Key Success Factors in the Low Cost Carrier Industry
Key Success Factors in the Low Cost Airline Business:
Low cost airlines strive to meet the basic demand of airline customers - a safe air transport from one location to another location - at a relatively low price. In order to be successful, they have to carry out their business from a certain value-based perspective - “less for much less” – and concentrate their attention on the following Key Success Factors of their industry:
- Overall low costs: Overall low costs are essential to be able to offer cheap fares. They are achieved by several cost-cutting business practices such as: o Point-to-point services (no waiting for baggage or passenger transfers, less complexity) o Cheaper product design (no free food or drinks, no newspapers) o Standardized fleet (lower aircraft capital outlay, lower training costs, cheaper parts & equipment supply, lower maintenance costs) o Use of secondary airports (lower charges) o Direct Sales via Internet as main distribution channel (less travel agent fees)
- High operational efficiency: High aircraft utilization is crucial to maximize the profits of the airline. Hence, quick turnaround times at the gates are required to reduce the time on the ground, where aircrafts do not make profits. Moreover, maintaining a high passenger load is important to spread fixed costs, increase staff productivity and overall profitability.
- High core service standards: In contrast to certain ancillary services such as free food and beverages, high core service standards such as safety, reliability (punctuality, reliable baggage delivery) and customer support are fundamental for customer satisfaction. Most importantly, safety problems and safety concerns have to be avoided. They have a particularly bad effect on low cost airlines, since a trade of between low prices and air travel safety will be suspected.
- Strong direct sales capability via the Internet: Whilst being the cheapest channel for ticket sales, the Internet is also
Low cost airlines strive to meet the basic demand of airline customers - a safe air transport from one location to another location - at a relatively low price. In order to be successful, they have to carry out their business from a certain value-based perspective - “less for much less” – and concentrate their attention on the following Key Success Factors of their industry:
- Overall low costs: Overall low costs are essential to be able to offer cheap fares. They are achieved by several cost-cutting business practices such as: o Point-to-point services (no waiting for baggage or passenger transfers, less complexity) o Cheaper product design (no free food or drinks, no newspapers) o Standardized fleet (lower aircraft capital outlay, lower training costs, cheaper parts & equipment supply, lower maintenance costs) o Use of secondary airports (lower charges) o Direct Sales via Internet as main distribution channel (less travel agent fees)
- High operational efficiency: High aircraft utilization is crucial to maximize the profits of the airline. Hence, quick turnaround times at the gates are required to reduce the time on the ground, where aircrafts do not make profits. Moreover, maintaining a high passenger load is important to spread fixed costs, increase staff productivity and overall profitability.
- High core service standards: In contrast to certain ancillary services such as free food and beverages, high core service standards such as safety, reliability (punctuality, reliable baggage delivery) and customer support are fundamental for customer satisfaction. Most importantly, safety problems and safety concerns have to be avoided. They have a particularly bad effect on low cost airlines, since a trade of between low prices and air travel safety will be suspected.
- Strong direct sales capability via the Internet: Whilst being the cheapest channel for ticket sales, the Internet is also