The concept of a low – cost airline came into the picture in the seventies by the American domestic carrier ‘South West`. The objective was to offer low-cost airfares to consumers. However, this created a bit of a situation as flagship carriers started to lose a sustainable amount of the market share to the newly formed low-cost airlines because of their ability to charge lower prices. In the 1970`s till the early 2000`s, one could witness a transformation of the low-cost carrier concept in the United States.
However, in Europe, the low-cost concept was established in the year 1995 with the introduction of EasyJet and Ryanair. Low-Cost Carriers are found worldwide; having transported approximately 1.3 billion passengers in 2018, amounting to the 31% of the total passengers on scheduled flights as per ICAO’s official statistics (2018).
The reason why low-cost carriers do so well;
· Fares: Unrestricted and low price
· Network: Point to point high frequency routes
· Distribution: Travel agents and call centres, no tickets
· Fleet: High utilisation, same type of aircraft across the fleet
· Airport: Secondary airports with short turnaround times
· Sector length: Short (around 400nm)
· Staff: High productivity with competitive wages and profit sharing
The foundations of a of low-cost airlines still remain the same, which is to provide the lowest price for the consumers by undercutting the price levels of legacy carriers.
The airline that has been chosen for the sake of this question is Lufthansa. Lufthansa Airlines was founded in the year 1953 but it was able to commence operations from the year 1955. Earlier it was a flag carrier and state-owned airlines but in the year 1994 was privatised. It is the founding member of largest airline alliance in the world Star Alliance.
There are 7 P’s that make up an airline marketing strategy:
· Complimentary dinners and beverages on flights and snacks suppers and refreshments are accessible at a low charge.
· Pilots and recently enlisted administration providers are prepared for both wellbeing and warm administrations.
· Flights has a very good reputation for dependability.
· Reasonable charges that make it feasible for touring more with family or companions.
· Lufthansa’s corporate headquarters are placed in Cologne, Germany.
· Lufthansa flies to 207 international destinations in 78 countries
· Lufthansa have moved its head office from Cologne to Frankfurt by 2017.
Ryanair like many other airlines, has a lot of ongoing promotion such as:
· Airport Counter Check-in: Check-in for your flight in the most conventional manner by stopping by the Lufthansa counter at the airport.
· Next Day or Advance Check-in: This option allows you to save time and check-in for your flight up to 24 hours in advance of your departure time via the internet.
· SMS Check-in: This option allows you to save time and check-in for your flight up to 24 hours in advance of your departure time via SMS if you meet the criteria for the service.
· Electronic Kiosk Check-in: For those who want to bypass the lines at the counter on busy travel days, Lufthansa offers check-in services for passengers via electronic kiosks.
· Offers: few discounts and promotional codes are distributed for cheap tickets.
· As a centre component of worth creation, a cutting edge and effective fleet is definitive for the Group’s prosperity. In the meantime, a modern fleet structure is a vital component of the Lufthansa Group’s environmental policy.
· Aircrafts such as airbus and Boeing make up the majority of the fleets.
· Planes from Bombardier and Embraer are also used in the European and regional segments.
· Lufthansa has a good product with constant maintenance to make sure the planes are all in optimum condition.
· The Lufthansa Group has more than 135,000 employees worldwide.
· The airline provides flexible working hours.
· There are choices for the professional development of staff and maintaining expert knowledge.
· The Lufthansa group employs people from 176 different nations.
· Comprehensive offers concerning health care and health maintenance mean that physical fitness is also taken into account.
Lufthansa has four classes; Economy class, Upper economy class, Business class and First class.
· In every class there is on board entertainment and food and beverage included.
Figure 2 Taken from the Lufthansa website
· Apart from entertainment and food and beverage service, there is on-board shopping
· Internet on board (at a charge)
· Well being on board such as ordering special meals and seminars for relaxed flying
· The Lufthansa website is very user friendly
· The aura in the plane is really good and everything is maintained at its optimum.
· The offices are all state of the art.
· The payment process when purchasing a flight ticket is super easy.
· Booking with Lufthansa is easy and a hassle-free process.
According to Alamdari & Fagan (2005) almost all the low-cost airlines in north America now offer some kind of frequent flyer programme, some have started complementary drinks, in-flight entertainment and different class systems as well (e.g. JetBlue). Ancillary services are crucial to an airline especially in today`s world where everyone is looking for comfort and luxury. Ancillary services are products or services that are optional but are related to air travel. They could vary from baggage to seat upgrades or meals but they are part of the passenger`s larger travel plans.
However, within the European Market, airlines such as EasyJet and Ryanair tend to follow a traditional cost leadership strategy when it comes to the basic services offered. Some of the ancillary services such as bags or extra legroom are linked to the purchase of the ticket. Below one can find the ancillary services that Ryanair offers onboard their plane.
IATA now recognises that ancillary revenues have become a key component of the improved financial performance of the industry.
A great way of promoting ancillary services in order to get more profit is by plastering adverts on overhead luggage bins, backs of seats, lounges and gate areas. Ryanair (2015) states that its overhead bin, tray table and boarding card advertising media offers an effective communication platform as the advertisements become lodged into the long-term memory of its passengers.
Kutze (2017:34), has mentioned that several low-cost airlines have been using a sustainable strategy in their ancillary revenue, as passengers are charged for inflight meals and drinks, thus reducing the amount of unused food and beverages being discarded after their expiry date.
There are other types of ancillary items that some airlines offer such as; airport lounges, sports or musical equipment and extra leg room space. Low cost airlines must apply effort as to understand the needs of individual person so a more personalised service can be created.
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Kutze R., 2017, Sustainability Analysis of the Airline Industry – Low Cost Carriers and Full Service Carriers, The International Institute for Industrial Environmental Economics, University of Lund,accessed on the 7th of May 2020
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