The number of people travelling by air has increased multi-fold over the last decade or so, courtesy low cost carriers (LCCs) or budget airlines. Over the last ten years we have had many LCCs make a foray into the market and some of them even beat expectations to become leading players by market share.
To keep themselves updated these LCCs have also moved ahead on the technological front by adopting airline packaging software and enhancing the airline reservation systemforbetter ticketing experience. Technological additions apart, these airlines have made changes to their operations to ensure cost savings.
Let’s observe some ways the LCCs stay afloat by filling up their seats while keeping the prices very competitive:
Single Class: LCCs maintain a single class – the economy, instead of maintaining more classes. This ensures similar seating arrangements, standardized design and material requirements resulting in saving of costs. Also, there is no need for expensive interiors and design.
Single Aircraft: Another great strategy is to maintain a single type of aircrafts, like Boeing 737s or the Airbus models. This helps in creating uniform operations and logistics thereby cutting down on hiring, training and upgradation resulting in savings.
Purchase and Lease: LCCs purchase just the number of aircrafts needed to operate and during peak season they lease the required additional aircrafts from aircraft leasing companies. This saves them a lot of money, an airplane could cost anywhere between $70 million – $100 million, whereas leasing the airplane for the required time is way cheaper.
Younger Aircrafts: Some of the LCCs are smart in that they choose airplanes that are 4 years or less in age. They maintain the average fleet between 3-4 years; younger airplanes are in better working condition and require lesser maintenance. Also, these LCCs lease the planes for only 4-5 years that way they do not need to conduct the D-check, which is the most stringent maintenance check for a commercial airline. The cost of a D-check is way too high and dents the profits of the airline company.
Full Capacity operations: The airlines maximize their flight capacities and ensure that every flight goes with 100% capacity thereby ensuring maximum gains on each flight. Sometimes these airlines also provide offers or cut down on the ticket fares to ensure full capacity.
More Trips: LCCs focus on having more trips per day between destinations and in the process carry more passengers and generate more revenues. The increase in the frequency of trips also lends popularity and preference for these carriers leading to an increase in market share.
Lesser known Airports: Some low cost carriers operate to smaller towns and lesser known but adjacent airports that are connected to the major cities to avoid higher landing fees. This saves costs since smaller airports charge lesser handling fee and also helps service lesser known towns prompting more people from these areas to opt for flights.
In Flight Requirements: These LCCs reduce the Inflight requirements such as Movies, Complimentary Food, Beverages etc., to save on costs. In fact, food and beverages are to be paid for in most low-cost airlines as the airlines have an additional source of revenue.
Lesser Luggage: Most LCCs tend to operate on low weight; they remove the unnecessary equipment and even purchase seats with low weight to ensure the aircraft is as light as possible. This helps to save on the maintenance and even helps reduce the fuel spend. Fuel is the biggest cost for any carrier and reducing fuel spends definitely helps save on costs.
Off Peak Travel: Another great way to generate revenues is to fly during off peak hours like early morning or late evening with lesser fares which leads to more bookings. They also deploy more flights during peak season to cash in on the opportunity.
No-frills Lounges: Some LCCs have started charging extra for bookings in airports, storing baggage in the hold etc. They also do not have expensive air conditioned waiting lounges, all of this helps cuts the costs.
Resource Management: Whether it is at the ground level or inflight, the carriers work to make optimum use of resources to ensure successful operations. Sometimes few resources play multiple roles which develop multi-skilled experience and also help the LCCs manage with less recruitment.
With fuel prices and surcharges going high and more players entering the field, the airline industry is only getting even more competitive by the day. In order to survive the competition and sustain the LCCs are doing everything they can to make the flight ticket cheaper and the experience better.
Breaking away from the tradition of ‘’only the rich can afford’’, these carriers are targeting the larger middle class segment to materialize higher passenger numbers and revenues. Two great examples of low cost airlines are – IndiGo, our very own airlines group that has managed to move to the number one spot in terms of passenger volumes carried and RyanAir, the trendsetting low cost airline which ranks as the largest airline in Europe.