Singapore Airlines have to renew their fleet more frequently than Delta Airlines, due to a shorter aging period for their aircrafts. At some point in time, Delta Airlines will end up with a bigger number of aircrafts, which would be older than the ones of Singapore Airlines. If we consider that the average age of Delta’s airplanes is 8.8 years, and of Singapore airlines is 5.1 (both: case - pgs. 2 and 3) then the difference in airplane ages will be 3.7 years. Using the average gross value (calculated in Q3) and assuming 3% of inflation before 1993, we can calculate the increased value of the fleet: Average gross value $
The requirements for the advance ticket purchases are much more lenient than their competitors’. Early boarding is offered to customers who are members of Southwest Airlines Rapid Rewards. Southwest Airlines sticks to their strategy of low-fare policy and have not followed the competitors along the path of offering add-ons for extra money. The profit margin erosion ends up being compensated by the increase in sales volume. Lastly, point-to-point route system minimizes delays, connections, and the total time spent on the trip.
Also, the graph below displays the positive correlation between prices and quality of product and services provided by British Airways and its main Europe competitors. EasyJet 's generic strategy is a typical cost leadership technique. The business theory of EasyJet is that cash can be made on any course where a airlines can fly three times each day to low cost terminal, taking into account a base business sector size. The premise of business accomplishment for such strategy is keeping up a 30-40% cost advantage over set up carriers. Focus: It is concentrated on targeting and supplying a certain group of customers or some particular segment of product line or even geography of operations.
The logic behind the strategy was that the smaller aircrafts were suitable for the shorter runways at the regional airports, which were much smaller in size, while jet aircrafts o the trunk routes helped it to achieved higher capacity and carry passenger over a longer range than the ATRs. Lease with airbus. Cheap airlines usually entered into an operating lease with airbus, wherein the title remain with the aircraft owner, while the operator paid up rental payments, which were tax deductible and reduced not only the capital expenditure on the operator’s balance-sheet but also the operator’s exposure to uncertainty of the aircraft’s residual value at the time of its disposal. The lease payments comprised of a fixed base payment and a variable maintenance reserve determined based on the aircraft
The major success to their continued success is due to their low-cost model and competitors are aware that they cannot match Southwest Airlines low prices therefore, by dropping the price even lower; Southwest Airlines can force a company to go bankrupt. Introduction In 1971, Rollin King and Herb Kelleher started an airline service with one simple notion: "If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline." They were right about that. Southwest Airline is now a major airline, in fact, the fourth largest airliner in the United States that is trading under the Symbol LUV on NYSE. The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit.
Since Nok Air positions itself as “premium low-cost airline”, the firm is now facing the high cost. The costs include fuel engine price, the premium onboard service, foods and beverages, the cost of offering high weight of baggage, and so on. Also, as Nok Air has to hedge fuel engine from Thai Airways International Public Company Limited, it mainly drives Nok Air to have the higher cost, and it results in decreasing the profit (“Broken Wing Nok Air,” 2008). However, the firm cannot increase passenger ticket price. Otherwise, it will be inconsistent with Nok Air’s position.
Listed below are some of the factors that enable Indigo achieve this: • Single type of aircraft: As per DGCA Indigo has 97 A-320-232 aircrafts as compared to its competitors who uses different types of aircrafts ranging from 3 to 9. This results in greater flexibility as same crew (pilots, ground staff, cabin crew) can be used and avoids costs involved in training and hiring staff. • Low average fleet age: Indigo has an average fleet age of less than 3 years which means less maintenance and attrition cost. All its aircrafts are leased for a period of 5-6 years which avoids D-check done after 8
However, when one airline serving a particular route cut its prices, its competitors, desperate to cover their fixed costs, quickly followed. This “price competition war” among the aviation industry enable consumers can switching to any airline companies whose offer the cheapest price. This is because consumers at that period is more concern about cost driven rather than the quality and services after the September 11 attacks. This shows low profitability as US airlines is compete more for business due to downfall of economy, by cutting down fare to attract customers and add services at lower costs to lure people into using their
Knowing this, firms may try to restrict velvet sky from obtaining a market share by reducing prices and innovating ways in which to persuade customers to remain or join them. 1time being a low cost airline may use this as a mean of reaction to the introduction of Velvet Sky into the aviation industry. They may drop prices and expenditure to maximise profits and market share.
With the advancement in technology for many things travelling personally is not important as with the help of web conferencing and services like online counseling the need for travel is reduced. The customer can switch to modes which are reasonable in terms of fare as air travel to some extend is expensive as compared to other modes of travel. The factor which alone reduces the attractiveness of the substitutes in the minds of the travellers is the fastness and reliability of air travel. Barging Power of Buyers There is a very low product differentiation so to succeed providing either services at very low cost or give a five star experience so that customer pays the price for the superior services offered. In addition, the availability of information is really high and with the emergence of travel portals who guarantee that they can search for the lowest fares out of all the options available and book it for the client with just a click which even provides the ease of purchase, the bargaining power of the buyer is increasing Frequent flyer programme and online duty free purchase services can create customer loyalty and reduce the threat of customer switching over to other airlines to some extent.