CONCLUDING REMARKS
Conclusions, Suggestions, Limitations and Study Future MAJOR FINDINGS
Brief Case of Vietjet, Qualitative Analysis Results, Marketing strategy for Vietjet
RESEARCH METHODE
Research Framework, Outline Qualitative Analysis: SWOT, 4P LITERATURE REVIEW
INTRODUCTION
Background, Motivation & Objective
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Chapter Two: Literature Review
2.1 The Definition of Low-Cost Carrier & LCC Business Model
The emergence of low-cost carriers has been a key catalyst for the development of the aviation industry in the last decade. There are various definitions that have been applied to describe the low-cost carrier ( Dietlin 2004; Kumar 2005; Doganis 2006; Hunter 2006; Holloway 2008). In essence the majority of researchers define LCCs as carriers, through a variety of operational processes, have achieved a cost advantage over full-service carriers (FSCs). A low-cost carrier will be defined as a carrier which translates these cost savings into lower , more affordable fares for the travelling public (World Bank Document, Ready for takeoff). Or according to Wikipedia definition : A Low-Cost Carrier or Low-Cost Airline (occasionally referred to as no-frills , budget or discount carrier, and abbreviated as LCC) is an airline that generally has lower fares and fewer comforts. To make up for revenue lost in decreased ticket prices, the airline may charge for extras like food, priority boarding, seat allocating, and baggage etc.
For any business, choosing the right business model is very important and the airline industry too. The business model will determine the way one intends to make money with the airline. There are many economic proposals, business strategy research for the airline industry and a lot of airline business models are presented. According to Airlinebasics.com , there are really 6 main airline business models which are being used by the majority of airlines around the world: Those are Legacy Airlines ( Full Service Carriers) , Low Cost Airlines (Low Cost Carriers), Charter Airlines (Holiday Carriers), Regional Airlines, Cargo Airlines ( Traditional Freight Carriers) and Hybrid Airlines. There are a number of key characteristics that can generally be found in LCCs as follows (IATA and World Bank Document)
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1. The service offering focusing on the key service of transport and removal of all
“frills” (for example, free baggage, on-board meals, assigned seating) or charging additional fees for them;
2. Primarily point - to - point operations, serving short-haul routes, often to/from regional or secondary airports lower airport charges, higher availability of slots, and reduced congestion .
3. High aircraft utilisation rates with short turnaround times between operations.
4. Low-cost distribution through online selling, a very high proportion of bookings made through the Internet.
5. A strong focus on price sensitive traffic, mostly leisure passengers. The fleet consisting of just one or two types of aircraft.
6. Different fares offered, related to aircraft load factors and/or length of time before departure.
7. The high labor utilization time through a higher number of average block hours per employee and/or higher passenger per employee ratio
Not all low-cost airlines do all of the above. However, here are the general characteristics that most low-cost airlines apply to themselves.
To put it simply, the business model of the low-cost carrier can be understood simply as follows: Travelers are very sensitive to cost, particularly for short flights.
LLC can offer very low prices by eliminating unnecessary luxuries, like in-flight meals or business-class seating. Given the high level of congestion at most hubs, low-cost airlines can also take the less expensive late-night and early-morning.
Some airlines actively advertise themselves as low-cost, budget, or discount airlines while maintaining products usually associated with traditional mainline
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carrier's services which can increase operational complexity. These products include preferred or assigned seating, catering other items rather than basic
beverages, differentiated premium cabins, satellite or ground-based Wi-Fi internet, and in-flight audio and video entertainment. More recently, the term "Ultra Low-Cost Carrier" differentiates some low-cost carriers, particularly in North America where traditional airlines increasingly offer a similar service model to LCC.
With the fluctuation of fuel prices & the global economic downturn created a thriving market for low-cost carriers pressuring more up-market airlines into looking for new strategies for differentiating their service. The airline industry is intensely competitive. This also means that low-cost airlines must always innovate, carefully prepare short-term and long-term strategies to cope with changes in the market and fierce competition among firms in the industry together.
2.2 The Growth Period
Over the past three decades, Low Cost Carriers (LCCs) have transformed the air travel market and created a revolution in air service (IATA) . In 2018, LCCs worldwide with the greatest number of seats accounted for about 31 percent of the world total scheduled passengers (Statistatic Portal 2019) . The global LCC has grown at a staggering pace since the beginning of this decade and now account for one third of intra-regional seat capacity.There are now more than 100 LCCs
operating a combined fleet of 6,000 aircraft. The LCC fleet has doubled in size since the end of 2009, when it consisted of only 2,900 aircraft (source: CAPA Fleet Database). Global LCC seat capacity has also doubled since 2009 (753 million) , reaching nearly 1.7 billion (1.564 billion) in 2018 (source OAG).
Asia Pacific region is now the world’s largest LCC market, where the LCC
penetration rate is now approaching the global average, accounting for nearly 600 million seats, or 35% of the global LCC seats in 2018. The Asia Pacific LCCs have
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expanded from a fleet of only 400 aircraft at the end of 2009 to 1,900 aircraft currently and are poised for more rapid growth, given their massive order book of 2,400 aircraft (CAPA). Latin America has also experienced rapid LCC growth, while Africa's LCC growth has been relatively modest. LCC growth in the Middle East market has been rapid but the region's LCC penetration rate remains low. The more mature markets of Europe and North America have experienced slower LCC growth than the emerging markets, although there have been significant gains between the two regions.