The current economic condition makes low cost airlines the necessity for present and future but economic condition keeps changing, people earn more money, splurge it and then they loose money and save it. Its a whole cycle which indirectly dictates the way an airline sells itself.
Why Low Cost Airlines?
The current economic condition shows how vulnerable airlines are, how much dependent they are on the market, Airlines are here to stay, they are a necessity for fast, cost effective travel. If airlines go cheap, more people will travel, more the profits.
In a country like India where the Airline tickets are one of the cheapest in the world, Airline industry has the biggest competition in terms of Indian Railways.
People like to travel cheap, specially for short distances, hence its not surprising that Low cost airlines are in profit where as three major airlines in India are in red.
Cutting cost is directly passed onto the customer, it also increases the profit a company can make.
There are many Low cost models but one of the most successful one is of South West Airlines, use one type of aircraft save the cost in maintainence, pilot/crew training etc...etc
If airlines follow such models all over the world, they would go in red only because of a better competition, competition in short is good for travellers as well as the better competitor, since cheap tickets equal to more flyers.
Airlines can go cheap by
1. Using one type of aircraft
save on training and maintainence costs
2. Go no frills
flyers wouldnt mind paying for food, some dont even want food on shorter routes
3. Go cheap with crew accomodation:
instead of putting them up in a 5star/4star hotel what they can do is buy/rent private residences locally, which would reduce the cost of crew handling considerably.
4. Give more cash incentives to the crew instead of some benifits.
5. Use somewhat low hour pilots as First officers:
the amount of salary to be given is reduced, plus to get hours pilots wouldnt mind less pay initially.
6. Start their own agencies to make profits:
instead of outsourcing and paying huge amounts or percentage, start their own agencies which sell tickets or do their own ground handling etc...etc
7. Maintainence
doing maintainence the proper way will save loads of money, eg: keeping the aircraft exterior clean etc...etc
8. Pass on the benefits to flyers:
device ways which will attract flyers to your airline, eg: paying them some cash if they are carrying less baggage.
9. Direct flights & better fuel management:
more direct flights will save lots of money, for international carriers, flying direct twin engine ETOPS aircraft might cut costs, better fuel management like eg: refuelling more in countries where fuel is cheaper, will further add to the savings.
- Akshay
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wow...something good....really impressive that too from you...goood goood
ReplyDeletegood job! Well written with alot of thot to it...
ReplyDeleteIts a very complicated subject you've chosen to write on and it should have been a little more in-depth than a layman's perspective, you being in the industry especially.
ReplyDeleteWell, low cost airlines have always been around. And the kind of profits that they make are also quite well known. Then why are most of these low cost carriers eaten up by the big-fish who are showing net losses?
Low cost airlines specialise on the following things :
1. Cost of the aircrafts - Mostly bought in lots and of the same type (you got that right), these are the lower end designs of the posh cousins.
2. Cost of operations - With a higher Pilot : Ground Staff Ratio (Basically lesser ground staff), the basic cost of operation is much lesser than the "Maharajas" and the "Kings" who have people to even escort you for your baggage.
3. Cost of maintenance - This factor crucially decides the feasibility of the ticket costs. Higher maintenance, lower profits, higher ticket costs.
4. Assets on land - There is no need of 5-Star accomodation, as rightly pointed. Instead, guest houses or rented flats are better!
5. Least time of parking at Metropolitan airports - Leading to lesser rents and lower expenses.
Yes, cheap/low cost airlines with no-frills are exciting to the common man. But at the same time, it shouldn't be so cheap that tickets are available at general stores.
The airline industry (for international travel) is not operating on a "low cost" design at all. They cannot afford to, since passenger comfort and "pampering" need to be escalated on such flights.
For domestic airlines to adopt a low-cost design is not such a bad idea but the kind of profits that they make for the company do not substantiate the amount spent on purchasing the aircraft, in the first place. That is why you have temporary profit curves, but over a period of time, these airlines perish/are taken over by the "high-cost" ones - eg. Damania, Air Deccan, Sahara, NEPC, East-West, etc!
But then, there are people like Spice & Go! Air which are making good revenue too... It would be interesting to see if they can justify their growth and control the expenses involved in having "Big" dreams !!
Your blog did get the brain-dial to start turning a little!
Cheers!
How about a next post on specifically the maintenance aspect can be changed: maybe some insight into how things happen , and how they should. That sort of tops the list for scared fliers too :P
ReplyDelete@neo
ReplyDeletei wasnt talking about buying aircraft in lots, which to the low cost model is not feasible, my point was buying only one type of aircraft for certain operation, ones which are adaptive to any route selected...eg: getting b737's 1st when flying domestic, then gradually increasing the number over the years, when you buy aircrafts in lots even the premium airlines go into loss making eg: kingfisher. B737's can be used in domestic as well as short distance international sectors, when you want to go over a longer distance start getting long range aircrafts (eg: B777,to fly direct) over a period of time gradually adding new destinations, here i am not talking about explosive growth but a steady one with basic low cost structure any airline could follow.
As you pointed about flying international, you have to look into passenger comfort, i second that but you can still be a low cost airline with frills, where the basic operating cost is low.
Worlds largest airline in terms of INTERNATIONAL PASSENGER numbers is a low cost airline, Irelands Ryan Air and the second one is EasyJet, another LCC which flies out of England.
Besides the ticket cost can be at airlines discretion, i am saying anything about it, my only point is that with lower "right and basic" operating cost any airline should be able to survive withstanding only competition.
Simple questions :
ReplyDelete1. How do you get the basic operating costs low, without affecting on the quality of the output?
2. If aircrafts are not bought in bulk, how do you connect larger number of destinations? You obviously don't mean to strain one aircraft around the globe...
3. With escalated surcharges and parking fees, isn't it more necessary to focus more on these aspects rather than the parameters which curtail the quality of flying for a passenger?
answers:
ReplyDelete1. get the basic operating cost low by doing proper and efficient maintainence, here again one type of aircraft saves considerable amount of money on maintainence and crew training and handling, rented places for crew, direct flights instead of transit flights.
2. thats my whole point, increase destinations gradually over the years and not exponentially, like for starters get 3 on lease and fly to major cities. when you go international, base your airline on two aircraft type model.
3. about the aspects, only government can change it, so i have no say on it, India unlike amy other country donot have to big airports in one city, so basically the only way around it is more time in air and less time on the ground.