The two polar opposite airline business models are low-cost (LCC) and full-service network carrier (FSNC). The objective of this assignment is to deepen your understanding of production costs, specifically how various airline business models affect the cost of operation.
For this assignment, you will duplicate a small portion of the research presented in Klophaus, R., Conradly, R., & Fichert, F. (2012). Attached, please use citations from this study.
Choose a low-cost carrier (LCC). From your research, determine if your selected airline closely follows the archetypal LCC business model or is more of a hybrid carrier incorporating aspects of both the LCC and FSNC business models. Klophaus et al. (2012) utilize several criteria that characterize the LCC business model. Table 1 below includes these and more criteria obtained from other sources. While you do not need to utilize all of these criteria in your analysis, you should employ all for which information is available from authoritative sources.
After the introduction, concisely compare and contrast the two business models.
For each of the selected criteria, explain how you have assessed your airline on a simple scale of your choice. Be certain to cite the source of the information and data. Then summarize your findings in a form similar to Table 2 in Klophaus et al. (2012). Much of the required information for the assessment, such as fleet composition, route structure, product offering, etc. will be available on the airline’s website. Aircraft cabin configuration is available at Seat Guru. (Links to an external site.) Another excellent source of information is the CAPA Centre for Aviation. Some information is available only to members, but much is free. Wikipedia may also be used for this assignment. Finally, articles in Air Transport World and Airline Business (both available in the Hunt Library ProQuest database) may be helpful. Of course, you may also use any other authoritative sources you find helpful.
Next, use the data in the Airline Monitor: Traffic, Fleet & Financial Data for 82 Leading Airlines of the World (Airline Monitor is a Hunt Library research database) to compare your chosen airline with a competing comprehensive network carrier. For example, if you chose Ryanair, British Airways or Lufthansa are competing network carriers. Compare the CASM. The LCC should have significantly lower CASM (otherwise it is not a low-cost carrier). Compare yield, a measure of average price, to determine whether the airline offers lower prices to compete with the FSNC. Other statistics that can be used in the comparison are load factor, utilization, and trip length. If you wish to compare by size or scale of the airlines, ASM, RPM, and departures are appropriate metrics. Be certain that you understand the definition and computation of each statistic. Several online glossaries are available.
In your conclusion, review your research findings. Did you find that your chosen airline closely follows the archetypal LCC business model or is more of a hybrid carrier incorporating aspects of both the LCC and FSMC business models?
Table 1. Low-cost carrier business model characteristics
Primarily point-to-point operations (offering no connections).
Serving short-haul routes, often to/from regional or secondary airports (some major cities are served by more than one airport. Midway Airport, for example, is a secondary airport for Chicago).
High aircraft utilization rates with short turnaround times between operations.
A fleet consisting of a single aircraft type (There are several models of the A-320 and B-737, but all are the same type).
Single class of service with high-density seating.
No (or limited) customer loyalty programs.
Limited passenger services with additional charges for some services (e.g. onboard catering).
A strong focus on price sensitive traffic, mostly leisure passengers.
Low average fares with a strong focus on price competition.
A very high proportion of bookings made through the Interne..