Introduction
A low-cost carrier (LCC), otherwise known as a cheap or budget airline, refers to a business model adopted by specific airlines that emphasizes seeking to reduce operating costs (Franke, 2004). Airlines that operate the LCC business model often eliminate some of the services that are offered in traditional airlines with the sole focus being towards minimizing the costs of travel entirely. Most of the LCCs operate for short distances within a given region, which are routes that are often ignored by the traditional airlines due to their lack of viability in terms of cost margins (Franke, 2004). When compared to traditional airlines, LCCs can be described as having a minimal connection to building comfort for its passengers. However, it is essential to take note of the fact that the LCCs can compensate for the decreased price of tickets by charging extra fees on items such as carry-on baggage among others.
Low-Cost Carrier (LCC) and Full-Service Network Carriers (FSNC) Business Models
When comparing and contrasting the Low-Cost Carrier (LCC) and Full-Service Network Carriers (FSNC) business models, it is essential to take note of several key similarities and differences in the structure of the models. The main similarity between these two business models reflects on the fact that airlines in both models have embraced technology in their use of online bookings and check-in. The demand for adoption of technology in the airline industry has similarly impacted LCCs and FSNCs, resulting in their need for having to adopt technological approaches allowing them to use the internet for purposes of booking and check-in. Another fundamental similarity between these two business models is that they often capitalize on high load factors as a way of seeking to minimize their operational costs significantly to help capitalize on their profits.
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Regarding their differences, LCCs are considered as being different from FSNCs, considering that they often focus on serving short-haul routes when compared to FSNCs, which often focus on long-haul international routes. Low-cost airlines operate between small and less utilized airports as a way of ensuring that they can move passengers, which allows them to minimize their costs of operations significantly. On the other hand, it is essential to take note of the fact that LCCs often have a high aircraft utilization rate when compared to FSNCs attributed to the millage that the aircraft can cover. Most of the LCCs often focus on the utilization of fleets that consist of a single aircraft type, which makes it much easier for them to minimize costs associated with servicing these aircraft. For the FSNCs, they often utilize multiple types of aircraft as a way of enhancing comfort for their passengers, which is the critical expectation.
Southwest Airlines Analysis
Southwest Airlines is considered as the largest LCCs operating in the world today operating in different routes within North America. According to the company’s 2018 financial report, the average airfare charged for passengers one way was $147.17, which is significantly low when compared to some of the comprehensive network carriers (Roberts & Griffith, 2019). The ability of the company to minimize its airfare costs can be attributed to the fact that it finds itself in a strategic position to reduce its cost per available seat-mile (CASM). In the 2018 financial report, it was clear that the airline has been able to reduce its CASM by one percentage point, which has had a significant impact towards reducing its operational costs (Roberts & Griffith, 2019).
A comparison of yield between Southwest Airlines is other some of the other comprehensive network carriers shows that Southwest Airlines has a high yield attributed to the rising demands for its flights in different regions in North America. The airline's return can be associated with the fact that it has focused much of its attention on introducing new routes as a way of increasing passenger capacity. In 2018, the airline was able to introduce 600 unique courses, which have had a significant impact towards defining the airline's approach to meeting some it's set out demand structures (Roberts & Griffith, 2019). The airline has been on the forefront in seeking to ensure that it maintains minimal airfare costs regardless of the variations in the price of fuel, which has been considered as a critical factor affecting the airline industry. That seeks to show that indeed Southwest Airlines ought to be regarded as a low-cost carrier.
Conclusion
Low-cost carriers (LCCs) are defined airlines that focus much of their attention towards minimizing costs of operations as a way of ensuring that they reduce the airfare costs for its passengers. An example of an LCC is Southwest Airlines, which is categorized as the world's largest LCC operating within North America. A review of the pricing model adopted by LCC indicates that the average airfare charged for passengers one way was $147.17. That is significantly low when compared to some of the comprehensive network carriers operating within the same region. On the other hand, it is essential to take note of the fact Southwest Airlines has a higher yield level taking into account that it has been on the forefront towards introducing new routes to curb the rising demands.
References
Franke, M. (2004). Competition between network carriers and low-cost carriers—retreat battle or breakthrough to a new level of efficiency?. Journal of Air Transport Management , 10 (1), 15-21.
Roberts, D., & Griffith, J. C. (2019). A Tale of Two Airlines: A Comparative Case Study of High-Road versus Low-Road Strategies in Customer Service and Reputation Management. International Journal of Aviation, Aeronautics, and Aerospace , 6 (2), 4.
