Preview

The product comparison between Network Carriers and Low Cost Carriers and forecasting the future market trends and global competition in airline industry

Best Essays
Open Document
Open Document
3247 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
The product comparison between Network Carriers and Low Cost Carriers and forecasting the future market trends and global competition in airline industry
The product comparison between Network Carriers and Low Cost
Carriers and forecasting the future market trends and global competition in airline industry

The deregulation in United Stated (US) since 1978 caused the emergence of new airline business models which are dynamic and competitive.

The

negotiation is less restrictive air services agreements contributed the explosion of new entrants with innovative business models entering the market.

This

phenomenon spread to Europe called liberalization in the late 1980s which completely open and unrestricted the market within the European Union. The airlines can restructure their network and business model to maximize the profit under this circumstance. Therefore, global competition became more drastic and occurred around the world.

Airlines changing their business

mode ceaselessly aim to increase the market share especially the development of low cost carrier (LCC) which influenced the whole aviation and tourism industry because the low cost concept stimulated people to travel more frequently and encouraged the first time travel; hence, it seized the big portion of the market share.

This essay analyzes the existing business

models in the contemporary industry and discusses about the distinctive features of products offered by full service carrier (FSC) and LCC.

Finally, it

will forecast the future market trends to see how airlines compete with each other and which business model will dominate the market.

First, FSCs, also known as traditional flag carriers and network carriers are typically operated similar business model such as Lufthansa, British Airways and Singapore Airlines which focus on serving average-paying customers by
0

the competitive hub-and-spoke network and preferable schedule actively.
Moreover, they usually offer the bundling services and emphasize the product diversification and service quality based on class differentiation (Graham,


References: AirAsia (2011a) Company Profile: Now Everyone Can Fly [Online] Available at: http://www.airasia.com/hk/en/corporate/corporateprofile.page [Accessed: 22 March 2011] AirAsia (2011b) Mobile Check-in [Online] Available at: Boniface, B. and Cooper, C. (2009) Worldwide Destinations Casebook: The Geography of Travel and Tourism, Oxford, Butterworth-Heinemann Cento, A. (2009) The Airline Industry: Challenges in the 21st Century, Heidelberg, Physica-Verlag CityJet (2011a) A Truly European Airline [Online] Available at: http://www.cityjet.com/about-us/ [Accessed: 21 March 2011] CityJet (2011b) Flying with us [Online] Available at: http://www.cityjet.com/flying-with-us/ [Accessed: 21 March 2011] Dennis, N. (2007) “End of the free lunch? The responses of traditional European airlines to the low-cost carrier threat”, Journal of Air Transport Francis, G., Dennis, N., Ison, S. and Humphreys, I. (2007) “The transferability of the low-cost model to long-haul airline operations”, Tourism Management, Gillen, D. and Gados, A. (2008) “Airlines within airlines: Assessing the vulnerabilities of mixing business models”, Research in Transportation Malaysia Airlines (2008) Five Star Value Carrier: Business Transformation Plan [Online] Available at: Morrell, P. (2008) “Can long-haul low-cost airlines be successful?”, Research in Transportation Economics, vol O’Connell, J. F. and Williams, G. (2005) “Passengers’ perceptions of low cost airlines and full service carriers: A case study involving Ryanair, Aer Lingus, Air Wensveen, J. G. and Leick, R. (2009) “The long-haul low-cost carrier: A unique business model”, Journal of Air Transport Management, vol
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Good Essays

