Low Cost Carriers Booker Chitura - 7672209
Introduction "Air transport is big business. Its origins can be traced back so far as 1919, just after the First World War; but it was not until peace was restored after the Second World War that the era of major expansion really began. More than half a century on an air transport is now a key element in the "world's largest industry", travel and tourism, which takes almost 11 per cent of consumer spending, and employs roughly one in every nine people in the global labor force. But air transport is also a significant industry on its own, contributing much to economic development." (Hanlon, 2007, p. 1) According to International Air Transport Association air travel is likely to double over next 20 years. The growth percentage will differ widely and developing economies are going to show fastest growth. It is important to mention, that trend in cost of travel is still going downwards. (Pearce, 2015). In addition, the competition between airline companies of the same type is also severe and it continues to increase. One of the most striking features of aviation industry in the beginning of this century was the availability for consumers of a new concept of flying. Low cost carriers (LCC's) opened a totally new product: no frills, no food, no drinks, no spacious seats, no travel agencies bookings, but a very low price. e. Southwestern Airlines was a pioneer of this concept in the United States. In Europe, the first one was Ryanair, who started operating flights in the route Dublin- London in 1986. In their own words, "we go after the big guys for a slice of the action and end up smashing the Aer Lingus / British Airways high-fare cartel on the Dublin- London route." (Ryanair, 2004). The aim of this paper is to Examine the different approaches to their market place, competition and aircraft operating strategies in the light of their ownership between Jetstar (a controlled LCC) and Southwest Airlines (an independently owned LCC). Background Numerous carriers that formerly established junior airlines have now re-absorbed those subsidiaries and created a low-cost product that propositions a certain amount of seats on PAGE 1
specific flights that involve payment for food and drinks and in-flight entertainment. The rise of low-cost airlines is now well established in various aviation markets, including North and South America, Mexico, Asia, Africa, the Middle East and Europe. These carriers operate individually, each airline functions according to its own marketplaces and characteristics. Furthermore, the carrier within carrier strategy has become progressively common in the Asia-Pacific region, in which several carriers are operating subsidiaries (Gross & Lück 2013). In May 2003 the Qantas Board formed Jetstar with the intent to launch a 'two brands, carrier-within-a-carrier' segmentation strategy (Qantas Press Release, 31 May 2003). The incentive for the decision was the need to contest with the swiftly rising Virgin Blue (currently Virgin Australia), an LCC that then featured a lower cost structure as measured in cents