Long Haul Low Cost Carrier Plan of Action

The noteworthy development in low cost carriers has produced a great deal of rivalry in the aircraft sector. Customary aircrafts have gone under weight with a crumple in gainfulness while some minimal effort bearers have delighted in benefits. The minimal effort aircraft plan of action can slice expenses to 40-50% of customary carrier costs while the conventional carrier plan of action has been tested to take care of expenses. Significant aircrafts have endeavored to reshape their plan of action to help income, sliced expenses and respond to focused dangers from minimal effort transporter. These procedures incorporate setting up their very own minimal effort carriers, expanding work proficiency, suggest ease aircraft task, and presenting charges for providing food and gear. This paper intends to research on whether long Haul Low Cost Carriers will it be a winning business model for airliners. . (Morandi et al., 2015

1. Introduction

The low cost carrier plan of action has been in existence for several years and their dominance in the overall aviation industry has been growing relentlessly. Notwithstanding, the best LCCs, for example, Southwest, Ryanair and Easy Jet have centered after actualizing the minimal effort methodology on short-haul routes. The primary vital target of this underlying reasons is to recognize the basic purposes whether there is a plausibility of Long Haul Low-cost bearer being a triumphant plan of action for aircrafts in light of the goal, we led a contextual analysis on Airbus A321LR.

The research project is organized into five main parts; introduction, literature review, methodology results, discussion and analysis. ; Background information about the LCCS, Problem Statement, Purpose of the Study, Aims and objective, Significance of the research and Research questions they are going discussed in chapter one . The second chapter ,Literature Review, the potential of Long Haul LCC in aviation industry, Potential cost saving, Stiff competition and increased demand, The quality of services provided by the Long Haul LCC, Point to point turn flights ,Cargo shipping ,Quick turnaround ,The utilization of the secondary airport, Flights available ,Charges Seats and cargo. The third chapter will discuss about the methodology used to conduct the study. Chapter four basically it will about the analysis of what was conducted and finally the last chapter is about the discussion and the recommendation of what should be done in the Long Haul LCC.

The airline industry made tremendous changes since the deregulation of the aviation industry, the aviation sector plays a significant role in the growth of the GDP which is obtained from the gross profits made by the individual airlines. Through taxes and revenue collection, the UK has been able to roughly capture close to 1.5% GDP contribution from the UK airlines (Chung and Whang, 2011) the aviation sector is one of the biggest business sector that supports almost 60 million jobs globally.

These numbers signify a part that the aviation sector has played in making the world global home for anyone. Additionally, the airline sector has played the vital role of enhancing the transport of people and goods to the different parts of the world which have been termed as an initiative of enhancing globalization. Statistically, in the year 2014, out of the 33million flights to all parts of the world, 3.3 billion passengers were transported, from the statistics, it is, however, relevant to put that the aviation sector is a primary transport component in the world.(Tyler, 2014; ).

The aviation sector has undergo tremendous changes over the years, before the emergence of the Low-cost carriers there was no room for entrance of new airlines because the aviation industry was highly dominated and regulated thus making it hard for any new entrances.

The government used to structure fares and also routes were determined by the same government. (Curtis and Rhoades, 2015),Such high level government intercession caused inescapable wasteful aspects all through the aviation industry, particularly regarding its unfavorable effect on market get to, benefit frequencies, evaluating opportunity, course systems and industry limit.

Unfortunately, the industry has been struggling for survival due to some numerous challenges that have persisted in a number of decades. The aviation sector has been underperforming when compared to other sectors in the world. These have been arrived by averaging the post-tax profit of the industry which has been estimated to be less than 1% over the last four decades. (Curtis and Rhoades, 2015)

It is essential to reckon other competing sectors like tourism and industries who majorly rely on the aviation services for survival have continued to excel. Poor business strategies and lack of proper control of finances in the sector have contributed to its continued underperformance, and this calls for immediate interventions by key players in the industry.

