concepts in air travel. The first, experienced by those that live in close proximity to the central hub, saw a significant increase in both flights available and service areas. The second key point is with air travelers that live near the spoke or regional areas of the routes. Those near the spokes have gained hundreds of new destinations with the new system. By traveling from the serving airports to the hubs air travelers are able to reach destinations on servicing or regional airlines that would not have existed prior to deregulation.

The “ Battle Of The Air” has been used to describe current situation in the airline industry. The emergence of “ No Frills “ discount carriers such as Air Asia, Mahlindo, Firefly have threatened the survival of the traditional giants such as MAS, SIA, Thai Airways in the APAC regions and even the Big Boys across the continents such as United, Delta, Continental, Luftansa, Emirates and US Airway ( Myron J.Smith, 2012 ) face competition

1) Focus on point-to-point service. This service provides more direct nonstop flights that can minimize delays and total trip time.

The airline industry has always been a fiercely competitive sector. Since the invention of low-cost carriers, also known as no-frills or

Similarly, the economic issues in the industry are also mostly concerned with deregulation. The evolution of industry structure plays an important role in determining the robustness and stability of lower airfares in unregulated markets (2000). Deregulation also keeps airline fares so low as compared to that of other countries. The reason for this is because despite the failure of most entrants since deregulation, investors continue to create new airlines. There is substantial evidence that entry, particularly by low-cost, low-fare airlines, has a substantial effect in constraining fare levels in markets served by the new carriers (2000). The second reason is that some in the industry

Southwest Airlines has proven itself as an industry leader in low-fare air transportation. Southwest serves 64 airports in multiple states across the country. Although the airline industry suffered a major blow from instances such as the Airline Deregulation Act and the multiple economic crisis’s, Southwest remains strong, while competitors of Southwest were suffering from problems such as bankruptcy. One of the major reasons Southwest was able to remain successful seemed to be due to their effective low-cost model that has been key to their business image. Another aspect that aided Southwest was the fact that their competitors were fully aware that they could not compete on a price level with Southwest. Southwest gave itself a reputation

The airline industry history can be broken down into two distinct eras, the regulation era, prior to 1978, and the deregulation era, post 1978. During the regulation era, with fare prices fixed, customer service and extra amenities were the main areas of achieving a competitive advantage. During this era, there were little new entries into the industry, indeed, “not a single new carrier was approved between 138 and

During the last decades the civil aviation industry has been affected by a dualism: full service network airlines (e.g. Lufthansa) on one hand and low cost airlines (e.g. Ryanair) on the other. The low cost carrier (LCC) managements are focused on cost reduction in order to implement the lowest price possible in every market they operate (Macchiati and Piacentino, 2006). They follow a simple business strategy: achieve higher returns on assets and customers, by reducing the cost of operations to an absolute minimum. Low prices are attractive to the consumers and they improve the yield per passenger. In addiction, LCC sell a range of disaggregated optional services called ancillary services which produce ancillary revenues (Wilson,

Threat of new entrants relates to the extent of ease associated with entering into an industry and competing with current market players (Volberda et al, 2011). In the Low Cost Carriers (LCCs) the threat of new entrants is low due to the substantial entry obstacles linked with entering the airline industry that include massive capital investment, economies of scale, access to supply and distribution channels, and legal requirements. However, a big threat can emerge in the near future as Full Service Carriers (FSCs) have shown interest in joining the LCC

Through PESTEL analysis, identify the major external environmental drives influencing the airline industry. Since the end of the case (2003), to what extent have these driving force changed?

In this essay, we will first describe the features of the market which determine its market structure and consider what the best market structure for the International Airline industry is. Then we will move on to the term of non-price competition and the three different ways in which airlines compete for a share of the market. Lastly, we will explain why a perfect competitive firm is unlikely to make supernormal profit in the long-run by using the graph and also discuss why the

• Provide background on the global industry • Present a regional analysis • Discuss current and future evolvement of the industry (trends) • Discuss challenges and strategies impacting the industry • Discuss the new breed of airlines • Discuss why airlines fail and how to achieve success