The low cost airline market

Résumé du document

Our future business career will conduce us to travel around the world. The way of traveling is a factor which influences international relations. The emergence of the low cost airlines has modified the traditional market. During our 4 years at ESTA, we have been directly touched by the low cost companies offer during all our student life and internships. For all these reasons, we have decided to analyze the low cost airline market. First, we will describe what a low cost company is, and then we will confront low cost and traditional airline companies. After that we will illustrate the study through a concrete example: the EasyJet case. Finally and in conclusion, we will focus on the future of this contemporary market.

The « low cost » is an economic model which aims to minimize its cost in order to reduce its prices for their customers. A company which follows this concept will seek to minimize its fixed and variable costs in order to be able to propose attractive prices.

Extraits

[...] The low-cost airlines companies need to be prepared for the future. They have to expect that serious difficulties will arrive quite soon. After a market analysis, just a few low-cost airlines companies should survive to the predictable fall of their profits. And that's due to 3 combined factors: Saturation of the market Orders of airplane completely out of all proportion regarding to the increasing demand Intensification of the competition between the 3 actors of the Flight market which are traditional airlines companies, charter companies and low-cost airlines companies. [...]

[...] However, the traditional airline model has always react against the low cost airline development. And nowadays, the main low cost companies such as Ryanair and EasyJet compete now with some new companies. Part Low cost and traditional major companies analysis We have to understand the differences between the situation in the USA and Europe. The Nord-American context is different because of its geography and its consumer's habits. The plane is the first option to go somewhere for an American, and many airports of great capacity exist through the USA. [...]

[...] Part What is a low cost company ? Definition The low cost is an economic model which's aim is to minimize its cost in order to reduce its prices for their customers. A company which follows this concept will seek to minimize its fixed and variable costs in order to be able to propose attractive prices. The European low cost companies did not invent a new way to manage their airline companies. This new economic model has been invented in 1971 by an American company called Southwest It is just in 1991 that Ryanair, became the first low cost airline company in Europe and a real network appeared in 1995. [...]

[...] If we consider that traditional airlines companies ordered only 30 airplanes with an option for 160 others, we may be worried. But, as we say the demand still increase especially thanks to new destinations, always further. And that's one point on which low-cost airlines companies are focusing. In the world, we've already heard about long-haul low-cost aircrafts in the USA or in Asia (Zoom Airlines, Maestro,) but since a few months, Europe is targeted. Tony Fernandes, the Malaysian aviations tycoon, launched Air Asia with interesting offers. London Kuala Lumpur for $140 and from second the period. [...]

[...] For example in the British Midland's Boeing B 737, we count 124 seats and in the EasyJet Company we count 149 seats for the same airplane. - Optimize the utilisation airplane rate: We can say that a low cost airplane fly around 20 and 30% more than a plane from a major company. The main reason is that the low cost airlines do not fly for long distances and they are not used for passenger's connection. In addition, they usually fly from secondary airports which are less busy. - Optimize their fixed cost: The first way to reduce their costs is to propose fewer services. [...]