1.1Background of the Study

Before 1978, the airline business was strictly under the observance of individual states. All the business programs of the airlines were determined and planned by the government. Each country had its carrier that provided air transport services to the people, which allowed many airlines to enjoy the uncompetitive market. The airline industry was highly regulated by the government whereby the licensing boards in different parts of the world provided a little room for newcomers in the industry. These allowed the national flag carriers to enjoy numerous subsidies and preferential treatment by the government with regards to interventions and vast market share (Curtis and Rhoades, 2015)

The existence of a few carriers brought a monopolistic form of market whereby reliance to the national flag carriers generated an unreliable and inefficient way of transport. The frequency of flights, routes, and destinations was not concurring with the customer’s taste and preferences which were a form of un-satisfaction which generated a lot of political heat with the quest initiating deregulation policy in the airline industry (Chung and Whang, 2011)

Deregulation began in the late 1970’s in the U.S; The US was the first initiator of the deregulation policies where new entrants in the airline industry were, allowed. The impact resulted in flooding of airlines in the aviation sector which induced stiff competition. It is estimated that close to 88 airlines entered the airline business immediately after the deregulation policy was initiated (Chung and Whang, 2011)

Large capital requirements, intense competition and fluctuation in demand were some of the factors that significantly contributed to the downfall of the estimated 88 carriers out of which 83 failed (Gittell, 2005)

These were the reign that the LCCs were born with the expectation of generating huge profits from the industry. Although, entering the business called for massive investments it was not an issue of concern to the LCCs. Unfortunately, due to the increased competition, fluctuating markets many entrants in the aviation sector could not stand the waves, and they automatically collapsed. Only, a few airlines were able to make it through, and this was because they had developed systematic approaches aimed at enhancing potential competition and the ability to withstand the dynamic market. (Sang, 2015).

The Low-cost carriers despite dominating in the short-haul market they are investigating the probability of starting the long haul operations as another avenue of generating profits. (Woodman, 2014) thus they are doubts whether those benefits they have been enjoying in the short-haul sector will be reflected in the long haul.

The emergence of LCCs especially in Europe has dramatically changed the aviation industry, thus the development of the LCCs to be the major repercussion of the deregulation market of the airline market sector. (Moreno Izquierdo 2013).

Europe was the primary initiator of the deregulation approaches where new contestants in the carrier business were, permitted. The effect brought about the flooding of carriers in the avionics part which actuated solid rivalry. It is evaluated that near 88 aircrafts entered the carrier business promptly after the deregulation arrangement was started (Curtis and Rhoades, 2015). These were the rule that the LCCs were conceived with the desire for creating huge benefits from the business. Even though, entering the industry called for substantial ventures, it was anything but an issue of worry to the LCCs. Unfortunately, because of the expanded rivalry, fluctuating markets numerous participants in the aeronautics area couldn’t stand the waves and they consequently crumbled. , a couple of carriers could endure, and this was on account of they had created methodical methodologies went for upgrading potential rivalry and the capacity to withstand the dynamic market.

1.1.1 Stiff competition

Rivalry between (FSA) and (LCCs) has been increasing over the world as of late, with the development of LCCs being massive in the household markets of US. In Europe, travel generally took the type of substantial gatherings, for example, organization representatives and local conferences, however, these days the incline has moved towards individual visits. With the upsurge in close to home the travel industry and the change in the travel industry type of individual vacationers, traveler goals have turned out to be more differentiated. After specialized advancements, development in the authoritative side is presently the boss driver of air transport administrations. (Whang, 2011)

The methodology used by LCCs was straightforward and focused over the long haul. Being an LCC, the organizations built up an appropriate arrangement of evaluating like those of the transports and autos, dissimilar to different carriers who had set higher transport expenses to the customers. These astounding methodologies improved all the more boarding of the aircraft transporters to different goals notwithstanding when the division was encountering hardened rivalry. The technique has been connected by the LCCs a la mode influencing them to be the favored air transport machines by numerous travelers everywhere throughout the world. The hard economy that has prompted an inappropriate expansion use of assets by numerous travelers has fuelled the need to spend fewer sums on transport making individuals surrender costly and sumptuous dream liners. .(Whang,2011)

Nonetheless, take note of that the Southwest carrier that used the strategy of offering point to point systems which were basic as they enabled travelers to interface with different goals which were not the situation with different aircraft which had strict and settled courses and goals. The settled directions and goals were a bother to the voyagers since they were compelled to sit tight for extended periods to achieve their purposes of goal what another place they could have utilized a shorter course. The procedure enabled the Southwest carrier to contend successfully and keep up its status in the aircraft business.

