UK Low-Cost Airlines in Recent Years - Report Example

UK LOW-COST AIRLINES IN RECENT YEARS AND IMPLICATIONS FOR THE TOURISM INDUSTRY due: Britain was second to the US in the establishing the low-cost airlines, and this essay investigates the factors that trigger growth in the airline sector, as well as the impact of that development in the tourism industry. The relationship between low-cost airlines and tourism is analysed and expounded to illustrate the consequences of decisions in either sector. In this paper organization is set such that, the tourism industry and low-cost airlines are first defined (scope). This is followed by an illustration of factors and their relation to the low-cost airlines. Finally, a conclusion is reached that evaluates how tourism and growth of the low-cost airlines relate. Key words: low-cost airlines, tourism UK Low-Cost Airlines in Recent Years and Implications for the Tourism Industry Introduction The UK travel and tourism industry is among the fast developing and largest industries, and acts as the labyrinth for low-cost airlines. The definition of tourists covers people with the intention of travelling and staying in a locale outside their homes. The tourists are categorized as leisure, business, or visiting friends and relatives (VFR) travellers (Blaha 2003: 19). The purpose of the tourists’ visit is used to define the categories of the industry. For purposes of origin and destination of travel the tourists are also categorized as either incoming or inbound outgoing, adventure or domestic tourists. Tourists exist due to the development of the travel sector, and thus the tourism and travel sectors must work intertwined. The description of the travel and tourism sector covers various sectors, as indicated in Figure 1. The sectors are linked due to the changes of the consumer needs, with growth. An example is the demand by tourists to combine accommodation, touring, and dietary needs to give rise to bouquets. The contributions of technology in communication have also facilitated the development of the industry, with a rise in different facilitators of the industry such as agents. The economic liberation and prosperity of the west has triggered the growth of the industry. In perspective, globalization has contributed to the growth of the industry, and diversification of airlines. Figure 1: Sectors of the travel and tourism industry The tourism consumer has different profiles, of which the players in the industry have developed products to suit different tourist needs. Travel is a major challenge to the industry, with air, land and sea being the alternatives. Air is the most preferred means of travel in considering the travel time, low accident occurrence, and eased access. Travelling via air suits different consumers from the first-class executives to the economy class, considering the money an individual is willing to spend. Some consumers prefer cheap flights, but most major airlines have high operation costs and are limited in the cheapness of services offered, considering the business model applied. British Airways is the second largest international airline, but UK’s top industry player. The airline encapsulates the image of air travel in the UK, although British Airways mainly covers the international travel with over two hundred destinations. Although the airline also operates locally, its target market and business structure translates to covering the long-distance flights. The company runs subsidiaries, which have different structures and targets. Operating in a competitive sector that has renowned airlines including British Midland and Virgin Atlantic requires introduction of diverse products to serve the needs of the local and international consumers (Egger & Buhalis 2011: 271). Low-Cost Airlines Low-cost airlines are a concept in which the principles of operation are based on keeping the operation costs as little as conceivable. This approach translates to offering the flight service ‘only’, with extras incorporated for an extra charge. The low-cost travel concept thus provides the customer with flight, and in some cases, depending on the flight operator a few uncharged extras such as snacks, depending on the characteristics of the flight. The operation strategy follows the yield management approach where the airline bookings are constantly monitored with adjustments to the fare prices done accordingly (Bamber, Gittell, Kochan & Von Nordenflytch 2009: 94). This monitoring follows the supply-demand forces with the prices of the flights increasing with the increasing demand. The airlines have fleets that it operates, and the abolition of classes means that the crafts can add in seats for more passengers per flight. Savings in the low-cost approach also benefit from advertising using cheaper means such as the internet, agencies and other airlines. Ancillary services (food and drinks) in the low-cost airlines are charged, in most cases steeply, per customer and depending on the choice. Furthermore, the airlines collaborate with hotels to sell rooms and services and offer package deals to promote business. The airlines go to the extent of introducing lottery tickets aboard the planes. Literature Review Low-cost airline were initiated in the US (South-West airlines in 1971), and in 1985 in Europe (Ryanair by the Ryan family (Irish)). This new initiative impacted the national flyers, British Airways and Aer Lingus, negatively as losses were recorded, and the competition increased. This led to the adoption of the South-West model (Mayer 2007: 32). The low-cost model’s success led to the introduction of similar airline operators, such as EasyJet, which is the second-largest low-cost carrier in Europe, originally established in UK in 1995. The cost of the flights differed greatly from the mainstream airlines, especially over short distances, such that the ticket price of an EasyJet flight connection between Luton Airport, London and Glasgow, Scotland was equal to a pair of jean’s price (Jones 2007: 1). Now that price has been established as the main reason, why would tourists choose Britain as a tourist destination, since development of the UK low-cost airlines and tourism could not prosper based on cheaper fares only. Attractions Several attractions would facilitate the use of Low-cost airlines in the UK. Under tourism, the obvious contributors to the high influx of tourist would be historical sites such as Big Ben. Such tourist attractions would contribute to the popularization