Low Cost Carrier Characteristics

Spirit Airlines, the leading ultra-low-cost, no-frills carrier; the worst all round Carrier charges for every service besides the basic fare. For this purpose, this paper will discuss the Carrier ticket distribution channels, pricing strategy and product promotion.

This research is being submitted on June 14, 2010, for Mr. Bergeen’s Microeconomics course at Rasmen College by John Divler.

Southwest airlines began in 1971 using a strategy unlike any other airline at the time. Starting out in Texas, with only three planes, they flew between the Texas cities of Houston, Dallas, and San Antonio (Coulter, pg 250). Their primary goal was to get their passengers to their destinations, on time, at the lowest possible fares, and to provide a fun atmosphere for their customers. They focused on providing short-haul routes with fares that were competitive with driving. Today, Southwest serves 101 destinations across the United States, as well as eight additional countries, and operates more than 3,900 flights a day. (Southwest , 2017) They have achieved a record 44 consecutive years of annual profitability, while staying true to their goal of providing the highest level of customer service at the lowest fare. In 2016 they ranked number 1 in customer satisfaction according to statistics listed by the Department of Transportation, with and average passenger airfare of $149.09 one way trip. (Southwest , 2017)

The financial success of Southwest has received a large amount of free publicity that has certainly helped to create an image of an airline to be trusted and used by many passengers. They had 31 years of continuous profitability.

Over the years, company sustained low operation costs and tickets prices following well-developed strategy. Among other measures, it was able to keep prices low by flying only one airplane type, minimizing service and maintenance expenses, and convincing employees to cut gate turn-around times and make the airline more efficient (Fitzpatrick, 2005).

Airlines must operate within a low-margin, high-fixed-cost environment, making profitability particularly sensitive to decreases in volume, either from environmental factors (e.g., the September 11,2001 attacks) or from competition. Moreover, the airline business is labor-intensive. Labor costs as a percentage of revenues ranges from a low of about 25 percent for the low-fare airlines to almost 50

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

Problems: Nearly all major airlines had done this unsuccessfully, proved unsustainable over time, never had a high-cost carrier transformed into a low-cost carrier.

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

As with all airlines, Delta’s recent performance has been significantly impacted by industry shifts and external events. Terrorist attacks and escalating costs have significantly impacted Delta’s profitability in recent history (Rivkin 4). The company has also been losing valuable market share to the low-cost carrier Southwest Airlines throughout the southeast and specifically in the lucrative Florida market (Rivkin 8). JetBlue also began encroaching on key Delta routes, and this seems only likely to increase (Rivkin 9). Despite this, Delta has still performed better than any other legacy carrier (Rivkin 8). Still, recent history has brought several changes to this legacy carrier, and the company has turned its attention towards new competitive strategies.

Within the aviation industry outsourced maintenance practices have become increasingly more prevalent to maintain current assets. There is generally three processes currently being utilized by the airline industry: outsourcing specific maintenance needs, in-house operations, and lastly, a hybrid approach, which entails a combination of outsourcing and in-house. How these are applied and to what extent are driven by each company and their own unique needs. This paper compares and contrasts the advantages and disadvantages of outsourcing maintenance practices as well as the effects of globalization on the airline industry.

LCCs (Low Cost Carriers) first emerged in 1950, by the Pacific South Airlines started offering nothing but low prices on air travel. Followed by the great success of Southwest Airlines from 1967 onwards, as well as facilitated by the liberalisation in air transport market, it has been in centre stage of the global civil aviation industry ever since. In spite of facing many challenges such as high oil prices, softening demand, surplus capacity, new participants as well as subsidiaries from FCCs (Full Cost Carriers) have been joining the main stream to survive, compete and dominate in airline business, mainly on short-haul routes. Given it’s nearly 60% cost advantage (Doganis 2001), some of them did succeed, for example, Ryanair from

ANSWER 1: Low fare price is one of the main thing passengers/ fliers consider when looking to fly, therefore for most, low budget airlines are their first option. Passengers are willing to give up their comfort and other in-flight services such as entertainment and during their journey for low ticket prices. However, over the past few decades, operating long haul flights was not to the advantage of these budget airlines. The cost of fuel made it for the most part, took up a huge proportion of the costs needed to manage/operate these flights.

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.

A low-cost carrier (also known as a no-frills or discount carrier) is an airline that offers low fares but eliminates all “non-essential” services. The typical low-cost carrier business model is based on: – –