Low Cost Carriers - Business Model, Impacts of its Expansion and Challenges

Table of Contents

1. Introduction

2. Deregulation of the European Aviation Market and its Impact on the Emergence of Low Cost Airlines

2.1. Outlook of the European Aviation Industry until 1988: Three Pillars of Economic Regulation

2.1.1. Bilateral Air Service Agreements

2.1.2. Inter-Airline Pooling Agreements

2.1.3. International Air Transport Association

2.2. Commercial Aviation Industry Liberalisation

2.3. Outcomes of the Single Aviation Market

2.4. The emergence of European Low Cost Airlines

3. LCC Business Model and Characteristics

3.1. Definition of the Low Cost Aviation Model

3.2. Overview of the LCC Market

3.3. Business Model and Strategic Positioning of LCC

3.4. LCCs Cost Advantages and Their Determinants

3.4.1. Aircraft Size and Seat Density

3.4.2. Fleet Commonality

3.4.3. Sector Distance

3.4.4. Aircraft Utilization

3.4.5. Usage of Secondary Airports

3.4.6. High Labour Productivity Rates

3.4.7. Types of Routes Served by LCC

3.4.8. Distribution Costs

3.4.9. Passenger Service Costs

3.5. LCC Market segmentation

3.5.1. Business Travel Market

3.5.2. Leisure Travel Market

3.6. Differences between Full Service Carriers and Low Cost Carriers

3.6.1. Operational Differences

3.6.2. Service Structure Differences

4. Impacts of the LCCs Operations

4.1. Benefits of LCCs Operations

4.1.1. Benefits for Consumers

4.1.2. Benefits to Airports

4.1.3. Benefits to the European Community

4.2. Negative Impacts of Aviation industry on EU Community

4.2.1. Effects on the Environment

4.2.2. Limitations of the Low Cost Product

5. Long-Term Sustainability of the European Low Cost Model

5.1. Resisting Economic Downturns

5.2. Low Cost Industry’s Dynamics and Challenges

5.2.1. Overcapacity

5.2.2. Decline in yield in the Average Fare

5.2.3. Controlling Costs

5.2.4. Basic Model

5.3. Competitive Strategies for LCC

5.3.1. Adopting a Strategic Position

5.3.2. Leveraging Capabilities

6. Conclusion

Objectives and Research Themes

This thesis examines the European Low Cost Carriers (LCCs) business model, focusing on its rapid expansion, strategic positioning, and long-term sustainability within the liberalized European aviation market, while analyzing its economic and social impacts on the EU community. The central research questions address the essential characteristics of the LCC business model, its driving forces, and its effects on the European community.

• Evolution of the European aviation industry through deregulation.
• Core operational and business characteristics of the Low Cost model.
• Economic benefits for consumers, airports, and the European Community.
• Environmental concerns and limitations of the Low Cost product regarding passenger rights.
• Strategies for long-term sustainability and resilience against economic downturns.

Excerpt from the Book

Summary of Chapters

1. Introduction: Provides an overview of the thesis objectives, including the analysis of the European LCC business model, its rapid growth, and the regulatory environment that facilitated its emergence.

2. Deregulation of the European Aviation Market and its Impact on the Emergence of Low Cost Airlines: Analyzes the transition of the European aviation industry from a highly regulated system to a competitive single market through various policy packages.

3. LCC Business Model and Characteristics: Details the operational and strategic features of the Low Cost model, comparing it with Full Service Carriers, and examines cost advantages such as fleet commonality, secondary airport usage, and labor productivity.

4. Impacts of the LCCs Operations: Evaluates both the positive benefits for consumers and airports, as well as the negative impacts regarding environmental sustainability and passenger rights limitations.

5. Long-Term Sustainability of the European Low Cost Model: Discusses the resilience of LCCs during economic downturns and identifies key industry challenges like overcapacity and the need for competitive strategic differentiation.

6. Conclusion: Summarizes the transformation of the European aviation industry and reaffirms that LCCs must continue to refine their strategies to remain sustainable in a volatile market environment.

Keywords

Low Cost Carriers, LCC, European Aviation, Deregulation, Business Model, Cost Advantage, Point-to-Point, Air Transport, Sustainable Development, Secondary Airports, Airline Strategy, Market Segmentation, Passenger Rights, Labor Productivity, Yield Management.

Frequently Asked Questions

What is the primary focus of this thesis?

The thesis focuses on analyzing the European Low Cost Carriers' (LCCs) business model, specifically investigating its rapid expansion, the driving forces behind its success, and its impacts on the European aviation market and the wider EU community.

What are the key themes explored in this work?

The central themes include the historical deregulation of the European aviation market, the operational characteristics of the LCC business model, its economic and environmental impacts, and strategies for ensuring its long-term sustainability.

What is the primary research objective?

The research aims to identify the essential characteristics of the LCC model, determine how it affects the EU community, and uncover the driving forces that allow this business model to thrive.

Which scientific methods are employed?

The research utilizes a retrospective analysis of the aviation industry's regulatory history combined with an examination of performance indicators, comparative studies between Low Cost Carriers and Full Service Carriers, and case study evaluations of regional impacts.

What does the main body of the work cover?

The main body covers the transition to a deregulated single aviation market, a detailed breakdown of the LCC operational business design (such as cost-cutting levers), and an assessment of both the positive benefits and negative impacts of LCC operations.

How can the work be characterized by its keywords?

The work is characterized by terms reflecting the shift in European aviation policy, the operational efficiency of LCCs, and the broader debate surrounding their economic, social, and environmental sustainability.

How did the Third Package of liberalisation reforms influence the market?

The Third Package, effective from 1997, removed most remaining regulatory constraints on intra-EU air transport, allowing open access to virtually all routes and fostering the conditions necessary for the rapid emergence and expansion of Low Cost Airlines.

Why do LCCs prefer to use secondary airports?

Secondary airports offer significant cost advantages through lower aeronautical charges and reduced tax costs, and their less congested nature allows for faster aircraft turnaround times, contributing to higher operational efficiency.