of the low-cost airlines, especially with tourists from neighbouring European countries, as well as with domestic tourist. Other attractions contribute to the travel of tourists into the UK. Tourism with economic and business benefits is a common contributor to the number of passengers in the region. Sourcing products and services, expanding businesses, and executive meetings are among the foundation of business travels and a contributor to the number of tourists in the region travelling using low-cost flights (Minkova 2011: 29). Legislation and Political Stability Politics and governance of a region play part in the hospitality associated success of low-cost airlines. Starting businesses in the UK and the political stability of the region have contributed to the number of people visiting the area. The general image of the UK elicits a feeling of security and plenty, which attracts immigrants as well as tourists. The UK has a long history of political stability, often associated with the monarch, and has a result benefited economically and infrastructural. Stability of the area meant that low-cost airline operators were able to use mainstream airlines, irrespective of the losses experienced by stakeholders in the major airlines (Andersen & Poulfelt 2007: 67). This concept gives the tourists assurance that their journey would be productive and safe, irrespective of the chosen airline operator. Several legislations were instituted in the constitution to facilitate the expansion of the travel and tourism sector as well as low-cost airline business. i. Tourism Act 1969 The Tourism Act of 1969, which was established by a British Tourist Authority (BTA) in conjunction with the England, Wale and Scotland boards of tourism aimed at providing the tourism industry with a clear objective. Consolidation of the UK in their approach to tourists facilitated the Low-cost industry as well as tourism by making proposals such as investing in the tourism industry. The act gave the stakeholders the ability to target different challenges and make amendments to facilitate growth of the industry via a legal channel. Developments of the tourism industry reflected on the low-cost airlines business under an increased influx of people interested in adventure and touring the kingdom, The BTA as well as the English Tourism Council (ETC), whose responsibilities are to market and manage the region as a tourist destination merged into VisitBritain (Doganis 2006: 56). ii. Package Tours Regulations 1992 More order and regulation of the travel and tourism industry contributed to the development of the low-cost airline business. The EC provided UK tour operators with a directive that covered the Package Travel Regulations, and consequently how the tour operators offered the package holidays offers. This act documented the responsibilities of the tour operators to their clients, which meant the expectations from the tour operators (Davison & Ryley 2010: 18). Breach of the regulations by the tour operators was also covered in the regulations, thereby providing the customer with recourse in the event the tour operator defaults their responsibilities. The tour operator, a new entity considering the traditional travel and tourism structure, was to be held accountable for the failure of individual suppliers. iii. Transport Acts 1980 and 1985 The 1980 and 1985, Transport Acts introduced the concept of freedom in operations in the travel industry. This at concentrated on the licencing of coaches in what that might be considered small distances (30 miles). This approach eliminated monopoly in the coach transport sector, and acted as a print by which the airline industry would be structured. The deregulation of licencing meant that public, as well as private companies, was able to operate all routes of travel (Davison & Ryley 2010: 18). The acts are instrumental to the establishment of low-cost airlines, which are not part of the mainstream airlines, which monopolized the UK and European airlines. Private companies contribute to the industry via both competition and quality of services. Economic Climate The UK is deemed as one of the wealthiest regions globally, and what this means is a stronger economy. A stronger economy has influence over different attributes of the community’s life, such as the income per capita. A stronger economy correlates to the affordability of services. Locals can benefit from a strong currency, and may easily engage in air travel, although cautious, hence use the low-cost flight. A strong economy translates to a large market for the flight operators, who are in a competitive industry that boasts of road and sea travel. In addition, the region promotes the industry via the ability to maintain and monitor the infrastructure to facilitate travel and tourism. An example of this impact is the number of airports owned by the British Airports Authority (BAA): • London Heathrow • London Gatwick • London Stansted • Glasgow • Edinburgh • Aberdeen • Southampton Discussion Reasons behind UK’s low-cost airlines growth i. VisitBritain In an effort to increase the number of tourists in the UK, VisitBritain was formed (discussed above), with the intention of marketing Britain. Coupled with the responsibility of world-class branding of tourist destinations, the entity has to establish relations with other tourism organizations. Promoting tourism in the UK incorporates both the high and low spending tourist. This is VisitBritain’s role to advise the government and associated organizations on how to increase the inflow of tourists (Gross & Schroeder 2007: 73). Monitoring the progress of the tourism industry and making amendments to improve on the tourist has a direct effect on the low-cost airlines customers. The number of people willing to visit the UK at low-cost increases with continued marketing and promotion of the destination. ii. Economic Crunch The economic crunch of 2007 affected tourists globally. Lower spending limits have forced travellers to seek alternative means of travelling, and low-cost airlines are making the most out of this shift. Travellers, even the high spending are cautious of their expenses, promoting cheaper travel. In efforts of recovery, stiff measure on the use of economic resources have been implemented by private and public owned intuitions, and the cheaper flights are an effective method of reducing expenses while achieving the same outcome. Revellers with the intention of sparing some spending money opt for the