Legacy carriers have continued to dominate the market but with the increased technological advancement there is still development of potential LCCs that are able to travel long distances with minimal fuel consumption which has been a potential threat to the established legacy carriers who do not know their fate in the near future (Matsumoto and Domae, 2018)These have raised the question if the long-haul LCCs will be the winning business model for airliners in future just because it will be prudent for potential investors in the airline industry to adopt a rather cost-saving investment and abandon the higher cost carriers.

1.1.2 Airbus A321LR

The case study of Airbus A321LR has some essential features that have greatly enhanced its intensive operations in the UK and other parts of the world through various routes and point to point networks (Matsumoto and Domae, 2018) It has a short and narrow body that distinguishes it from legacy carriers in Britain which have broad and long bodies to enable them to carry a vast number of passengers. The Airbus has properly developed engine system that has reduced its fuel consumption rate to about 15% which is vital as it has automatically cut-off the significant cost incurred in the purchase of fuel (Matsumoto and Domae, 2018)

The Airbus has grown to its prominence in the past two decades putting in mind it started its operation in 1994. Despite the existing challenges in the UK aviation sector the airline has dominated the short-haul market and its entrance in the long-haul market has not been viewed as a potential challenge. The Airbus has some essential features that have enhanced its perseverance in the UK aviation sector which has had ups and downs in the recent past. (Matsumoto and Domae, 2018)

The increased competition in the UK aviation sector has posed a challenge to the legacy carriers. As we speak it has been established that close to 50% of flights in Europe are being operated and controlled by the LCCs (Matsumoto and Domae, 2018)It is, however, a mistake to make a conclusion that the national flag carrier majorly controls airline services in the UK. The chief of the matter is the LCCs have fully exploited the short-haul market and from the profit obtained they have developed interests in the long-haul market. Investors in the Airline business in the UK have opted to buy low-cost carriers like the Airbus A321LR since they are less cost intensive in fuel consumption and maintenance.

The Airbus A321LR is one of the significant LCCs in the UK which is in the run to spread its wings in the long-haul market. The ability of the Airbus to carry up to 80% capacity has been enhanced by the reduction of fare concerning various destinations. The company has continued to maintain and cultivate its relationship with the clients by providing some booking waivers that have increased the number of clients. A good example is the reduced amount of fees to individuals who make prior bookings. Although, the legacy carriers have tried to compete with the LCCs they have been forced to subsidize their charges which translates to numerous loses if the situation is kept constant for a period.

The reduced fare prices by the LCCs in the UK has led to them filling their cabins. Research indicates that 80% of travelers in the UK are individuals who are stills struggling with the economy and it will cost them at to meeting the charges offered by the legacy carriers, and therefore they opt to use LCCs like the Airbus A321LR. Airbus A321LR which has attractive offers (Srisaeng, Baxter and Wild, 2014) these essential prerequisites have necessitated the need of the LCCs to join the long-haul market with the primary objective of enhancing their client’s satisfaction and simultaneously make vast profits.

1.2. Problem Statement

The airline sectoris probably is one altogether the quickest developing ventures on the planet. The airline trade has contributed over regardless of else to the enlarged business, correspondences, exchange, and conjointly the travel trade among the enterprises of the world. Aboard this development, today’s carrier trade is try challenges like safety, fuel utilization, oil costs, air-movement, nice rivalry, economic emergency, flying emanation, and operational issues Determining, the approaches that can be used to initiate a system of transition of the LCCs from short-haul market to long-haul market is vital to cut the cost incurred by use of legacy carriers.

1.3. The Purpose of the Study

The purpose of this study was to establish whether long Haul LCC will it be a winning business model for airliners improve their success and profitability in Long haul Market when compared to legacy carriers who have been in the industry for quite a while but have lost the short-haul market to the LCCs. Finally, this study will be aiming at determining the potential measures available that can be used by the Airbus A321LR and other LCCs to maneuver in the long-haul market.

