Differences between the Low Fare/Low Cost Airlines models and the Full Service Airline models
There are many strategic approaches in their operations, which distinguish LFA/LCA business models from the traditional full service airline models. There are several main elements, illustrated below.
The service factor
LFA/LCA ́s lower prices for the customers are to some degree achieved by offering the customers significantly lower service levels. They do this for both in-flight and pre-flight services. In pre-flight services, the airline does not offer the choice of business lounges. They also do not pre-assign seats on flights as passengers are allowed to take the seats of their choice as they get on the aircraft. On the full service airlines, on the other hand, passengers are assigned seats, or they can choose the seats they wish to have when paying for the ticket. They also have different seats for people who pay for different classes on the airplane. People who are willing to pay more get superior services and more comfort than those travelling in the economy class.
With regard to cancellations or delays, the customers are not provided with meals or accommodation. They are expected to make their own alternative arrangements. Therefore passengers are expected to carefully read all the terms and conditions prior to purchasing the ticket. This is not the case with the full service airlines. EasyJet, for instance, will provide accommodation and meals in the event of such incident. Ryanair, on the other hand, categorically refuse to make any such arrangements. They do not cater for meal vouchers or any hotel accommodation for the flights that are cancelled or delayed for reasons, which are beyond Ryanair’s control .
With the LFA/LCAs, no free drinks or foods are generally availed in-flight but they may be purchased within the plane at rather high prices. This is meant to turn what would have been a cost for the airline into a possible source of revenue. There are a few exceptions though. SWA, for instance, always provides sponsored snack boxes and complementary soft drinks . The German airline LFA Air Berlin offers complementary soft drinks and sandwich for passengers . They do this as a sigh of goodwill, and this sometimes attracts the customers. With the full service airlines, one is assured of full courses. In some of these airlines, they offer all you can eat, for no extra cost. Airlines such as Emirates even offer snacks for children .
Turnaround times
The LFA’s usually aim to having low turnaround times; in general, they aim their flight schedules are at 25 minutes. What this means is that from the arrived time of the aircraft at the gate, it should have disembarked all the baggage and passengers and again embarked new loads of other passengers and baggage within twenty-five minutes. To ensure that this happens, they do not make use of air bridges. Passengers walk right out as stairs pull up. They can also use both the back and front of the plane for exit/entrance. As mentioned earlier, they do not have pre-assigned seats, and this increases the chances of passengers being at the gate by boarding time to be able to get a seat of their choice. The fact that most of these airlines do not serve any free food or drink for the passengers on-board also speeds up their cleaning process between the flights. The cabin crew does thorough cleaning at night.
For full service airlines, this is not possible. There is need for more cleaning due to the food and drinks spilled on the plane during flights. There is also much resistance from trade union, who often demand that the planes are checked and thoroughly cleaned after every flight.
This low turnaround time means that LFA/LCA’s can increase their daily aircraft utilization. This is one of their main cost advantages as opposed to full service airlines. Longer turnaround times mean lower profits for the airline as they cannot make as many trips.
Homogenous fleet
Most LFA/LCA`s generally pursue a strategy of using homogenous fleets with only a single type of aircraft. The most commonly used aircraft is the Boeing 737, which is the aircraft of choice for the LFA/LCA ́s. Boeing, has gradually upgraded the 737 aircraft from the 737-200 to its latest 737-900, although the main layout of the plane is still the same. This is very important as it helps to save cost in maintenance and pilot training for single-aircraft fleets .
Full service airlines such as Lufthansa are forced to use a mixed fleet. This is because unlike most LFA’s, they operate both long haul and short haul flights .
Hub-and-spoke vs. Point-to-point travel
This is one of the main differences between LFA/LCAs and FSAs. Point-to-point travel implies that the airline only transports the passengers from between point X and point Y, for example, from Copenhagen to Madrid. Where one needs a connecting flight to get them to Copenhagen or another onward flight after landing in Madrid, they are to book that separately. The airline is also not responsible for any delay that would cause them to miss their onward flight because they simply carry passengers from X to Y – no more, no less. They strictly travel from point X to Y are although the passenger is allowed to buy separate tickets to make the necessary connections. However, one must bear in mind that they will still have to pass through all the check-in procedures at all the stops, so they should ensure that they include some extra time in their travel itinerary. This system allows the airline to operate different city-pairs according to seat demand only, because they do not have any responsibility to accommodate passengers who are waiting for connecting flights.
The hub-and-spoke system is made up of a hub (this is usually the primary or main airport) and spokes, (these are secondary airports) which feed this hub with passengers to fill up any spaces in the aircraft. The passengers who wish to make connections will usually have several available choices for the destination. They can travel via a number of different hubs using several different airlines. For instance, one could travel from Copenhagen to Madrid through Frankfurt (using Lufthansa), Paris (using Air France) and many more options, making it a very competitive market with yields, which are quite low. Traditionally airlines could make up for the low yields by ensuring that they charge disproportionately high prices for passengers travelling from point-to-point, and this effectively subsidized transfer passengers and enabled them to negotiate some discounts at the airports for the transfer passengers.
Whereas LFA/LCAs are only able to make point-to –point travel arrangements, full service airlines are able to use hub-and-spoke systems and still make profits. This is because they are able to charge high prices for their services, making it possible for them to cover the difference.
