Low cost carriers or low cost airlines are airlines that have low fares and lesser comforts for the travelers. In order to compensate the revenues that the airlines have lost through the reduced prices of the air tickets, these airlines in their business models resort to strategies such as charging extras for priority boarding, food, baggage, and food among several others. The normal model of low cost carrier is majorly used in the developing economies to ensure that most people can access air travel, as well as cargo transport. While research and tradition indicate that the price remains a key competitive factor in the industry, it is no longer the single driver of the low cost carrier business model. Low cost carriers currently focus on several other areas such as multi-channel strategies, merchandising, and increased partnerships.
Additionally, more emphasis have been increased on maintaining the low costs while compensating for the rising costs of aircraft and fuels, integrating new services into the current model alongside enhancing customer service, crossing international borders and trying the long-haul segments, and expanding market opportunities including expanding market opportunities such as increasing international reach and access through participating in Global Distribution Systems (Sabre Airline Solutions). Fly Dubai is one of the low cost carriers that have adopted the new low cost business model. The airline maintains low costs while compensating for the lost revenue in ticketing by several avenues and has ventured into the international markets. This paper compares the normal model of low cost carrier with that of Fly Dubai in terms of operation and business model.
There are several differences and similarities in these business models such as in their common practices. For instance, the normal model of low cost carrier is configured to operate aircrafts with a single passenger class aircrafts with a single type of aircraft to reduce the costs of fuel, maintenance, training, and crew cost per passenger (Sabre Airline Solutions), Fly Dubai reported ordering to buy 50 Boeing 737-800 NG aircraft in 2008. However, Fly Dubai has adopted a new business model as it has diversified its types of aircrafts to include carrying cargo. Nevertheless, Fly Dubai has maintained it aircraft by buying seven new Next-Generation Boeing 737-800 aircraft to join the fleet in 2012 (Air Cargo Update, n.d).
One similarity between the major carriers and low cost carriers is their development of one or more bases aimed at defending their market and maximizing the destination coverage. Fly Dubai, being a low cost carrier also uses this model. In its bid to increase its destinations, the airline doubled its destinations in 2014 from the previous year to 34 destinations and doubling its network in India and other countries and continents. However, the airline has only one base in Dubai. The airline has managed to maintain and increase its market share despite being new to the industry due to its ability to access different markets with ease.
The low cost carrier airline industry is a challenging industry since the revenues received from ticket sales are very low considered to the major carriers. Therefore, innovation is a major competitive advantage in the industry. Instead of increasing ticket prices, the airlines in this industry seek to increase ticket sales to increase the volume of sales, and consequent revenue. For instance, Air Asia has been reported to collaborate with airports to develop special low cost terminals specifically designed for a low cost airline with low overhead and maintenance costs. Similarly, Fly Dubai is innovative in its business model. The airline actively increases the number of its aircraft and routes to enhance the connectivity of Dubai to the international world. Additionally, the airline is increasing its local routes. While embracing technological advancements of the century, the airline has managed to reduce the paperwork and introduced electronic airway bills to provide reliable services for its freight forwarders with signed multilateral agreements with IATA.
Fly Dubai was launched in 2009 and by redefining the low-cost model by offering the product segmentation that has evolved in Europe and North America, is now the largest LCC in the Middle East. The airline has managed this success in the low cost carriers by ensuring that its services are offered at affordable costs and accessible in different destinations. While price has been a major reason for success of the airline in the industry, other incentives such as new routes including destinations to Russia. The success is also associated with the increasing profits every year. The airline has also increased its relations with the government in different ways including supporting the free flows of trade and tourism in destinations that were previously underserved by other airlines at reduced costs. From the attached case study, the airline’s contribution I support of a thriving commercial and tourism sectors is demonstrated by its increase in revenue.
In conclusion, while Fly Dubai is considered as a Low Cost Carrier, it adheres to the principles of the low cost carrier model, but has shifted to a hybrid business model, which combines the principles of cost saving of the low cost model with the route structure and flexibility of a full service carrier.
References:
Air Cargo Update. (n.d.). Brighter Skies and a Positive Outlook for Fly Dubai
Sabre Airline Solutions. The Evolution of The Airline Business Model: Technology and business solutions that give low-cost carriers the freedom to grow their businesses as they choose. Retrieved from www.sabreairlinesolutions.com
