Low Cost Airlines in Indonesia

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Date :Avril 13, 2011

INTITULE MODULEThe management of Tourism
Nom du PROFESSEURDjoehana Wiradikarta Anda

Low Cost Airlines In Indonesia

Group Member:
Xue Qiujing

Table of Contents
I.General introduction of low cost carrier3
2.History of low cost carrier3
3.Business Model4
a.Reducing operation cost5
b.Simplifying in-flight services6
4.Trends in the industry6
b.Long distant low cost carrier7
II.Why is Indonesia such an important market?8
III.Low Cost Airlines That Fly To and/or In Indonesia8
1.From Europe8
2.From Asia and Oceania10
b.Examples --- 7 selected airlines11
1) AirAsia11
2) JetStar12
3) Tiger Airways13
4) Cebu Pacific Air (banned in EU)14
5) Firefly15
6) Pacific Blue15
7) Viva Macau15
c.Indonesian Low Cost Airlines16
2.Presentation of each airline18
a.AirAsia Indonesia18
c.Lion Air19
d.Batavia Air (a.k.a. Metro Batavia)20
3.Problems of Indonesian low cost airlines20
a. Safety Issue20
b. Appendix --- List of air carriers banned in the European Union22 Bibliography 23

Low Cost Airlines in Indonesia
I.General introduction of low cost carrier
Low cost carrier (also known as no-frills, discount or budget airline/carrier) is basically an airline that generally offers cheaper flight tickets and less comfort compared to traditional airlines by using a different business model from traditional airline business model. In short, low cost airlines’ priority is to reduce the operational cost to make up the loss in revenue generated by the reduced price. The reason why this type of airlines is also called no-frill airline is that their prices do not include any service that is usually offered for free by traditional airlines. For example, passengers will have to pay for the check-in luggage, allocation of seat, the food and on-board entertainment, etc. 2.History of low cost carrier

Low cost carrier started in the post Vietnam War era when people started to wanting to spend vacations in places far away from where they lived. In order to meet the demands of price sensitive and budget travelers, low cost carrier business model was created. The first low cost airline was Southwest Airlines, which was founded in 1971, in Dallas, Texas. And the first airline that offered no-frill transatlantic flight, from NYC to London, was Laker Airlines . Low cost airline industry experienced its bloom during 1970s, starting from the United States. Europe and Asia were latecomers. In Europe, low-cost carriers took off in 1997 with the deregulation of Europe's domestic travel markets . At that time, national governments opened their national airspace to foreign airlines, thus enable airlines to fly to almost everywhere they wanted. As a result, the competition increased and low cost carriers like Ryanair and EasyJet started to grow rapidly. South East Asia has witnessed explosive growth in the budget airline market since 2000. Malaysia’s AirAsia has rapidly expanded to become the major carrier in the region. Its success has generated a lot of rivals, notably Singapore’s Tiger Airways and Australia’s JetStar. 3.Business Model

In short, low cost airlines make profit by reducing the cost and charging extra money for almost any service. In airline industry, there are two very important indicators --- the CASM (Cost per Available Seat Mile) and the RASM (Revenue per Available Seat Mile). CASM is a commonly used unit cost used to compare airlines. It equals to direct operating cost of a flight/(total seats × flight distance). It indicates the cost per seat per mile. The RASM indicates the...
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