Select any two airlines of your choice; one needs to be a Full-Service Carrier (FSC) and the other needs to be a Low-Cost Carrier (LCC). You are requested to compare their commercial and financial performance (for 2019 and 2020 OR 2019 and 2021)
Select any two airlines of your choice
Select any two airlines of your choice; one needs to be a Full-Service Carrier (FSC) and the other needs to be a Low-Cost Carrier (LCC). You are requested to compare their commercial and financial performance (for 2019 and 2020 OR 2019 and 2021) using the financial ratios and concepts learned during this course (the selection and applicability of the relevant ratios and concepts is part of your assessment and therefore cannot provide further guidance on this aspect). However, you are required to address the following topics in your assessment:
• Airline Business Model Characteristics and Adaptations
• Industry Trends
• Future Challenges
• Economics and Demand
• Supply and Capacity
• Covid19 effects to airlines
• Post-Covid19 era challenges
• Costs and potential sources of finance
• Fuel cost reduction strategies (either implemented or to be considered)
• Airline revenues and strategies for increasing them
Introduction
The development of LC carriers, their networks and
competition became literally the trend in Europe. Pioneer
ideas of Pacific South West later taken by Southwest in
1973 even before market liberalization in 1978 led to the
concept of LCC in Europe while applied this model by
Ryanair. According to the European Cockpit Association
(ECA, 2002) [1] in the 2000 European low-cost airlines
transported 20.7 million passengers (8.6% market share)
and this performance has been dramatically increased
every year.
Two main LC carriers Ryanair and easyJet
have actually reached the European level when in 2004
transported 26.4 and 24.3 million people. (Dobruszkes,
2006; Koblen et al., 2012) [2], [3]. Ryanair currently
carries over 70 million passengers per year (2012)
becoming a major airline on the European market with
constant increasing of its shares and significantly affects
the economy not only on the aviation market but also of
many European regions.
The aim of this paper is to
analyse the fares of different airlines and to reveal
dependences which have impact on these pricing policies
as well as to examine what kind of measures airlines use
to fight with competitors. Important part is to define
major differences between two airline models FSC and
LCC also from operating views.
Comparisons of FSC and LCC
Airlines are divided into LCC and FSC by the product
which they offer. This is the newest categorization which
has its origin in the 90-ies of 20th century as a result of
arrival of low-cost carriers.
Traditional carriers (full
service or “many frills” airlines) offer transfer or transit
flights, as well as connections between their network and
interline cooperation also with other carriers. FSC
provide flights to big hub airports, their network could be
described as “hub and spoke” – connecting major cities
with lines to surroundings, their network is extensive and
offers variety of connections and possibilities.
Typical representatives of this model are Ryanair,
easyJet, Transavia, Vueling, Norwegian Airs Shuttle and
others. They are focusing on the implication of all
internal processes and continuous cost reduction.
Shipping rates do not have any restrictions but evolve
dynamically according to changing demand and time.
This model is specialized in scheduled flights on short
and medium distances (Hunter, 2004) [4].
An important difference is the possibility of rebooking
or flight refund methods. At the FSCs whose pricing is
based on the tariff system, passenger can make changes
or cancellation in terms of purchased class or put it in
another way – tariff, while LCCs possibilities of flights
changes are very limited. Reservation change is
additionally possible only for a fee; if passenger is not
able to use flight – fare will not be refunded.
From Table I is clear that FSCs are carrying higher
overhead costs necessitated by their way of operation
based on the assumption of capacity utilisation and by
building lines to hub airports, as well as higher operation
costs due to the providing “fills” on board.
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