Low Cost Carrier Characteristics - 1946 Words

The idea to enter the world of the full cost carriers by low prices isn’t a new one. Already in 1977 Laker Airways founded the â€Å"Sky Train† between London and New York. Even if this service was never successful, more and more low cost carriers were founded during the progress of deregulation and the development of an own low cost strategy began. When we today have a look at the homepages of low cost carriers we cannot but state that nearly all of them are operating successful despite the issues of September 11th in 2001, SARS in 2002 and the war in Iraq in 2003. Southwest for example has shown a positive net income for the period of 1990 to 2002 (Appendix A) and is nr. 5 of America’s most admired companies in 2005 (Homepage). Also Ryan†¦show more content†¦Maintenance: As maintenance costs are a typical economy of scale business it is only possible for full cost carriers to run it cost-effective. Hence low cost carriers mostly outsource their maintenance (Pompl, 2002). But the low cost carriers make strong efforts to find new maintenance concepts that are more appropriate for their needs and even more cost efficient e.g. through cheaper labour costs. As Allan Marking, chief engineer at easyJet says: Im not looking for the minimum maintenance performance, Im looking for the best value where maintenance is an investment in the reliability and longevity of the aeroplane (Pilling, 2004). Labour costs: â€Å" For most airlines wage costs and associated social security and pension payments for staff represent the largest single cost element† (Doganis, 2002, p.115). Appendix C gives an overview of the great differences in average annual remuneration. In the low cost business it is normal to get lower wages by higher duty times for the crews as low cost carriers aim to make the pilots most productive. â€Å"The average Southwest Pilot produced 800 block hours in 2000. In comparison, the average United Airlines’ pilot produced only 54% of the output produced by the average Southwest pilot† (Gillen Lall, 2004, p.44). Despite this fact the staff of Southwest is highly motivated. For instanceShow MoreRelatedNational Airline Market Analysis : The Airline Deregulation Act Of 19781702 Words   |  7 Pagesto this foreign competition and domestic pressures the Airline Deregulation Act of 1978 was passed. Deregulation meant the market would be generally fr ee from government controls and operate under free-market principles. By the early 1980s new carriers flooded the market causing an initial drop in fare prices. In this new market Airlines such as Pan American and TWA suffer financially. Many of the large legacy airlines that operated successfully under the guidelines of the Civil Aeronautics BoardRead MoreThe Success Of Delta Team896 Words   |  4 Pagescompete in an industry where profit margins are small and the end product is essentially the same. 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