Airline Operations Analysis

Topics: Low-cost carrier, Airline, AirAsia Pages: 10 (2869 words) Published: March 13, 2013
Aviation is a very dynamic yet competitive industry. With trends that emerge and airlines investing heavily on Research and development to capture the segment and the market, it is quite evident nowadays that low cost carriers are good at what they do and have posed a serious threat to legacy carriers. The concept of cutting cost and cheaper air travel is so much in demand, that low cost carriers are at ease in the market. Legacy carriers have enjoyed good fortunes for a while since short haul carriers never saw beyond the long haul concept. However when they do, is it going to be feasible? Will the long haul model work for Low Cost carriers? Many have tried it, many have failed and some others are struggling. The deregulation and Open skies agreement adding to fuel costs have all played an important factor in trying to limit the success of such operations. This paper will help understand the history of LCC (Low cost carrier) long haul operations and the reasons for the failures. Discussion will also be made to outline a successful and efficient model that can help these LCC achieve their long haul goals.

The possibility of starting new operations have increased because of continuous deregulation and the end of multiple bilateral agreements between countries. Over the years, quite a few carriers have tried to adapt the low cost model to long haul operations. The idea is however not new but various attempts in the past have been unsuccessful.

Laker Airways

Freddie Laker’s Skytrain in 1977 was one such first venture. Laker airways transformed its UK based charter operations into a long haul “no-frills” airline flying form London Gatwick to NewYork, and adding subsequently Los Angeles and Miami.

Its attributes at that time were common with the low cost suppliers of now. Such as:

Point to Point operations
In Flight catering at an extra cost
Single class seating (High Density)

The strategy of Laker airways was to significantly reduce the unit costs thereby substantially reducing their fares.

Reasons for Failures:

Due to a lack of advance booking, passengers had to queue up at the airport for each flight. This was a major disadvantage for lakers airways.

Economic downturn in the early 1980’s led the demise of the airlines by 1982

Strong competition from other carriers and depreciative nature of its base caurrency also lead to its failure.

People Express

Since the Laker airways was a standalone operation, after its failure, by 1983 a US based LCC called People Express started its operations from New York to London Gatwick adding Montreal and Brussels at a later stage. The differentiation with People Express was in its connectivity to Newark hub all thw while having a very successful domestic base.

Some attributes of People Express:

They believed in Simplicity
Their flights had premium class seats
Extra charge for Checked baggage at US$3

Reasons for Failures:

Over expansion of its network and too many connections with hubs led to its demise in 1987

There was also evidence of management problems.

Previous LCC long haul operations:
Oasis Honk Kong Airlines Limited.
Oasis Hong Kong was the first company to announce and offer Low cost flights from Hong Kong to London Gatwick starting off in 2005 with a two-class B747-400 for 18months before it failed. Sticking to their mantra: “Making frequent long-haul flights accessible to all” they had various features that could have toppled legacy carriers. Attributes:

1.Fares at the very beginning were offered for as low as US$ 142 for one way flight from Hong Kong to London Gatwick. 2.The ideology was to offer Business class travel more affordable with prices as low as US$900 one way for business class seats. Failures:

1.With dreams of rapid expansion and new routes, Oasis Hong Kong fell flat owing to the fact that it became economically unsustainable. 2.They went into liquidation with debts of over 1...
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