Notes

Low Cost Carriers

Inputs | Outputs |

Ticket sales | |

Food and duty free and baggage and ads | |

1. Low cost carriers

2. Full service carriers

What routes shall we fly?

1) Short distance vs long distance

2) Types of airports (International)

a. Primary to Secondary

b. Primary to Primary

c. Secondary to Secondary

| Pros | Cons | Competition |

Secondary to secondary | Less congestedLower taxesNew customersFewer delaysLanding fares are low | Customers facilities are poorLess customers for airlines | Low cost carriers |

Primary to primary | Customers can easily travelConnections (easy transitions) | Airport landing fees are high | Full service carriers |

Secondary to primary | Most full service do not offer these routes, mostly low cost airlines offer these routes | | Low cost carriers |

If there is another low cost carrier flying a particular route, will you want to enter into that route?

* You can only enter with a lower cost. Which means you should have new process, new technology, and new way of replicating things otherwise you’ll be entering a price war in which only the customers will benefit.

Checklist

If demand exceeds supply, anywhere can make money. Only in markets with competition where demand does not exceed supply, then you won’t be able to make money.

First movers on average waste a lot of money trying a lot of new things, and they are generally not defendable.

1. Already a low cost carrier serving a route, we don’t usually enter the route.

2. Already a full service carrier serving a route, we should enter the route if our business model/strategy allows us a lower cost of operation. Can attract price sensitive people to take your services

3. Fresh/virgin routes: Analyse whether the costs is less than the benefits. Strategy: how quickly you start up these routes and make them profitable. How do they identify new routes and the speed at which they can make new routes...