different papers
Running head: LOW-COST CARRIERS 1
LOW-COST CARRIERS 3
Easy Jet as a Low-Cost Carrier
Student’s Name
Institution Affiliation
Low-cost carriers are airlines that generally offer low fares for eliminating several traditional services to passengers. There are many examples, but in this study, we are going to discuss the Easy Jet.
Easy Jet
The easy let uses the LCC model since it minimizes costs by reducing the overhead costs. Management of passengers flow is made simple by lack of connection of flights and direct booking through the internet. The EasyJet have reduced price through the application of the LCC model. The firm uses fleets that allows better flexibility when planning the crew, generating savings when training and educating and also spare parts maintenance.
In major cases, easy jets fare do not have a character of great changes or deviations from average prices. In some cases, also the easy jets fare shows great changes with time, but only in cases where there are drastic changes are shown by competitors. It is clear that EasyJet has competition in their fares in the field of the LCC and also in the FSC. Their flights are relatively more expensive than the offer of Ryanair, but it still it can assume Ryanair's customers in terms of competition. More so, easy jets compete significantly with FSC while also having a good reputation as strict LCC. The prices in air transport depend on the nature of the market and the competitions. The airlines apply the principles in their philosophy extent. It is a tariff system and fare determinant system.
The LCC processes are symbolized by cross-functional processes. It emphasizes simple fares, servicing single passenger class, conduction of direct flights and lastly using few employees in-flight services. Most of the LCC provides a short spot to spot services; this allows airplanes to have many take-offs and landings thus spending minimal time on the ground.
The easy Jet started operating in November 1995 from London's Luton airport. In two years, it emerged to be the model low-cost airline and a strong competitor to the flag carriers. This company comprises of identifiable marketing and operational characteristics.
Economically, EasyJet's mission was to fill the aircraft with customers who were cost conscious, rather than to fly with half-empty planes (Hanlon, 2006). It has a simple structure of price. However, the price for a seat changes over the available plane flight and the departure date. All the easy jets sales are directly booked through the telephone or the web.
The major factor in this model is the existence of demand uncertainty for one of the groups. There are two equilibriums of prices where the airline maximizes the profits, and the customers maximize the utility. Prices increase with time in all capacity levels. In the case of high capacity, the industry practices straight discrimination of price between the two sections. In a common situation, the company adjusts prices level for the two segments. Meaning it does not serve businesses passengers first and using the tourists as the buffer when there are some cases of excess passengers, but it rather restricts both segments demand to ensure the capacity matches with the demands which are expected. The firm foregoes the tourist segment in cases of low capacity.
When the capacity is high, the prices in those two periods does not depend on the capacity level, and hence the difference between the two period’s prices does not depend on the capacity's level.
In the deals of the last minute, the firm does not recognize a-priori whether it is going to offer the last-minute deal, it discounts period 1 and period two prices under non-constraint. There is an inverse relationship between the increasing price rates over time and available capacity of seats.
In model development, we take a one-way aircraft route between any two cities, having a one service provider. The utility does not change with time. Large airlines which allow last-minute clearance of prices do not observe deep discounts. Constant schemes of price in the last minute deals are not usually optimal. The scheme of pricing used by the easy Jets which starts with meager prices and later increasing them with time is optimal, and it exploits heterogeneity in sensitivity of customer's price. If the easy jets were to grow and become more prominent, the current strategy might no longer be optimal. This poses a significant challenge to the airline on whether it should retain its current size and the proposition of substantial value, or becoming a bigger airline having a new value which the market may reject (Doganis, 2013).
Easy jet focuses on flexible cost control continues delivering great results and support investment in the resilience of operation. Headline charge per seat raised by 2.4% to £53.52 driven by adverse foreign exchange change of £308 million which is similar to £ 3.56 per seat and the disruption costs that remains as a vast industrial challenge. The general cost performance is controlled by, reduction of fuel cost by19.2% in each seat at constant currency, initiatives in Airports and handling of the ground, engineering and savings maintenance, minimized navigation charges and finally up gauging fleet with the delivery
of additional of 21186 seat –A320 and two A320neo airplanes.
In concussion, all air carriers whether high cost or low cost (Klophaus, Conradly, & Fichert, 2012). They include increasing prices of fuel, airport taxes, and also competition in the market of aviation which has led to the creation of a hybrid airline that has combined features of both the FNSA and LCC models. The LCC remains to be the main carrier flight model.
Doganis, R. (2013). Flying off course: The economics of international airlines. Routledge.
Hanlon, P. (2006). Global airlines. Routledge.
Klophaus, R., Conrady, R., & Fichert, F. (2012). Low-cost carriers going hybrid: Evidence from Europe. Journal of Air Transport Management, 23, 54-58.
International Air Transport Association. (2006, July). Airline cost performance: IATA economic briefing. (Links to an external site.)Links to an external site.