1.4. Objectives of the study

i. The research will center on setting up if the Airbus A321LR and different LCCs entrance in the whole deal market will have a maintainable cost-sparing preferred standpoint interestingly with the current inheritance bearers

ii. The study will be aiming at investigating the potential dangers that can upset the survival of LCCs in the whole deal showcase.

iii. The study will examine the current challenges in the short-pull market and how they can be controlled in the whole deal showcase after a fruitful change of LCCs.

iv. The study is aimed at how to develop up a focused system that can be connected by the Airbus A321LR in the whole deal advertise.

1.5. The significance of the research

The research will be vital as it will provide more relevant information for the Airbus A321LR to entirely dominate the ever competitive airline market

1.6. Research questions

The study aims at addressing the following questions

i. How does the introduction of Long Haul LCC affect the airline industry?

ii. Which are the key factors enhancing the growth of Long Haul LCC in the airline market?

iii. Do the Long Haul LCC have an impact on the increased air traffic?

iv. Do the Long Haul LCC offer quality airline services?

v. What are the reactions exhibited by the clients to the Long Haul LCC?

1.7. The scope of the Study

Determining, the approaches that can be used to initiate a system of transition of the LCCs from short-haul market to long-haul market is vital to cut the cost incurred by use of legacy carriers. The study will act as a benchmark to the Airbus A321LR in its journey to enter the long-haul market.

1.8. Limitation of the research

It’s expected that developing a research method that will put the short-haul market and long-haul market potential adaptations strategies in comparison will be difficult. Besides, accumulation of resources to finance the research methods will be a difficult task. Developing, recommendations for the Airbus A321LR and the LCCs on ways to control challenges in the long haul-market will be exhaustive as it will require a critical analysis of available options and a clear understanding (Israel, 2014b).

1.9. Research roadmap

Chapter one entails introduction describing the LCCs and their development, the research objectives, the research questions, the focus and the scope and finally the limitations of the study. Chapter two will have a literature review whereby research works of iconic individuals relating to the topic will be utilized substantially to develop a clear understanding of the problem. Chapter three will have the research methods that will be used to investigate the tactics that can be used to enhance the rise of LCCs in the long-haul market. Chapter four will contain the research findings, their analysis, and discussion. The last section will entail the conclusion and recommendations.

2. LITERATURE REVIEW

Low cost carriers have conveyed a vital transformation to the aviation sector. In years now, LCCs possessed the capacity to change the idea of flying for the two travelers and air terminals. Numerous optional airplane terminals that were already, best case scenario, spokes in the center point and-talked frameworks of conventional aircraft organizations or occasional goals, these days speak to active piece of the European air terminal industry. The achievement of the connection among aircrafts and airplane terminals involves more prominent network and portability for a region, and by and large influences neighborhood economies around air terminals.(Bitzan and Peoples, 2016)

The positive aftereffects of some European air terminals in the most recent decade advanced that any airplane terminal could enhance the availability and network level of a region and recover the local economy (by invigorating the travel industry, making new employments and giving associations bigger urban areas, among others) if it is equipped for pulling in LCCs. In this way, airplane terminal administrators have executed diverse plans to energize the nearness of these bearers, and particularly to have their flying machine based there.

For the most part, the relative reliance among aircrafts and air terminals is managed by specific elements, among which are the market capability of a region for the bearer (populace, GDP, and vacation destinations), airplane terminal specialized angles (turnaround time, level of blockage, accessibility of openings, and taking care of), conceivable motivating forces given by the air terminal administrators (air terminal charges and taking care of expenses), and appropriations or money related assurances from the air terminal/nearby expert. The blend of these components, shapes the level of reliance between the two sections and influences the dependability of the relationship, including the real market intensity of the carrier and its capacity to can anticipate great assertions from the airplane terminal administrator.(Bitzan and Peoples, 2016)

2.1 The potential of Long Haul LCC in the aviation industry

Despite the prevalence of LCCs in international aviationnowadays, their success has been primarily unnatural at intervals the short-haul market. With the European short-haul market maturing, LCCs are more and more work the possibility of commencing long-haul operations as a fresh provide of profit (Srisaeng, Baxter and Wild, 2014) recognized, the line is throughout a relentless state of flux, unsteady between periods of survival, adaptation, recovery and innovation. Therefore, it’s imperative that LCCs adopt versatile business ways thus on be able to adapt to dynamic business conditions. However, doubts exist whether or not or not the identical value advantage LCCs have enjoyed in short-haul markets is come-at-able once operational long-haul. Historically, shorter routes have offered plentiful larger potential to achieve value aggressiveness over inheritance airlines. As a results of the higher costs, LCCs have practiced difficulties in generating profitable margins on long-haul flights whereas still providing low fares.(Srisaeng, Baxter and Wild, 2014)