    Current Economic Analysis of Virgin Atlantic
    • 1897 Words
    • 8 Pages

    Current Economic Analysis of Virgin Atlantic

    Similarly, the economic issues in the industry are also mostly concerned with deregulation. The evolution of industry structure plays an important role in determining the robustness and stability of lower airfares in unregulated markets (2000). Deregulation also keeps airline fares so low as compared to that of other countries. The reason for this is because despite the failure of most entrants since deregulation, investors continue to create new airlines. There is substantial evidence that entry, particularly by low-cost, low-fare airlines, has a substantial effect in constraining fare levels in markets served by the new carriers (2000). The second reason is that some in the industry have argued that financially marginal carriers may act in ways that depress prices below competitive levels, inducing contagion in financial distress (2000). In addition, some industry participants have argued that financially distressed carriers have cut prices in an effort to raise short-term cash, depressing market prices below efficient levels and threatening the financial security of healthy carriers. Another economic concern is the fact that the airline economy of the US is in a huge upset after the September 11 attack. Some of the companies declared bankruptcy while others are still struggling to survive (2003).…

    • 1897 Words
    • 8 Pages
    Good Essays
    Read More
  • Good Essays

    For the Uk Airline Industry Discuss the Way in Which Its Market Structure Affects the Ability for Firms to Set Prices and to Make Profits.
    • 1075 Words
    • 5 Pages

    For the Uk Airline Industry Discuss the Way in Which Its Market Structure Affects the Ability for Firms to Set Prices and to Make Profits.

    For the UK airline industry discuss the way in which its market structure affects the ability for firms to set prices and to make profits. (16 marks)…

    • 1075 Words
    • 5 Pages
    Good Essays
    Read More
  • Powerful Essays

    Industry Analysis of Us Airlines
    • 1590 Words
    • 7 Pages

    Industry Analysis of Us Airlines

    A4A passenger airlines have 1299 aircrafts on order for delivery through the end of 2022…

    • 1590 Words
    • 7 Pages
    Powerful Essays
    Read More
  • Satisfactory Essays

    Transportation Deregulation
    • 576 Words
    • 3 Pages

    Transportation Deregulation

    Airline deregulation has enabled more competitive pricing and increased carrier flexibility. Prior to deregulation, airline pricing was regulated by the Civil Aeronautics Board. Additionally, air routes were also controlled tightly. With more freedom, carriers can offer more effective options to those who wish to use airfreight as a means of shipment.…

    • 576 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    Southwest Airlines
    • 6862 Words
    • 28 Pages

    Southwest Airlines

    Following the Deregulation in 1978, a competitive price war ensued among the airline industry as a direct result of the new freedom for airlines to set their own fares as well as route entry and exits. This gave rise to the operating structure of the airlines as it exists today, consisting of the point-to-point system and the hub and spoke system. With this came the change of focus for major airlines to non-stop, cross-country routes in densely populated cities, which, in a regulated environment, would be profitable. This resulted in the obvious outcome of increased competition, thus lowering the average industry prices for non-stop cross country routes which were profitable. This caused operating costs to increase, narrowing the profit margins. During the mid 80 's, acquisition led to eight airlines capturing a disproportionate share of domestic traffic. Due to a recession and increasing fuel prices in the 90 's, bankruptcy and collapse were common to many carriers. As a direct result, new airlines were formed, and now position themselves as low fare, no frill airlines.…

    • 6862 Words
    • 28 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Topic 1 Discussion Answers Bharathi Sriram
    • 1619 Words
    • 5 Pages

    Topic 1 Discussion Answers Bharathi Sriram

    According to a study generated by IBISWorld on the Annual Global Airline industry revenue for 2014, figures were indicated at $745bn with over 9,000 businesses worldwide. From such figures we can infer that global competition in this industry is inevitably high. Such competition is present and can be seen in examples like existing Airline companies such as Etihad and Emirates which offer similar services, packages and prices to its customers. What can be noticed however with the Airline industry is that the threat of new entrants is quite low - this is in large part due to the fact that the Airline business involves a billion dollar investment and high capital (Porter, 2008). It is also a service which although used frequently, in one customer’s life-time; the extent of use may vary depending on many situational factors such as seasonality, business or leisure purposes and so forth. In Australia, the same notion holds in terms of new entrants to the marketplace. Major players in the Australian Airline network include Qantas, Virgin and Jetstar.…

