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Choose one element of an archetypal low-cost-carrier business model from the list below. Explain how it reduces cost compared with a large international network airline. Why do global network carriers not incorporate this element into their business model?
Low-cost carrier business model characteristics (IATA, 2006):
- Primarily point-to-point operations.
- Serving short-haul routes, often to/from regional or secondary airports.
- A strong focus on price sensitive traffic, mostly leisure passengers.
- Typically one service class only, with no (or limited) customer loyalty programs.
- Limited passenger services, with additional charges for some services (e.g. onboard catering).
- Low average fares, with a strong focus on price competition.
- Different fares offered, related to aircraft load factors and/or length of time before departure.
- A very high proportion of bookings made through the Internet.
- High aircraft utilization rates, with short turnaround times between operations.
- A fleet consisting of just one or two types of aircraft.
- Private-sector companies.
- A simple management and overhead structure with a lean strategic decision-making process.