Case Analysis Of Full Service Carriers And Low Cost Carrier
The company set out to compare the profitability and sustainability of Full Service Carriers (FSC) and Low Cost Carriers (LCC). The main aim of the study was to find out the demand for travel on each type of airlines. Furthermore, the company could decide if it wants to launch a full service carrier and if investing in LCC would reap significant profits or become a liability.
Incheon International Airport in Seoul, South Korea was chosen as the base point for both carriers with high travel demand and low number of competitors. 316 business levels and 328 tour levels established favourable conditions for setting up a hub.
Spokes were strategically chosen in the Asia Pacific Region to tap on the rising economies of the Four …show more content…
Although LCC enjoyed full occupancy, their flight frequency of 7 schedules per week, compared to competitors operating with 20 schedules, resulted in lower revenue and profits. On the other hand, FSC’s low occupancy rate was still able to generate sufficient revenue to cover operational costs for the same route.
Both LCC and FSC were not optimizing their full revenue potential in limited frequencies. The inflexibility will cause passengers to fly with other competing airlines instead.
3.2.3 Aircraft Performance
The type of aircraft determined potential passenger capacity and possible destinations.
From 1970s to 1980s, four competitors entered the Incheon- Hong Kong flight route market with lower airfares. Despite their low occupancy rates, they were able to reap higher profits than both Oppa Air and Noona Air. An explanation for their sustenance could be the larger Boeing or McDonnell Douglas aircrafts, which could accommodate a higher passenger capacity than the LCC’s Tupolev aircraft, in turn resulting in higher passenger load and …show more content…
There is potential of market leadership in reaching to less visited destinations, developing countries and established economies.
4.4 Minimizing Overhead Expenses
LCC should aim to lower overhead costs such as office expenses and personnel cost as it is difficult to impose high airfares on passengers. By fully maximising resources and removing unnecessary costs, it is able to align with its ‘no-frills’ business model while sustaining profits.
4.5 Domestic leadership in Asia Pacific Region
Since LCC are limited in their flying ranges, flight frequency for short haul routes should be increased to remove any chance of leaving aircrafts idle. Perishability is a great enemy and LCCs should strive to cater to more passengers in competent availability. Relative to domestic airlines, LCCs have potential to dominate short distances between territories in Asia Pacific. In an era where air transport is still new, LCCs can take advantage of passengers who wish to explore regional countries while maintaining