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Low Cost Airlines Name: Course: Tutor: Date: Low Cost Airlines Introduction Irrespective of the decreasing trend facing the airline industry, low-cost airlines are realizing higher levels of success, which is evident from their increment of the number of passengers using their services, profit levels and turnover (Brander and Zhang, 1993)…
For more than a decade now, the potential of the low-cost airline business has been evident from the huge capitalization of these airlines at stock market spheres (Brock, 2000). For example, at the start of the current decade, in 2002, Ryanair realized a market capitalization of 4.9 billion Euros, which was 45 percent more, when compared to the levels realized by British Airways (Rhoades, 2008). The increased uptake of low-cost airlines was evident from its revenue levels, which were approximated at 20 times compared to that of the traditional competitor (Dempsey and Goetz, 1992). The huge success of starter low-cost airlines in the industry has led to the emergence of new airlines in the same category and using the same business, trying to mirror their strategies. The success of these airlines can also be traced from the fact that they have stimulated a new class of demand, which offers evidence that they are not getting their customers from traditional airlines; low-cost airlines are attracting new demand and customers into the industry (Dresner, Lin and Windle, 1996). Due to the major impact of low-cost airlines, traditional airlines have acknowledged the threat of the growing competition; therefore, have reacted to the new business model, especially in the line of business travel (Meyer and Menzies, 2000). ...
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