Can the low cost model go long haul?
Institute of Technology Tralee E-Mail: In the seventies, Freddie Laker experimented with his Skytrain and had relative, albeit short lived, success. The idea has been touted numerous times since then but it has never truly come to fruition.
However, with an ever more price-conscious consumer, there seems to be a growing market for an airline that can significantly reduce the cost of a ticket over the Atlantic Ocean. There are a number of issues which would negatively influence the effectiveness of a Low Cost Carrier in long-haul markets.
There is much debate as to how significant a reduction can realistically be offered considering the costs of flying between North America and Europe. The Low Cost model has proven to be a resounding success in the short-haul, European market.
If the likes of Ryanair, EasyJet and Norwegian Air are to expand their operations, there is an increasing likelihood that they will seriously consider moving into the, very competitive long-haul market. These airlines have been able to create a competitive edge due to the ruthless way in which they reduce operating costs compare to full service, traditional airlines.
Reducing the amount they spend on landing charges, training and operating costs and ground-handling fees has allowed them to offer large discounts on fares to their customers.
It would be difficult for them to achieve such cost-effectiveness on transatlantic routes for a variety of reasons. From legal operating restrictions to high taxes, there are a number of obstacles in the way of establishing truly low fares on the transatlantic routes.
However, with the right innovation and technological advances, we may in the near future see an emergence of competitive, low-cost, long-haul airlines. Since deregulation was introduced in Europe, LCCs have broken the hold of legacy carriers on the aviation industry.
Before the likes of Ryanair and Easyjet, Full-service carriers were the only option when it came to flying. Only higher income people were able to afford the cost of flying.
LCCs are now the most popular choice for short-haul travellers. Aside from increasing traffic on already established routes, such as London to Barcelona.
They have introduced routes which would have previously never been operated by full- service carriers such as British Airways. Routes like Dublin to Tallinn would previously have been unused or at least sparsely used.
Similar, although less dramatic figures can be seen for other successful LCCs. Despite what may be assumed, this has not led to a decline in the passenger numbers of traditional Figure 1.
Instead, LCCs have introduced new passengers onto these routes who previously would not have been flying. The growth in passengers flying on LCCs has generally been from a different target market to that of the full-service airlines.4.
Can the long-haul, low-cost model work? Studies have examined the possibility of the low-cost model integrating in long-haul flight business and clear advantages and disadvantages have been noted. Low-Cost, Long-Haul Travel According to reports, the consortium held high level meetings with potential investors this week and is looking to start operating by mid, provided the group can collect the $ million in capital it needs to begin operations.
strategy_article EBHRM-Strategic-Management-and-Competitive-Advantage-Concepts-and-Cases-5e-Global-Edition-Barney-_-Hesterly Read the Case AirAsia X: Can the low Cost Model go Long Haul located in your textbook. The current iteration of the long haul low cost model has been around for a decade, with Jetstar and AirAsia X the initial pioneers.
However, it is only very recently that the size of the long haul low cost sector has started to become significant. strategy_article EBHRM-Strategic-Management-and-Competitive-Advantage-Concepts-and-Cases-5e-Global-Edition-Barney-_-Hesterly Read the Case AirAsia X: Can the low Cost Model go Long Haul located in your textbook.
Low Cost Airline Model The Low cost airline model is a plan of action in the airline industry that is principally centered on expense decrease as the fundamental upper hand (Briody and Ferraro, ).