Key success factors for the low-cost airline industry
Figure 1 illustrates the process followed to determine the key success factors (KSF) in the low-cost airline industry. It is adapted from the process developed by Grant (2005: 93). The texts highlighted in red are the responses to the questions posed in the model and serves as the inputs to the discussion on the KSFs for the low-cost airline industry.
Figure 1. Identifying key success factors in the low-cost airline industry.
As consumers become more informed and cost-sensitive a low-cost airline must have the ability to offer its service at a cost not only lower than that of the full-service carriers, but also on par with its rivals within its segment. Transparency: Although more informed many of the low-cost airline consumers are not familiar with the hidden costs of purchasing a ticket. It is hence important to adopt a “what you are quoted is what you will pay” policy to pricing.
Professionalism: The conduct of the airline staff (especially front-line) is a major factor in the consumer’s perception of value purchased. Safety: Air travel impacts in a very personal way on the lives of passengers. Firstly the personal safety and security of the passenger is determined by the airline during consumption of the service. Secondly the safety (security) of the consumer’s personal belongings (luggage) is determined by the airline. Hence it is critical that this aspect is addressed effectively. Comfort: Passengers need to feel comfortable even though they are not flying in premium liners. With the squeeze on cost it is thus essential for the airlines to strike the balance between trimming excesses from their service offering while still ensuring minimum levels of passenger comfort. Convenience: Through collaborative agreements with players within the car rental and hospitality industries, the airlines can offer access to these services without incurring additional costs. This is an important differentiator as it saves consumers time and perhaps money through economies of scale. Reliability (booking system speed & up-time; seat availability, ie no over-booking): The on-line user interfaces when booking tickets, processing payments and checking in need to be reliable. That means that the system up-time, speed and data base accuracy need to meet the customer’s expectations. Customers will migrate if they constantly loose connectivity while in the middle of booking tickets or they forfeit bookings or low prices due to slow system processing speed. The same is true for reservation systems that allow excessive over-booking or booking errors. Routes: Low-cost air lines need to have market presence on the main routes to compete both with the traditional carriers and other low-cost rivals. With the already congested main airports and the associated access routes in the larger cities this could lead to delays and additional queuing time. It is thus important to secure apron space on decentralised airports such as Lanseria, Rand and Grand Central Airports. Flexibility: Although only presenting a reduced service offering it is essential that the low-cost airlines still allow for flexibility in terms of booking changes. Another element to flexibility is the ability to cater for special needs passengers such as the disabled and single mothers travelling with babies. Accessibility: To keep overhead costs down it is imperative for this kind of business to be accessible via low-cost options where the customers can be part of the service delivery process and bear some of the costs. Typically these access mechanisms include internet bookings and special notifications via email and/or sms.
Departure & arrival times: Although not as “non-negotiable” as for business travellers – adherence to departure and arrival times are important to individual/private travellers as the personal cost of delayed flights can be high....
References: Bakhru, A. 2006. Analysing the External Environment: study guide for MBAB820. Milton-Keynes: Open University.
Grant, R. 2008. Contemporary Strategy Analysis. 6th edition. United Kingdom: John Wiley & Sons Ltd.
Lubbe, B.A. 2003. ‘Tourism Distribution’. In: Lubbe, B.A. ed. Tourism Management in South Africa. Cape Town: Pearson Education South Africa. 200-210.
Thompson, A.A. and Strickland, A.J. 2001. Strategic Management. 12th edition. New York: McGraw-Hill.
Townsend, S. and Bick, G. 2003. ‘Kulula.com: Now Anyone Can Fly (Abridged).’ WBS-2003-4(a). Wits. Wits Business School.
Van Wyk, S. 2009. ‘Low-cost airlines in holding pattern’, Business Day. 2009. 3 July.
Please join StudyMode to read the full document