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How have low cost airlines affected the development of the aviation industry?
Pages 6 (1506 words)
However, one sector in this industry seems to be and has been performing exceptionally well i.e. the Low Cost Carriers. These carriers in contrast to flag carriers are experiencing increased passenger…
The seemingly bright future of these carriers poses interesting questions in regards to what effect they have and will have on the whole aviation industry. America’s Southwest Airlines and Europe’s Ryanair both offer the best examples of low cost carriers that have transformed the airline industry in the regions they operate. This paper will analyse the effects that the low cost airlines have on the development of the aviation industry.
In the American aviation industry Southwest is the fastest growing airline having been established back in 1971 with just 3 aircrafts. Today is has about 540 aircrafts (all of which are Boeing 737s) which form the most modern flee in the world. This airline has an unbeaten profit record in the American industry of 17 consecutive years when considering all the quarters of every financial year till 2008 first quarterly report (Southwest 2011). Southwest also boasts of a customer base of more than 85 million per year which is more than that of Delta, American and United airlines. It is notably in the high-end competition due to its low fares, quality of customer service and on-time arrivals. Its major and direct competitors are JetBlue, Air Trans and others like Delta. Due to its low cost model of operations the airline spends 50 to 70 percent less than the major carriers in the same market (Stevenson 2008). This hugely explains the low fares, high quality of service, huge fleet of modern aircrafts and long profitability streak.
In essence the Southwest Effect is described using three principles. These principles translate to the major impacts that low cost airlines have on the industry. The first is that with the presence of Southwest Airlines in a market, passenger numbers will increase. This is dictated by the fact that the airline brings in competition especially in ticket prices thereby attracting more customers. The ...
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