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All the traditional industries operating in conventional ways are today facing quite hard challenges from their new competitors who offer services at lower budgets. Generally, any traditional business industry for providing full service with a touch of conventionality and high quality has to keep the prices high for their services. That is why when people get the other choices at lower budgets they readily accept and adapt to that. The services they get in return are generally not full like the traditional one but people do not mind that as the quality is generally reasonable. The same thing can be said for the airlines as well. Traditional airlines in recent times have faced significant losses from their businesses and some had to file for bankruptcy. But their low-cost or budget counterparts have managed to carve a niche in the field. They have managed to create a business model which has given them a sustainable business advantage.
Comparison between traditional and budget airlines
There has to be a comparison between the traditional and the low cost or budget airlines to find out the reason for such differences in profitability in the same field of business. Before comparing let us define the low-cost or budget airlines first. Low-cost airlines are those which offer services at lower costs of tickets. But they cover much fewer services than the traditional airlines within that price and to make up the reduced fare of tickets they offer services like food, priority boarding, seat allocation or baggage handling for additional charges and this, in the long term has worked extremely well for them and given the edge f the competitors.
Below a comparison has been drawn between the two poles of airline service providers. The comparison is in tabular form.
The business model of budget airlines: source of sustainable business advantage
The budget or low cost airlines maintain a business model which they call the no frill services . They are able to minimize the investment by reducing the cost of ground staff and the entertainment and meal services within the flight. The target is the general economy class which does not mind the lack of additional services and is happy to get the destinations covered in lesser price and lesser time.
The routes are generally short and the times taken to cover these distances are not much. So this time can be easily managed without the in flight entertainments. Leasing aircrafts, taking secondary airports, avoiding transfers at hubs and maintaining single flying class all are means of reducing cost. Extra earning for meals, extra baggage and no return of fares in case of missed flights keep the profitability up. The worthiest invest is made by heavy advertising in all sorts of media has also proved useful for these airlines. The business model is headed to sustained profitability. The traditional airlines need to adopt some features to be able to stay in competition with these budget airlines.
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