BM054-3.5-2-CMAC
Individual Assignment Page 1 of 2
This assignment is an individual assignment and is worth 30% of your total assessment. Your assignment must be type written using font Times New Roman size 12, 1.5 spacing, justified alignment, 1 inch margin on both sides of each page and properly bound. Cover page of the assignment must include name, student ID, and subject code. Submit before 12 April 2012 by 7.00pm
LOW COST AIRLINE'S STRATEGY MODEL
About 40 years ago, Rollin King and Herb Kelleher got together and decided to start a different kind of airline and the first low cost airline called "Southwest Airlines" was invented. Southwest Airlines founded in 1971 and it was a novel business model innovation that breaks all the rules. They began with one simple notion "If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline." A low-cost airline is also known as a no-frills, discount or budget carrier or airline. It is an airline that generally has lower fares and limited services. The term originated within the airline industry referring to airlines with a lower operating cost structure than traditional airlines. Low-cost carriers should not be confused with regional airlines that operate short flights without service, or with full-service airlines offering some reduced fares, because they have different business model. Low-cost airline's the key strategy logics are: • Very low ticket prices (customer) ¦ High utilization rate of fleet of aircraft (growth, routes) • Simple structures (processes) • Lean and productive personnel (resources) The growth perspective follow only the strategy logic of the high utilization of aircrafts, which is based on elements such as the efficiency in ground services (25 min gate turnaround), short-haul, frequent and point-to-point routes between mid-sized cities and secondary airports. The key issues keep planes in the air the most of the time. The utilization rate with high volume is very crucial for the low-cost airline's strategy model and every business issues must follow this logic.
REQUIRED:
a. Write an overview of low cost airline. What are the differences between a low cost airlines and premium economy airlines? (Hint : it is required to define the low cost airline and explain the differences between low cost airlines and premium economy airlines)
(10 marks)
b. Pricing strategy is the biggest weapon for low cost airlines. In your opinion what are the cost and operating strategy adopted by low cost airlines to offer such a cheap ticket for passenger. (Hint : it is required to analysis the operation costing and pricing strategy used by low cost airlines and required to use knowledge of costing to add value on your research, analysis and findings. Your answer should be rationale and practical) (30 marks)
APU Level 2 Asia Pacific University of Technology and Innovation 201203