Asian Low Cost Airlines
A Strategic Management Analysis
Analysis is made from Strategic Alliances between
Batch 20 and Batch 21 of SGU MBA Program
If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. Rollin King and Herb Kelleher, founder of Southwest Airlines in 1971
SECTION 1 – Budget and Low Cost Airlines
1.1. Budget Airlines
The original concept of budget airlines is basically outsourced business. It puts together other businesses into and integrates those separate businesses into a form of operation and put effort to create a brand. Basically, it will try to minimize capital investments and cover it with operational expenses. And by nature of its business model, the cost structures are all variable costs, or very minimum fixed costs.
With this business model, the company is not only rent the aircraft, but also outsourced its pilots, flight attendants, and other employees. It will sell tickets through agents and use service from company doing aircraft maintenance and services. And to ensure the profitability, it is critical that the operational costs, which is the main source of expenses, to be as low as possible. Therefore, it is typical that companies using this business model to use old airplanes which are close to end of the service-life. This will cost them much lesser than new airplanes. 1.2. Low Cost Airlines
BusinessDictionary.com defined low cost airlines as “charter and/or scheduled flights to offer bargain-basement fares. Budget airlines usually land at and take-off from secondary airports, do not provide inflight meals or refreshments, and may not even offer numbered seat allocation. Their ticket prices are fixed, and non-refundable in case of a cancellation or no-show. Also called no-frills airline”. Wikipedia defines it as “an airline which tries to keep its prices and fares lower than competitors. It usually does this by not offering services like free food and drink on a flight and keeping fines from airports low by keeping on time. They also usually only use one type of aircraft”
In this business model, airline companies are trying to squeeze cost structure and create an affordable ticket price. It minimizes services, uses budget terminal, reduces allowable luggage, less leg room, no in-flight entertainment and meals. Secondary airport will be the first choice, and the each airplane will only have approximately 25 minutes between flights for refueling, cleaning, onboarding passengers, etc.
SECTION 2 –Low Cost Airlines in Asia
A Malaysian-based low-cost airline owned by Tony Fernandez.AirAsia is Asia's largest low-fare, no-frills airline and a pioneer of low-cost travel in Asia. AirAsia group operates scheduled domestic and international flights to over 400 destinations spanning 25 countries. Its main hub is the Low-Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA) in Malaysia. AirAsia's registered office is in Petaling Jaya, Selangor while its head office is at Kuala Lumpur International Airport. 2.2.
Tiger Airways is headquartered in Singapore. It operates scheduled flights to regional destinations in Southeast Asia, Australia, China and India from its main base at Singapore Changi Airport. Its head office is in the Honeywell Building in Changi Business Park Central. Tiger Airways won the CAPA Low Cost Airline of the Year Award for 2006 and 2010 2.3.
Indonesia’s largest privately run airline, capturing the largest share of the domestic market share. Headquartered in Jakarta, Lion Air flies to cities within Indonesia and to Singapore, Vietnam, Malaysia and Saudi Arabia. Its main base is Soekarno-Hatta International Airport. As of July 2010, it operates scheduled passenger services on an...
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