One of the airline industry’s best features is its dynamic growth throughout the years. Because aircraft travel connects people together, more and more people in the past years have shown their willingness to use airplanes as one primary mode of travel between faraway locations. This fact, along with the reduction in the cost of air travel itself, and the rise in available leisure time for people, is able to generate growth in the airline industry’s demand. The different airlines themselves are able to showcase this dynamism after they have been set free from economic and government regulations. One of the latest product innovations which airlines promote is the long-haul, low-cost operational business model. This means that more and more people can travel further away, without shelling out much more than if they traveled to much nearer locations.
Primarily speaking, the low-cost business model has its foundations on the adoption of the most efficient working practices possible in an airline. These, coupled with quick turnaround times, point-to-point services, and the use of single aircraft types are able to cut down costs to a minimum. These types of airlines must also utilize their workforce and capital allocations extremely well, using only what is needed, and employing only essential positions. These companies should always keep a close eye on their books, and must make sure not a penny spent has gone to waste or on redundant positions. Usually, managers which have a keen eye for detail are employed to watch over employees and key service sectors within these airlines. These people must be able to have a balanced approach to management – being strict when the times call for it, yet still being able to give enough space for their employees to grow within the company.
Unbundling of Fares
Another technique often employed by low-cost carriers would be offering unbundled fares, which means that the ticket price is separated into different segments for both promotions and to give customers several options on what flights to take. An example of this would be to only pay a dollar to go to a certain location 6 months from now. This type of promotion doesn’t say though that the customer would still need to pay for tariff fees, and other fees required by the government. Only the airline’s operational fare itself costs one dollar. This type of practice is often a driver of demand, and not really a direct source of profits for budget airlines. By driving up the demand for later dates, regular-paying customers would increase in number, and would recoup any losses they would have for offering seats at extremely low prices at a previous time.
The Bottom Line
Low-cost budget airlines have severely dented the profitability of legacy carriers by undermining the pricing given to airline traffic. This may or may not change the entire airline industry’s outlook in the foreseeable future, as there needs to be a balance followed by the airlines themselves, the customers, and even the airports and aircraft suppliers. Both legacy carriers and the new budget entrants need to be well-taken, since both bring some level of value and demand to aircraft use in general. Airports for example, should decide whether they would accept deals with a new hotshot budget carrier which promises extremely high growth and demand, while your base carriers who have been with your business since the start could only offer modest growth. In the bigger picture, both these types of airlines would benefit by mutually agreeing to deals that will not undermine each other’s operations. Being able to focus on their target markets and to grow those markets to high volumes would only push forward the airline industry as a whole.