how low cost airlines gain competitive advantage

7/31/2019 How Low Cost Airlines Gain Competitive Advantage

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Running Head: HOW LOW COST AIRLINES GAIN THEIR COMPETITIVE

ADVANTAGE

Title: How Low Cost Airlines Gain Their Competitive Advantage

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HOW LOW COST AIRLINES GAIN THEIR COMPETITIVE ADVANTAGE

Introduction

Airlines companies have lost millions of dollars in the past number of years; some

of them are even facing bankruptcy and no idea how to salvage what they have lost.

Southwest Airlines, however, has a passion of maintaining costs low and taking care of its

staff as well as managing the company in times of boom. This is the secret to its triumph.

This paper looks at how airlines like Southwest gain competitive advantage by operating at

low cost.

Low cost carrier

This feature comprises of low flight fares and fewer on board comforts. To recover

money lost in reduced ticket prices, extras like food, luggage, is charged separately. In spite

of this operating model, this feature should not be confused with any service short flight

policy. Several airlines promote themselves as low budget airlines to keep their clients, at

the same time preserving products related to the conventional key carrier services like

beverages, audio as well as video entertainment, and wifi internet and so on. Publicizing

itself as a low budget or discount helps to access many travelers to appear cheap and

affordable to all (Button, 2011).

General practices

An airline practicing the low cost carrier feature operates with an aircraft

constructed to handle just a single class of passengers. Formerly they used old aircrafts like

older models of Boeing 737, however, since 2001; smaller, new fuel efficient aircrafts are

being used.( Neufville, 2008). These comprise the Airbus A320. This move has led to

reduced costs in training as well as servicing the aircrafts. Operation of aircrafts with

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minimum equipments that are optional leads to low acquisition, as well as maintenance

costs hence maintaining aircraft weight at a low level, therefore saving fuel.

In the history of south west airlines, luggage is not transferred from one aircraft to

another even though both flights belong to south west air lines. This move encourages the

travelers to get tickets for direct flights.

South west airlines operate a point to point service their centre of attention being

towns which act as mini hubs for traveler connections to other cities, for instance,

southwest airlines control the market in California, managing many flights in northern, as

well as southern California, for a low ticket price of $30. This is a strategy to increase

destination coverage as well as preserve its market. It offers an uncomplicated fare system

for instance charging one way tickets half the price of return tickets. Normally, ticket prices

increase as the plane continues to fill up, but early reservations are compensated (Evans,

2011).

The airlines employees in most cases carry out several roles for instance, cleaning

the air craft, or manning the gate hence cutting down on personnel expenses, southwest

airlines are an example of fuel equivocation so as to decrease fuel costs.

Employee perception

Treating employees well does not mean giving them enormous paychecks. At

southwest, some of the workers earn lower salaries than those working for competitor

companies, the stocks are available to everyone working at the company, not just the

executives. This enables them to share in the companys financial success. In addition, the

company has a policy to give its employees job security. Having happy employees saves

money as handling employees in a satisfactory manner results to a range of non financial

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actions. Officers at southwest, when receiving a pay raise, the amounts are no larger,

proportionately than those of other employees; more so during recession reduction of

salaries is fair to all in the company.

Employees at southwest airlines have the freedom to go beyond their responsibilities in

their work, for them to deliver professional customer service. The staff generates quality

service to the airlines clients Due to this hierarchy (Swan, 2006).

Marketing

Through insistent marketing approach, the airline differentiates itself from the rest,

by corresponding with clients on the quality of service they offer. However, lowering ticket

prices is not enough competitive advantage. If an airline competing with southwest

announces increase in fare prices, southwest is obligated to act in response to these

developments, it has to do this at the same time preserve its existing low cost of tickets and

still raise its daily profits. Southwest airline can raise its existing tariff by half what the

competing company is offering, to accomplish this goal (Freiberg, 2001).

The airline advocates itself, as the best in the industry by offering, low cost safe as

well as reliable exceptional services. Instead of competing for customers with other

airlines, southwest identified two kinds of client, leisure price sensitive and time oriented

clients. Its goal is to satisfy the two kinds fully and retain them. (Morrell et al, 2006).