cheaper flights, effectively expanding their spending limits. The low-cost fares represent a channel by which any tourist, irrespective of category lowers the cost of travel, and with competitors improving their quality. iii. Demographics The demographics of the tourist is another contributor to the success of the low-cost airlines. Travellers are constantly changing their profile, especially with the economic hardships. In view of recent economic developments, the age of the tourist, among other industries, is aging. The more elderly people are inclined towards taking holidays and touring the globe as opposed to the younger adults. Characteristics of the aged airline consumer benefit the cheaper flights, since the consumer is interested in spending less for more. Additionally, due to challenges such as unemployment, the elderly have dependencies and have no tendency towards the use more money than budgeted (Gross & Schroeder 2007: 79). There is a liability perception associated with the aging consumer and thus an incline towards the cheaper option. Moreover, the incorporation of extras as a means of improving service in the low–cost airlines, to compete for the reducing number of consumers, has favoured the newer and advanced low-cost airlines as mainstream airline equivalents. iv. Technology Technology has also played part in the success of the low-cost airlines. The consumer is more adapted to accessing information on the cost of flights to various destinations. The impact of ICT on communication influences the choices made by the consumer as the consumer can conduct research on the availability of cheaper and alternative flights. Consumers can ask for quotas from different airline companies and agents and facilitate travel through minimized costs. Information such as airfare costs was unavailable in the inception of the Low-Cost airline concept, but it has contributed to the rise of cheaper airlines consumers. Implications on the tourism sector i. Job Creation The tourism industry has seen an increase in the number of job opportunities available. Employment in the tourism industry has increased with the demand on the tourism associated sectors experiencing a similar demand as the increase in the number of tourists in the UK. The percentage of employees in the tourism industry in the UK is estimated at about 7.7% (translating to about 2.2 million). Thus, increasing the tourists only means an increase in the number of employees (Gross & Schroeder 2007: 98). The employees to the industry are not necessary organization based since the self-employment index is also on the rise. The tourism industry does not only employ directly, but also influences the growth of other sectors, such as agriculture. ii. Economic Growth Tourists translate to spending and income to the host nation. An increase in the number of tourist in the UK equates to an increase in the income generated by businesses as well as the money available in the free market. The visitors boost the local spending, demanding an increase in the GDP (Gross Domestic Product) from different sectors, which ultimately leads to the growth of the economy. The industry brings in much cash via the visitors and fuels the calls for development of similar sites. Subsidiary industries such as hotels and resorts, which are part of the tourism bracket, continuously grow to meet the expectations of the market. iii. Sites Conservation and Restoration Proceeds from the tourism industry are usually channelled back to the sector, as a form of investment, and is used to establish more tourist attraction sites. Developing the attraction sites is part of the local authority responsibility, and considering an increase in revenue is projected by such projects, there is a concerted effort to meet the demand by the tourist influx. Upgrading existing attraction sites, and restoration of the dishevelled ones are some of the steps that authorities make in an effort to improve the tourism sector. VisitBritain, in this case, is responsible for giving advice on how such restoration and improvements can be made. The changes to the sites create buzz, which is associated with an increment in the number of tourists and consequently the revenue collected from the tourists’ spending (Gross & Schroeder 2007: 85). The improvements are such that studies and courses on historical attraction sites are conducted to increase the popularization of tourist sites. Efforts of the rehabilitative and restorative authorities are towards ensuring a continuous stream of revenue. iv. Cross Culture Exchange Inevitably, when tourists visit the UK, there is an interaction of cultures. The locals may adopt a culture from the tourists or vice versa. In most cases, the tourists ape the locals. The impact of having tourists in the UK under culture is the adoption of some practises by the visitors, which degrade the culture, when done without an understanding of the culture and people. The case of cultural dilution is most impactful in the youth and the globalization trends coupled with social media both popularize and lower the significance of culture. Conclusion Low-cost airlines are an investment by mainly private companies and were introduced with the sole aim of providing air transport at a cheaper price. Their establishment is a strategic move that involved market segmentation, and providing a service to consumers who felt that their financial well-being was affected by higher air fares. The impact on tourism came about as a result of purpose for travel, since the travellers had to be driven by purpose. Consequently, the impact on tourism and economy is founded on the same principle, where money saved would be used for another purpose. The future of low-cost airlines is bright, following the economic crisis of 2007 and the efforts of recovery that are on-going. Bibliography ANDERSEN, M. M. & POULFELT F. (2007). Discount Business Strategy how the New Market Lead. New Delhi, Wiley India Pvt. Limited. BAMBER, G.J., GITTELL, J.H., KOCHAN, T.A. & VON NORDENFLYTCH, A. (2009). Up in the Air: How Airlines Can Improve Performance by Engaging their Employees. Ithaca, Cornell University Press. BLAHA, V. (2003). Low Cost Carriers - Evolution, Strategies and Performance. München, GRIN Verlag. DAVISON L., RYLEY T. (2010). Tourism destination preferences of low-cost airline users in the East Midlands, Journal of Transport Geography, n. 18. DOGANIS R. (2006). The Airline Business. 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