Budget Airlines Case Study

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3. Compare and contrast the business model of the network and budget airlines. What are the strengths and weakness of each model?
Differences between the business model of the network and budget airlines Network Airlines Budget Airlines
Capacity of passenger High Low
Price High Low
Flight routes Major hubs Point to Point
Number of routes Many Few
Service content Many Few
Labour cost High Low
Fixed cost High Low
Flight cost recovery Low High
Status of environmental competitiveness High Low

Strengths
Network airlines strategic approaches Budget airlines strategic approaches
• The strengths of network airlines are they use a couple of strategic approaches which includes hub and spoke system. This means that the network airlines route their
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The budget airlines they hire non-union workers and cross train employees to perform a multiple jobs. This helps the budget airlines to cuts down the operating costs and save the amount of people that need to support and fly an aircraft.

• Hub and spoke networks connect the passengers from many origin cities to many destinations. The hub and spoke network has many operational advantages. First it exhibits economics scope. By using the hub and spoke system the network airlines have been able to serve some 38000 city pairs.
• The budget airlines also favor flying point to point rather than through hubs. They also choose to fly out of secondary airports which cheaper than the more dominating hubs. This is a lot cheaper.
• The network airlines have advantages to having airport dominate on a particular route, which includes the airport dominance enables to carries and attract more passengers and raise fares on routes out of that airport because it have competitive advantages on routes. • However the budget airlines focus on large market with the large traffic volume such as up and down the East Coast. They also offer no frills on the flight, in flight food or complementary drinks, so they can keep the prices down. This result in offer low fares ticket for their
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This greatly influencing the company that focus on quality need to change their marketing strategy towards price concern. And yet, although all the airline companies using low price strategy, not a lot of companies were gaining a profit at that time. Price wars can create economically devastating and psychologically debilitating situations that take an unexpected toll on an individual, a company, and industry profitability. No matter who wins, the participants all seem to end up worse off than before they joined the battle. This is better for them stop the price wars but bundle their services with products. There is not discounts in price, but consumer can enjoyed flight in terms of small

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