The emergence of budget airlines is directly attributed to the transformation of the global business environment. The major drivers which facilitated this trend are: the deregulation of the European air travel sector; the establishment of the European Union; the 9/11 tragedy; the rapid technological advancement; and change in customers' lifestyle and preferences. It is irrefutable that the deregulation of the European airline industry primarily contributed to the rise of low cost carriers. It can be recalled that deregulation has lowered the barrier to entry in the industry as well as enhanced the competitiveness of the players which are previously receiving subsidy from the government. This, in turn, largely contributes to the cost efficiency of airline operators allowing them to charge lower prices to passengers. The establishment of the European Union affects the airline industry has the same effect like the deregulation of the sector. This has opened up markets and lowered operating costs, encouraging the proliferation of low cost carriers (Sorensen 2006). ...
Lastly, technological advancement has significantly enhanced company's efficiency. It can be recalled that the internet technology has lowered the airline's costs in terms of booking and servicing customers by eliminating travel agent costs. This has paved way for huge costs savings which cut down the cost of airline operations (Sorensen 2006).
It can be seen that all of the aforementioned factors which paved the way for the emergence and wide acceptance for low cost air travel have altogether pushed the prices of airline operation down allowing the fast entry of prospective players and allowing industry participants to price more competitively. It can be seen that the business model employed by a typical budget airline is primarily affected by these changes in the external environment of companies.
A low cost carrier which competes in the European airline industry typically a business model which offers only a single passenger class and a single type of airplane which is usually an Airbus320 or Boeing737 which allows the company to cut on training and servicing costs. Budget airlines also typically employ a very simple fare scheme which rewards early reservation by increasing the fare charged as the plane fills up. There is usually no reserved seating in order to allow customers to choose their own seats thereby encouraging early and quick boarding. In order to drive down operation costs, technological innovation particularly the internet is used in order to eliminate the huge commission usually passed on to travel agencies. Budget airlines also prefer flying on secondary and simplified routes as well as having relatively shorter flights and faster turnaround times. Budget airlines, unlike