Porter's Five Forces Model Analysis of Low Cost Airlines Industry

The assignment provides a detailed analysis of the low cost airlines industry using Porter's Five Forces model. It examines the key characteristics of the industry, including point-to-point operations, short haul routes, and adequate focus on price sensitive traffic. The document also discusses the major competitors in the industry, their features, and the prime focus of low cost airlines.

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LOW COST AIRLINES INDUSTRY
MEANING OF LOW COST AIRLINES INDUSTRY
A low-cost airline is a type of airline which do not provide traditional
services in the offered fare which results in comparatively low fare and
fewer comfort to the travellers. To cope up with the lost revenue, airlines
can charge for food, baggage, priority boarding, seat allocation etc.
PRIME FOCUS OF LOW COST AIRLINES INDUSTRY
These types of companies tend to focus on the following aspects:
 Point to point operations
 Short haul routes
 Adequate amount of focus on price sensitive traffic
 Comparatively low fare
 Focus of leisure passengers
 Offer single class service with no or limited customer loyalty
programmes.
 Absence of non-essential feature such as, schemes for frequent
flyers, reclining or comfortable seats.
 Online sale of tickets and check in
 Passengers are loaded via stairs and not through jet ways
MAJOR COMPETITORS AND THEIR FEATURES
The major competitors of Low Cost Airline industry are:
 Rynair Airline: €6.648 billion (2017)
 WizzAir Airline: €1,571.2 million (2017)
 Easy Jet Airline: £5.047 billion (2017)
 Thomas Cook Airline: £7,812 million (2016)
They all share certain common features. One of them is pricing policies
where the cost of fare is quite dynamic with the help of discounts and
promotion of tickets. Some airlines tend to charge additionally for taxes and
baggage. Others gives a leverage to carry baggage up to a certain weight.
Differentiation policies are also applied by some airline companies where
they offer food and beverages to their customers as well. Other differentiate
themselves in terms of offering reclining seats, comfortable seat covers etc.
The major concern of this industry is that whether the business
model of these airlines is profitable enough? However, these
companies are able to generate profits and thereby leading to
positive growth through cost advantage, point to point business
model and no frills being offered to the customers. It results in
attracting large number of customers than usual.
REFERENCES
Akamavi, R.K., Mohamed, E., Pellmann, K. and Xu, Y., 2015. Key determinants of passenger loyalty in the low-cost airline business. Tourism
management, 46, pp.528-545.
Bilotkach, V., Gaggero, A.A. and Piga, C.A., 2015. Airline pricing under different market conditions: Evidence from European Low-Cost
Carriers. Tourism Management, 47, pp.152-163.
PORTER’S FIVE FORCES
MODEL ANALYSIS
Bargaining power of buyers: High
Bargaining power of suppliers: Low
Threat of new entrants: High
Threat of substitute: High
Industry Rivalry: High
MARKET STRUCTURE
 Offering low prices to the customers
 High competitive market
 Possess secondary airports and shorter dispatch time
 Shorter routes
 Product differentiation for competitive advantage
 Airlines tend to loose their market share due to new entrants easily.