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.
[...] However, the traditional airline model has always reacted 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. [...]
[...] 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. He is now looking for construction of a world low-cost alliance, gathering all the tenors of the sector as Easyjet or Virgin , reinitiating the hope of success for global low-cost long-haul flights. [...]
[...] - The second one is the charter concept (to fix a fly date and a fly route at low prices) - The last one being the low cost approach (low cost regular fly without connection) The charter approach being particularly specific, the low cost airline has to compete with the traditional system. The first marketing idea from Southwest can be resumed like this: a customer wants to take advantage of an attractive price, Southwest take only his transport in charge, without every service around. [...]
[...] The reason of this success story The biggest strength of the plane company is the cost reduction. For example there is no agency where you can buy a fly ticket for a travel; everything is through the website of the company. Moreover it is the future passenger who has to print himself the confirmation of the reservation which has been sent by e-mail. Easyjet, in United Kingdom use only secondary airport (Lutton) and then can reduce the fees. In the rest of Europe (France, Belgium, Netherlands . [...]
[...] It comes also from the fact that low cost companies attack directly major companies on their own field. EasyJet for example shows that they want to attract a “business” consumer group and that's a huge problem for major companies, because EasyJets purpose is really attractive on prices. To continue with EasyJet (which is presented in details in part the company installs itself more, in principal airports, and it wants to do from Orly airport one of its base. And these types of threat like doing from a principal airport a headquarter of a low cost company represents potentially 10 millions Euro of turnover losses for companies like Air France or British Airways. [...]
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