    • 1619 Words
    • 5 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Southwest Porters Five Forces
    • 2475 Words
    • 10 Pages

    Southwest Porters Five Forces

    The domestic US airline industry has been intensely competitive since it was deregulated in 1978. In a regulated environment, most of the cost increases were passed along to consumers under a fixed rate-of-return based pricing scheme. This allowed labor unions to acquire a lot of power and workers at the major incumbent carriers were overpaid. After deregulation, the incumbent carriers felt the most pain, and the floodgates had opened for newer more nimble carriers with lower cost structures to compete head-on with the established airlines. There were several bankruptcies followed by a wave of consolidation with the fittest carriers surviving and the rest being acquired or going out of business.…

    • 2475 Words
    • 10 Pages
    Powerful Essays
    Read More
  • Best Essays

    As Planes Get Bigger, the Market-Place Gets More Competitive
    • 1779 Words
    • 8 Pages

    As Planes Get Bigger, the Market-Place Gets More Competitive

    The main suppliers of air travel industry are dominated by Airbus and Boeing (Kotler et al. 2009). Other suppliers of airline industry could include Commercial Supplies (in-flight amenities and equipment, catering services, cleaning services, uniforms, fuel, office supplies and equipment for organization), IT Products & Services and Engineering suppliers (aircraft parts and non-aircraft parts, services to support the aircraft maintenance and operation) (Singapore Airlines Invites Tenders 2010)…

    • 1779 Words
    • 8 Pages
    Best Essays
    Read More
  • Powerful Essays

    Airline Deregulation
    • 1597 Words
    • 7 Pages

    Airline Deregulation

    In 1978, economic policy experienced a dramatic event that would change the airline industry for decades to come. The United States Airline Deregulation Act of 1978 effectively broke down the government control of the industry and allowed the airline industry to flourish over the next 25 years. Before deregulation, the airlines were tightly controlled by the federal government. Because of this micromanagement, airline companies were few and competition was scarce. Prior to deregulation aircraft travel was a costly mode of transportation which was limited to the upper class. Because of the tight control the government had on it, the industry saw little, if any, significant growth. “The Airline Deregulation Act of 1978 phased out the government's control over fares and service and allowed market forces to determine the price and level of domestic airline service in the United…

    • 1597 Words
    • 7 Pages
    Powerful Essays
    Read More
  • Better Essays

    Ryanair vs. Easyjet Price Comparison
    • 1211 Words
    • 6 Pages

    Ryanair vs. Easyjet Price Comparison

    The European Airline industry’s growth dramatically changed after deregulation phased into the European market. Prior to deregulation, bilateral agreements between host countries in Europe existed, and typically each country had a national airline (Airline Operations & Management, 2014). The industry stagnated and costs were very high for air travel. Deregulation in Europe was phased in beginning in 1987, and concluded in 1993 (Airline Operations &Management, 2014). After deregulation, airlines were able to operate routes without restrictions, and pricing for tickets was not controlled. Similar to the U.S., a proliferation of failures and bankruptcies occurred.…

    • 1211 Words
    • 6 Pages
    Better Essays
    Read More
  • Good Essays

    Delta Airlines
    • 2028 Words
    • 6 Pages

    Delta Airlines

    Deregulation of airline industry in US brought many changes to the way the industry operated, which automatically resulted in increase in the number of carriers which specialized in services which were limited to regions and non-stop operations round the clock. These low cost carriers strategy was to purchase older cheaper aircraft and sometimes also operated outside the boundaries of industry wide online reservation systems which many of the larger carriers have implemented effectively. Against the inconvenience caused to the passengers, low fares as compared to the industry standards were offered to the passengers and every now and then new marketing strategies were implemented in order to lure more passengers to use their services on the basis of cost based competitive strategy. This paper also focuses on one of the low cost airline i.e. Delta Airlines and its oligopolistic position in the airline industry. By investigating Delta Airlines, a better analysis of price vs service impact in the airline industry as a whole can be understood and the impacts on travelers and people investing in the organization. Till late 1070s, much of the prices were setup by the government which resulted in price not being a factor of competitive…

