Low Cost Airlines
Essay by 24 • December 27, 2010 • 1,021 Words (5 Pages) • 1,414 Views
AGENDA
Basic information about the sector
Characteristics of the sector on the Global level
Analysis of the European market
Analysis of National markets
Answers to Investors questions
AGENDA
BASIC INFORMATION ABOUT THE SECTOR
Characteristics of the sector on the Global level
Analysis of the European market
Analysis of National markets
Answers to Investors questions
History of Low-Cost carriers
Typical Low-Cost Business Model
Single passenger class
Single type of aeroplane
Simple fare scheme
Unreserved seating
Flying to cheaper, less congested secondary airports
Emphasis on direct sales of tickets: e-ticketing
Employees working in multiple roles
Flying early in the morning or late in the evening to avoid air traffic delays and take advantage of lower landing fees
Fast turnaround times (allowing maximum utilization of aircraft)
Simple Product Definition
e-ticketing
No frills
Low cost passenger flights
Car rentals
In-flight sales of beverages, food, and merchandise
Sales of rail tickets, hotel accommodation and travel insurance
Charter services
Position in the Value System
AGENDA
Basic information about the sector
CHARACTERISTICS OF THE SECTOR ON THE GLOBAL LEVEL
Analysis of the European market
Analysis of National markets
Answers to Investors questions
The Industry at Global Level
Global Leaders
Market Concentration
Concentration ratio of top 4 firms CR4: 36 %
Seperate continents markets don’t overlap as all carriers concentrate on a chosen continent only
Biggest concentration on North American and European markets
Market share of low cost airlines is biggest (11% and 12% respectively)
Concentration due to increase as a tendency to merge of bigger carriers
AGENDA
Basic information about the sector
Characteristics of the sector on the global level
ANALYSIS OF THE EUROPEAN MARKET
Analysis of National markets
Answers to Investors questions
Macro-Environment Analysis
Macro-Environment Analysis
Macro-Environment Analysis
Macro-Environment Analysis
Macro-Environment Analysis
Macro-Environment Analysis
Macro-Environment Analysis
Macro-Environment Analysis
Conclusions
The macro-environment suggests Opportunities outweigh the Threats in macro-environment
So the sector is growing and has potential in future
Economic Profile of the Industry
Market Size: $140 billion
Scope of competitive rivalry: Regional
Market Growth rate: 5.7 % for 2007
Expected growth rate 2007-10: 5 %
Stage in Growth Cycle: Growth for CEE
Maturity for WE
Industry Profitability: 6% (2006)
Expected profitability for next 5 years: 10 %
Economic Profile of the Industry
Scope of competitive rivalry
Open sky policy in Europe implies unrestricted airspace; hence Competition might rise in the next 5 years further
Prevalence of Vertical Integration: Low
Entry/Exit barriers
License to operate airline company
Availability of slots at major airports
Development of secondary airports
cost of leasing/ operating/ servicing the airplanes: DATA to lease
High breakeven period
High time for establishment of brand
Economic Profile of the Industry
Scale Economies & Experience Curve effects
Crew unit cost cut 30% by US airlines & 20% by European airlines
maintenance & distribution unit cost cut by 30% in both regions
"Low/Average" pace of technical change - Maybe because of the complexity involved in air engineering
Product Description: Ryanair
Economic Profile of the Industry
Customers
Young students
Professionals with access to internet
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