The Airbus A321LR being one of the significant LCCs in the UK which is in the run to spread its wings in the long-haul market has great potential because of the ability of the LCCs to consume less fuel as compared to other airlines. The high operational cost and the escalating cost of fuel are some of the threats that made the aviation industry to adapt LCCS. (CAPA, 2013), Thus they prompted the management of these airlines to analyze their operations and find potential areas for operational improvements.

2.2 Potential cost saving

The Airbus A321LR has properly developed engine system that has reduced its fuel consumption rate to about 15% which is vital as it has automatically cut-off the significant cost incurred in the purchase of fuel (Srisaeng, Baxter and Wild, 2014) Direct ticketing is one of the significant characteristics of The Airbus A321LR that has created a substantial impact on the airline industry (Scribd, 2018)The Airbus A321LR leveraged their market by partnering with manufacturers to increase the capacity of the airline by redesigning of The Airbus A321LR.

Since the LCCs have a much lower cost base, however, offer an item like the full administration transporters, there have been a couple of misguided judgments about the representative remuneration of minimal effort bearers among the all-inclusive community furthermore, the media. The most well-known mistaken judgments are that minimal effort transporters do not have unionized workers and that Low-cost holders offer significantly lower compensations to their workers contrasted with their full administration partners.The majority of the real minimal effort transporters in America are unionized with a few exemptions (Jet blue). Be that as it may, in contrast to the full benefit transporters, minimal effort bearers have a substantial association with their associations. (Scribd, 2018)

2.2.1Strategies of the low-cost carriers

Most low-cost carriers formulated policies that aided them to dominate the ever competitive airline industry. Their idea is a straightforward one. Minimal effort carriers cut out the isolation of travelers and utilize extremely restricted seating which, thus, makes a higher limit. They do this with substantial planes, so every flight has a lot of seats. For the most part, the travelers pay for the seats and whatever else is additional. Ryanair has even begun charging clients to utilize the toilets on short flights. These organizations target relaxation clients, not business travelers. (Cattaneo, 2017)

Tickets are sold on a first come, first serve premise, and in this manner, the expense of each trip rises to rely upon the interest for seats. The courses are never too long, which takes away the need to stop and refuel at different air terminals while expanding the recurrence of the flights. (Scribd, 2018)

The low-cost carriers that have survived and benefitted have done as such through overwhelming utilization of publicizing and advertising. For instance, Ryanair once promoted that its flights cost as little as one penny, before charges, which was secured vigorously by the media. Some ease transporters have additionally grasped and abused, for their advantage, a portion of their fights in court. (Cattaneo, 2017)

Southwest’s prosperity is principally ascribed to the development in the interest for the administrations it offers: low-evaluated air transportation under improved wellbeing conditions. We do see a huge difference in the American customers’ conduct, in the mid-1990s: they turned out to be more cost touchy, because of the financial downturn and to the expanded corporate command over the business the travel industry.

The techniques utilized in bringing down the levies comprise, principally, in slicing costs through different methodology, in offering administrations of a higher quality than other minimal effort administrators, keeping up a decent proportion value quality and, to wrap things up, in executing a proficient administration. (Cattaneo, 2017)

The Southwest’s low expenses are not founded on low wages. Contrasted with some other US customary aircraft, an incredible piece of the Southwest representatives are exchange association individuals and, subsequently, they are paid at the business normal income. This is one reason why the organization had exceptionally fulfilled workers and the least staff turnover rates among all U.S. aircraft administrators. The organization’s low expenses are basically founded on the very beneficial utilization of its real perspectives: air ships and workers. (Cattaneo, 2017)

It very well may be seen that South west has utilized, amid time, just a single kind of air ship - Boeing 737, reality that permitted a cost decrease in keeping up and fixing planes as well as in preparing the workers. The organization thinks about that utilizing just Boeing 737 offered the cockpit representatives the likelihood to know exceptionally well the plane thus to diminish at least the mischances’ rate and to achieve an execution in the operational wellbeing. (Oldorf, 2013).

