Llow Cost, Long Haul Model

Topics: Low-cost carrier, Airline, AirAsia Pages: 2 (516 words) Published: March 3, 2013
Low cost, long haul model

* Low cost: an airline that offers low fares in exchange for eliminating many in-flight services to passengers. * Long haul: more than 6 hours flight in general, but the definition is very elastic. * Target market: leisure, time and price sensitive business travellers

Current issue

* A swiss regional airline Baboo is planning to launch a new long haul, low cost and europen-based airline FlyA in summer 2013, with transatlantic operation to the east coast of the U.S. * A Singapore budget ailrline, Scoot, will begin operations this model in 2012, joining Malaysia's AirAsia X and Australia's Jetstar, a Qantas subsidiary, in flying long-haul in the region. * Transatlantic budget carrier Zoom Airlines ceased all operations because of financial difficulties in 2008. * International Lease Finance Corporation (ILFC) to lease six Airbus A330-300 aircraft to AirAsia X between 2013-2014. AirAsia X CEO aims at being the dominant market leader in the low-cost long-haul segment.

Problem/ challenge

* Fuel is the most expensive part of long-haul costs, and there is less scope of fuel reduction per passenger. Bigger aircrafts need with higher fuel cost to fly and the price of fuel is fluctuant. * Product and service become more complex: scheduling, in-flight entertainment, flight transfers and air cargo. * Taxes are a huge barrier and a threat to low cost long haul airline, because of Air Passenger Duty raised. * Difficult to match the marginal cost of economy class seats in a mixed configuration aircraft of major carriers. * Labour cost is huge because of long haul airline incurs some overseas accommodation cost and allowance. * Regulatory obstacle: Bilateral agreements limit the markets when new entrant TO start this business model.

Strategy of running long haul low cost airline

* Cutting labour cost: Cabin staff should be reduced in number to the safety minimum (1 per 50 passengers)....
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