Client reward system

Southwest Airlines operate a reward program to its staff. The program is based on

how often a passenger travels with the air line, and not the number of miles a passenger

flies, in that the more a client uses the airline, he gets a bonus, for instance paying half

price for a return ticket, as well as transportation to the preferred hotel from the airport,

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more so winning fully paid family vacations, same day delivery service, The dedication to

this assurance earns the company acknowledgments well as an excellent client contentment

record (Gittell 2005).

Client satisfaction

Southwest airlines mission is high quality service delivery to its clients with the

wisdom of company spirit and friendliness. The airline has successfully met the most

essential needs of their clients, for instance, at ticket counters, travelers do not wait in

queues. The airline has online ticket purchasing where one can make a reservation at home,

purchase and print the ticket. More so if a client would want to reschedule a flight, the

airline makes it easy and convenient. (Pfeffer, 2009) Southwest airline, unlike other

airlines, offers spectacular low travel rates to its clients, and guarantees them a safe plus

secure moreover a time departure and arrival. The airline offers excellent connectivity amid

the passengers destination. In addition, customers with unique needs such as disability are

well taken care of until they get to where they are going.

Security is the key to every being. At southwest airlines, every plane departing is

assigned qualified air marshals who uphold security details on air. This move has

guaranteed that travelers get to their destination safe as well as having all their belongings

with them. More so cases of terrorists, hijacking are managed effectively.

Long haul flights

Airbus A380 can hold up to 900 travelers in an all economy design, hence allowing

a low price long haul service. Though per seat costs of such a plane would be cheaper than

those of a contending airline there are a few possible low cost investments in a long haul

process. An operator of such a process would find it almost impossible to distinguish itself

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from a conservative airline. Low cost carrier normally flies their planes longer on daily

bases scheduling departure first in morning times and arrivals at night.Longer flights

indicate less capacity to enhance aircraft operation by adding short flights every day

(Whitelegg, 2005).

Cultural aspect

South west airline uses its time on cutting costs as well as constructing a tradition

of people who want to convey excellent client service (Ott, J 2004). This culture takes

action as the driving vigor for the staff to bring out an outstanding customer service. This

culture being the center of attention, the airline is able to exercise it as a competitive

advantage.

Conclusion

As much as south west airlines is faced by labor and fuel cost challenges from other

low cost carriers joining the industry, it still has a competitive advantage over them. These

new airlines would have to operate at equal or lower costs for them to grow. South west

airlines stand out as in August 2007 it was reported to have carried more travelers than any

other US airline.

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Button, K., Costa, A., Costa, F., & Cruz, C. (2011). Problems of cost recovery by

European airlines since market liberalization. Transportation Planning &

Technology, 34(2), 125-138. doi:10.1080/03081060.2011.554703

De Neufville, R. (2008). Low-Cost Airports for Low-Cost Airlines: Flexible Design to

Manage the Risks. Transportation Planning & Technology, 31(1), 35-68.

doi:10.1080/03081060701835688

Evans, J. (2011). Quality and performance excellence : management, organization, and

strategy. Mason, OH: South-Western Cengage Learning.

Freiberg, K. (2001).Nuts. New York Londres: Texere.

Gittell, J. (2005). The Southwest Airlines way : using the power of relationships to

achieve high performance. New York: McGraw-Hill.

Morrell, P., & Swan, W. (2006). Airline Jet Fuel Hedging: Theory and Practice.

Transport Reviews, 26(6), 713-730. doi:10.1080/01441640600679524

Ott, J. (2004). Big Tests for Discounters. (Cover story).Aviation Week & Space

Technology, 160(26), 40-43.

Pfeffer, J. (2009). Competitive advantage through people : unleashing the power of the

work force. Boston, Mass: Harvard Business School Press.

Shaw, S. (2011).Airline marketing and management. Farnham, Surrey Burlington, VT:

Ashgate.

Whitelegg, D. (2005). Flying for peanuts: the rise of low-cost carriers in the airline

industry.Journal Of Transport History, 26(2), 125-129.

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how low cost airlines gain competitive advantage

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