    • 2028 Words
    • 6 Pages
    Good Essays
    Read More
  • Powerful Essays

    An Analysis of People Express Airlines: Rise and Decline
    • 4639 Words
    • 19 Pages

    An Analysis of People Express Airlines: Rise and Decline

    Strategy is defined as the process of positioning the organization in the competitive environment and implementing actions to compete successfully. The premise behind the strategy of People Express was to focus on the people, both the customers as well as the employees. Employees were referred to as “People”, and the passengers were referred to as “Customers”. Examples of strategies implemented by People Express early in the process include:…

    • 4639 Words
    • 19 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Strategic Vision for Airtran Airways?
    • 4778 Words
    • 20 Pages

    Strategic Vision for Airtran Airways?

    On September 27, 2010, a merger of AirTran Airways and Southwest Airlines, two major low-fare carriers in the U.S, was officially announced and lead to a nearly-establishment of a “most competitive low-fare airlines”. The U.S Airlines industry had grown in competitiveness since “the deregulation act” in 1978, seeing increasing entry of new carriers into the industry and continuous innovation in operation and service. However, since the beginning of this decade, it has been in a crisis due to the long-term recession of the U.S economy and instable fuel price, which in turn, led to bad performance and increasing debt of many players in the industry, and AirTran was among them.The merger was a result of such situation. The merger, at the current time, is planned to be completed within the next two years, and once complete, all AirTran’s utilities, including aircrafts, pilots, service network, etc.,will be rebranded and served under the name of Southwest. However, this strategy, in which the AirTran brand will be completely disappeared, offers merits to the merged airline, but it certainly has demerits as well. Although merging into one operator would give the two carriers competitive edge to become the largest low-fare airline in U.S and a potential to expand overseas, AirTran’s core competencies including strong hub presence in Atlanta and its unique cost control and advertising techniques would be highly possibly abandoned and adapted to those of Southwest. Besides, differences in cultures and corporate objectives are proved to be a not simple task for the merge. Therefore, instead of this in-planning strategy, what we recommend is a new strategy, in which the brand AirTran will still be maintained and serve majority as an international business unit of Southwest. Following in this report will be our analysis of business environment of the…

    • 4778 Words
    • 20 Pages
    Powerful Essays
    Read More
  • Best Essays

    Rise of Budget Carriers
    • 2781 Words
    • 12 Pages

    Rise of Budget Carriers

    For many years the Airline industry in the Asia Pacific region has been tightly regulated and consequently stable as national governments had control over operations of their national carriers and bilateral agreements between states meant that full-fledged airlines could operate without facing any competition at all. With the reform in airline licensing and access to air routes highlighted in the report[1] of the Pacific Economic Cooperation Council (PECC) conference, new rules meant intra-Asian open skies and relaxation of ownership rules. This in turn led to the boom of low-cost carriers in the region. With the skies now clear of restrictions, low-cost or ‘budget’ carriers could now prey on air routes once dominated by full-fledged carriers. With business models based on low fares and no frills, meaning the absence of meals and the comfort of using aero-bridges at airports among others, low-cost carriers took the region by storm with Virgin Blue and Air Asia leading the pack.…

    • 2781 Words
    • 12 Pages
    Best Essays
    Read More
  • Best Essays

    Airline Industry in the Philippines
    • 3920 Words
    • 16 Pages

    Airline Industry in the Philippines

    Today, domestic air transport industry has evolved into oligopolistic structure. The liberalization under Executive Order 219 signalled the entry of new airlines in the industry. The bigger players, as defined by the size of their…

    • 3920 Words
    • 16 Pages
    Best Essays
    Read More

Related Topics