Seat density
Most LFA business models utilize higher seating density to act as a source of possible cost advantages. The seat pitch for LFA/LCAs is usually twenty-eight inches whereas the economy class seat s of full service airlines usually has a seat pitch of thirty-two inches. This makes it possible for LFAs to fit in more seats in their aircraft, thus increasing the maximum seat capacity of every flight. For instance, EasyJet fits one hundred and forty-nine seats into the Boeing 737-300 in their airline while Lufthansa fits one hundred and twenty-nine seats into theirs. Assuming that they have similar operating costs, this translates into seventeen percent lower costs for the airline EasyJet .
However, one must also consider that one of the reasons for having fewer seats at Lufthansa airline is to cater for the First Class or Business Class seats, which are significantly more expensive than the Economy seats. These seats also produce significantly higher yields, and offset most of the cost resulting from having fewer seats.
The choice of airports
There are three main categories of Airports. The first category is primary airports. These are the airports found in major cities, like Heathrow in London. The second category is secondary airports. These are smaller, but are still found near major cities, such as Stansted in London. The third category is regional airports that are usually situated somewhere in the province, quite a distance from capital cities. An example of this is Aarhus airport, Denmark. They usually have the least number of traffic .
Larger network carriers use primary airports as the “hub” for their hub-and-spoke system. This puts them in a very good position, giving them bargaining power, because they have the infrastructure and size needed to process the large passenger numbers. Airports like Heathrow may process more than sixty-three million passengers every year. Primary airports are usually the most expensive in terms of aeronautical fees and other charges, such as landing fees, per passenger charges or the ton of freight handled, charge for aircraft parking as well as other aeronautical charges, for instance, air bridges and airport traffic control.
In order to lower the aeronautical and other costs, low fare carriers such as Ryanair and easyJet have developed routes to regional and secondary airports, even though they still maintain their presence in a few primary airports like Dublin Airport (for Ryanair), and Amsterdam and Schiphol (for EasyJet). Another reason for this due to the huge amount of traffic found in these primary airports (for instance, in Heathrow a plane takes off or lands every minute, 24hours a day, 7 days a week on average). This leads to a lot of congestion very often, and this is not favorable for the low fare airlines, which aim for very low turnaround times. The congestion would often force them to compromise and this would lead to delays.
Operations
Most LFA/LCAs travel to a limited number of destinations. This is because they have to be conscious of the costs, and some of the destinations may not cover the costs they incur. Full service airlines such as Emirates, on the other hand, cover a much wider area, including some of the places avoided by the LFA/LCAs.
Distribution system
Most LFA/LCAs no longer use the services of travel agents. This is because most travel agents are very expensive, so in order to cut costs, they only distribute their tickets through the Internet and call centers. Paper tickets are no longer issued. The passenger receives a booking code, and they must present it upon check-in. one of the advantages of this system is that it reduces the costs of distribution to a total minimum.
Frequent flyer programs
Most LFA business models do not use frequent flyer programs. This is a feature of full service airlines. This is where the frequent fliers are given certain discounts and privileges in order to encourage them to keep using that particular airline. However, there are a few exceptions. SWA operate a program known as Rapid Rewards program, in which the customer receives one return flight free of charge for every eight return flights they make . Air Berlin also has similar programs in Europe by the name Top Bonus . However, most LFA/LCAs do not use this technique to retain customers.
Full service airlines have many ways of retaining their regular customers. On top of offering free flights to regular customers, some of them also allow the children of their most regular customers to make free flights when travelling with their parents. An example of this is Cathay Pacific .
Additional Services
Many LFA/LCAs offer the minimum requirement for flight for their passengers. They do not offer any unnecessary comfort or luxuries. Full service airlines offer extra services which make the flying experience more enjoyable for their passengers. Etihad Airways, Sri Lankan Airways and Gulf Air have a program known as ‘nanny in the sky’. These are child assistance programs offered to parents who are travelling with their babies or young children. They avail this service to all their passengers, regardless of the class they may be flying in. over the past year, the airline has trained three hundred crewmembers to become childcare experts. They expect to have 500 Flying Nannies by the end of this year, trained in child sociology and psychology at Norland College, England.
This service is also offered for young children who are travelling without adult company. They are offered special kids’ meals, fruits and snacks. They even get more snacks at the end of the flight. The children are kept busy throughout the flight with games, arts and crafts, magic tricks and other forms of entertainment. The older children may even get a tour of the plane. This gives the parents time to relax and enjoy their flight .
Many full service airlines are offering many services to attract and retain clients. These range from extra comfort in the waiting areas, in-flight Wi-Fi, to drive-in cinemas at the airport. Many airlines also offer affordable prices for the middle class. Emirates airlines offer a family oriented entertainment system with hundreds of channels from which their customers may choose. They also reduce the price by half for children under the age of eleven years.
Conclusion
LFAs and full service airlines target different markets. This makes it easier for them to coexist and compete effectively without any of them being pushed off the market. The prices offered by LFAs make it possible for people with average incomes to travel, while the luxuries offered by full service airlines make it possible for people who wish to have some extra comfort to do so. This makes them both necessary in the air travel industry.
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