2.3 Stiff competition and increased demand

Competitive pressure in the airline industry has dramatically affected how the LCCs operates. For instance, the volatility in the fuel consumption and fluctuation has affected the airline industry (Oldorf, 2013). LCCs airlines were forced to lower their cost. The significant growth in the number of passengers flying on the LCCS has tremendously increased due to competition. ( CAPA, 2013).competition has dramatically changed how customers are served, how the revenue collected is managed and the pricing of the tickets. The LCCs took the highly priced tickets and other services and unbundled them which significantly contributed to the increased demand. (Whang, 2011)

This greatly simplified the fare structures and booking processes whereas at the identical time giving lower fares. They removed most of the foundations, introduced unidirectional tickets combined with easy to grasp step pricing…..as a consequence they were able to establish the image of associate airline invariably giving ver.(Acar and Karabulak, 2015)

LCCs’rating and selling ways exemplify this, the success of LCCs has wholly changed the aviation industry as a whole, and legacy airlines have felt the impact of the changes because they have suffered the loss of significant market shares to LCCs, the legacy airline had to move their business model much closer to that of the LCCs (Sciedu.ca, 2018) however the legacy airline cannot reduce the level of service that they usually offer to their clients.

In any case, the upheaval of LCCs has relentlessly put descending weight on airfares. Since Southwest Airlines began to give low-toll local administrations during the 1970s, LCCs have growingly affected the air travel business. Subsequently, LCCs drive heritage transporters to bring down tools by offering contending administrations, particularly in rural markets. Additionally showed that officeholder carriers slice tolls because of the risk of section by Southwest Airlines, (Bachwich and Wittman, 2013) scrutinized the effect of potential rivalry from a few LCCs and found similar outcomes. These observational discoveries, concentrating on value relapses, propose that the value premiums of heritage transporters at center point air terminals have declined as of late. Also, LCCs have lower labor costs (Bachwich and Wittman, 2013)

2.4 The quality of services provided by the Long Haul LCC

One of the main factors considered when examining passengers’ decision making includes service expectation and passenger satisfaction. Service expectation and passenger expectation has contributed to how the LCCs operate. (Scribd, 2018).

Aircraft administrations are comprised of substantial and elusive properties. Aircraft organizations utilize substantial airlines to transport travelers and payload to their goal, while travelers encounter a number of elusive administrations, for example, friendliness of group, and solace of seats, lodge administrations, and administration recurrence.

Thus, the study is centered on internal cost-cutting to the detriment of customer consideration. The low organized ’voice of the client’ accordingly results in a fortuitous administration conveyance which does not fit the customer needs. Besides, the ignored administration introduction has supported the pervasive origination of ’poor service carriers’ among travelers (Fageda and Fernández-Villadangos, 2009). Hence, to have a clear distinction from the legacy airline and sustainability in the future market the LCCs have to give priority to the services they provide to their customers. However, considering the price parameters ticketing price is one of the antecedents that restricts the services provided to the customers.

Demand for aviation is forecasted to continue its upward trend this increase in demand, not to mention ever shrinking margins represents a significant challenge for the airlines. This has caused several long-standing players within the trade (particularly at intervals Europe) to rethink their competitive and operational methods in order to satisfy the market demands and maintain profit. While several ancient carriers are fighting the challenges of the modern aviation market, the cheap carriers (hereafter LCCs), that implement novel business methods, have found success. These airlines give a novel context when learning Service Quality. As their name implies, these airlines operate below a different business strategy than ancient airlines, primarily by having a universal focus on reducing price tag costs. Low price tag costs are maintained through the reduction of mounted prices, leading to LCCs being among the foremost profitable of airlines within the world. (Fageda and Fernández-Villadangos, 2009).

2.5 Point to point turn flights

Point to point turn flight mushroomed after the emergence of the LCCs to attack the hub-and-spoke networks by giving customers an option of direct services which were never provided before by the hub-and-spoke networks(Tan, 2011)LCCs have indeed played a crucial role in ensuring that the gaps left by hub-and-spoke networks have been filled. However, much the LCCs have filled the vacuum most customers pre