Comparison of Low-Cost Airline Models
1 Summary
Low-cost carriers have been established for many years. A model for a low-cost airline is described, derived from the operations of several such carriers. The models followed by the three main low-cost carriers in the UK, Ryanair, easyJet and Go are then outlined. The impact of the differences between these models is then assessed to see how they affect the cost base and productivity of the airlines. Finally, it is suggested that Ryanair’s model is most suited for the current conditions in the air transport industry, although easyJet’s model could be more favourable if conditions changed in the future.
2 The Low-Cost Model
Southwest Airlines is recognised as creating the model for low-cost, low-fare carriers. Its model has been adopted by several airlines hoping to emulate Southwest’s success. Some have taken the model further and adapted it to provide an even lower cost base for their operations. However, it is not clear that any single airline has identified a perfect model. Each has adapted its model to suit its operating environment and strategies. The core elements of any low-cost model are outlined below. , ,
2.1 Network structure
· network consists of point-to point, short- or medium-haul services with no interlining, connections or baggage transfers.
· use of less congested secondary airports leads to reduced taxi times, quicker turnarounds and lower airport charges.
· high frequency of service at every airport served provides a larger return on the investment necessary at that airport, whilst also providing flexibility for passengers thereby encouraging further demand.
2.2 Aircraft Fleet
· single fleet type, providing commonality and flexibility benefits.
· high aircraft utilisation means fixed costs can be spread over more flying hours and more passengers.
· newer aircraft seem to be favoured, despite the advantage of very low depreciation charges associated with older generation aircraft.
· aircraft are configured in a
Low-cost carriers have been established for many years. A model for a low-cost airline is described, derived from the operations of several such carriers. The models followed by the three main low-cost carriers in the UK, Ryanair, easyJet and Go are then outlined. The impact of the differences between these models is then assessed to see how they affect the cost base and productivity of the airlines. Finally, it is suggested that Ryanair’s model is most suited for the current conditions in the air transport industry, although easyJet’s model could be more favourable if conditions changed in the future.
2 The Low-Cost Model
Southwest Airlines is recognised as creating the model for low-cost, low-fare carriers. Its model has been adopted by several airlines hoping to emulate Southwest’s success. Some have taken the model further and adapted it to provide an even lower cost base for their operations. However, it is not clear that any single airline has identified a perfect model. Each has adapted its model to suit its operating environment and strategies. The core elements of any low-cost model are outlined below. , ,
2.1 Network structure
· network consists of point-to point, short- or medium-haul services with no interlining, connections or baggage transfers.
· use of less congested secondary airports leads to reduced taxi times, quicker turnarounds and lower airport charges.
· high frequency of service at every airport served provides a larger return on the investment necessary at that airport, whilst also providing flexibility for passengers thereby encouraging further demand.
2.2 Aircraft Fleet
· single fleet type, providing commonality and flexibility benefits.
· high aircraft utilisation means fixed costs can be spread over more flying hours and more passengers.
· newer aircraft seem to be favoured, despite the advantage of very low depreciation charges associated with older generation aircraft.
· aircraft are configured in a