Transferring the Successful Business design of Short-Haul Low-Cost Airlines to the Long-Haul Market  Why Does It Not Work? Dissertation

Transferring the successful business structure of

short-haul low-cost air carriers to the long-haul

market – why does it not work?

Universidad del Manso

Globalization, Multinational Corporations & Foreign Direct Investment Exploration Paper

several. 12. 2012

1

1 . Introduction

With regards to financial successes the flight industry have not performed more than the past decades. It has possibly been mentioned as ‘an example of just how not to work business in the 21st Century, when looking at hard numerical facts' (Button & Ison, 2008). However , there have been exceptionally thriving cases, particularly in the low -cost short-haul airline industry. Businesses such as Whizz air in The european union or Southwest Airlines in america have gained considerable revenue throughout the previous decade. Also during the aftermath of the September 11, 2001, terrorist attacks, incurring extreme losses in the airline industry, they have remained profitable (Button & Ison, 2008, Flouris & Walker 2005). As opposed to full -service carriers, most low-cost carriers' (LCC) business models contain one particularly significant feature, particularly its price. Rigorously simplifying the consumer merchandise and focusing on the main of atmosphere transportation allows LCCs to charge substantially lower fares and thus to compete with convent ional airlines. Low-cost shorthaul airlines have already been gaining considerable market stocks and now rule many markets (Button & Ison, 2008). The success of these cheap carriers nevertheless are only within the part of short-haul distances and still have yet to become achieved in the segment of long-haul routes. Several tries to enter the low-cost long-haul airline part have been produced in the past nevertheless eventually almost all trials revealed to be unprofitable. Naturally the following question here is: Why? Is the low-cost ‘no-frills' airline style economically not really viable intended for long-haul trip routes? This paper even comes close the cost and also other advantages of LCCs and evaluates how far they could be applied to long-haul sectors.

This starts by talking about the essential success elements used by short-haul LCCs inside their business versions and then continues to analyse previously failed tries to enter the low-cost long-haul segment and speculates regarding proposals of how the LCC model can work. Finally a summary will be attracted for how come the LCC model has not yet been successfully transported from the brief -haul towards the long-haul airline flight segment.

a couple of

2 . Qualities and crucial success elements of short-haul low-cost air carriers

2 . 1 Airport decision

A significant part of airlines' expenditures are air-port fees thus LCCs evidently have an bonus to avoid these costs. Costs charged by airports are usually relative to require. Therefore , main airports such as Frankfurt Intercontinental or London, uk Heathrow eviden tly fee more to airlines than an nearby secondary airport, e. g. Frankfurt -Hahn or London Stansted. This is often seen during Europe and North America the place that the majority of LCCs are solely based on such airports. Extra beneficial top features of the se secondary locations are that they can be less congested and enable more quickly turnaround times of aircrafts. This allows for more airline flight capacity per day, meaning an increase in aircraft and crew utilisation.

2 . a couple of Type of airplane

A typically observed and very important feature of short-haul LCCs is definitely the use of only 1 type of aeroplanes. Southwest Airlines for example , completely uses Boeing 737s and Ryanair runs more than 290 Boeing 737 -800s (Flouris & Master, 2005). Working various types of aircrafts not only increases costs for repair and staff training yet can also be a cause of productivity loss. If flight family and friends, pilots and maintenance employees exclusively make use of one type of aircraft, routine behaviour will bring about more efficient usage of labour. In addition , replacement parts of aircrafts are available in huge orders creating price advantages through financial systems of scale. This is not just true to get spare parts yet...

References: Press button, K., & Ison, H. (2008). The economics of low-cost airlines: introduction. Study in

Transport Economics, twenty-one, 1-4

Binggeli and Pompeo (2002)

Flouris, T., & Walker, T

Koenigsberg, Um., Muller, At the., & Vilcassim, N. M. (2008). easyJet® pricing approach: should lowfare airlines give last-minute offers? Quantitative Marketing and Economics, 6, 279-29. DOI:

10. 1007/s11129-007-9036-2

Lubbe, B. (2000). The Changing Role of the Travel and leisure Intermediary. Southern region African Diary of

Financial and Managing Sciences, a few, 273-289

Morrel, P. (2008). Can long-haul low-cost flight companies be successful? Study in Transport

Economics, 24, 61-67

Pels, E., Njegovan, N., & Behrens, C. (2009). Low -cost flight companies and air-port competition.

What WAAS and LAAS Means for the continuing future of Air Travel Dissertation