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

Topics: Airline, Low-cost carrier, AirAsia Pages: 16 (3247 words) Published: April 25, 2014
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, Papatheodorou and Forsyth, 2010).

Second, regional carriers usually are act as a feeder carrier for the legacy carriers or the alliances which target to niche market and provide point-to-point routes in their own regional hub (Delfmann, Baum, Auerbach and Albers, 2005).

The aircraft capacities usually less than 100 seats which able to land

by shorter runway and have their own staircases which flexible to use different kinds of airport (Wald, Fay and Gleich, 2010).

For example, CityJet is a

subsidiary company of Air France KLM group for flying 16 destinations within Europe (CityJet, 2011a).

Appendix A shown the cities are served by CityJet.

The characteristics are similar to legacy airline such as free baggage allowance, complimentary drinks and snacks and frequent flyer programme (CityJet, 2011b).

Third, charter carriers such as Condor and Martin Air are act as the air service providers for leisure travel in Europe which usually incorporate with tour operator, accommodation and ground transport services (Cento, 2009). The quality of products and services are flexible which depend on what type of customer onboard. They are non-scheduled and seasonal-sensitive market tended to fulfill the larger demand for travelling the warm water destinations particularly southern Europe during school breaks and summer holiday but lower demand in the rest of the year (Wald et al., 2010).

They maintain

mono-class service, high-density seating and high frequency of aircraft 1

utilization for reducing cost, but they still serve free in-flight drinks and meals (Doganis, 2006).

Fourth, LCCs is most successful business model after deregulation which is the mixed model of FSCs and charter carriers and changed the way of air travel.

The characteristics are simple products and simplified operations

such as no free meals and in-flight entertainment, free seating and quicker turnaround time.

Southwest Airlines is the pioneer to adopt this scheduled

low-cost, no-frills and...


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]
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vulnerabilities of mixing business models”, Research in Transportation
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