Cheap airline services - Essay Example

? CHEAP AIRLINE SERVICES By Table of Contents Table of Contents 2 Overview 3 Introduction 3 Literature Review 4 Strategies and Practices 5 Impact on the Market 9 Challenges 12 Methodology of the Research 12 Objectives of the study 13 Theoretical Framework 13 Research Approach 14 Research Design 15 Purpose 15 Strategy 15 Techniques and Procedures 16 Secondary Data 16 Primary Date 16 Ethical Considerations 17 Conclusion 17 Overview Cheap airline services generally imply long haul carriers that offer cheaper terms of travel as compared to the average conventional flights. The basic approach has often involved the elimination of certain luxuries, comforts, and services normally associated with luxury airlines. Other approaches involve the introduction of complex methods of determining the cost of travel (Bisignani, 2006, p 45). Some of the problematic issues that attend to the introduction of the cheap airline services involve claims of hidden charges, concerns over the levels of safety and matters of comfort for these airline services. Further, in the liberalized market economy, a flight that is regarded as budget within one region may qualify as expensive in another. This is because there are no structural universal regulatory mechanisms in the global airline business, which could be relied upon for an objective and all-inclusive interpretation of the essential meaning of cheap airline services. Introduction The desire to make airline services affordable and accessible continues to attract various approaches and strategies among different companies spread in different countries across different periods. Studies show that the emergent of the low cost carriers from the mid-1990s led to significant changes in the airline industry particularly within the United States and Europe (Chandler, 2002, p. 4). The idea of cheap airline services often implies a wide range of meanings within different contexts. Although the general idea of offering cheap airline services has some universal connotations, the various strategies employed towards this objective illustrate a highly localized application of the same in terms of the strategies, methods, and the relative levels of success for companies that have attempted to engage in this kind of business (McCartney, 11). Some of the common characteristics of cheap airline services include reduced fare, point-to-point airline services, lack of seat assignment, secondary airports flights, lack of free meals or drinks, higher flights frequency, and short flights. These characteristics are usually conducted in various ways depending on the airline’s chosen operational strategy. The terms “cheap airline services” is often used interchangeably with various other terms that carry the same meaning. Other attendant synonyms include low-cost carriers, budget carriers, no-frills, cheap flights, and discount flights (Flouris & Walker, 2005). Regardless of the different adjectives, the baseline often implies the provision of airline services that cost significantly lower than the average carrier. Generally, cheap airline services are usually conducted in ways that show high levels of efficiency in terms of time and costs. The increased levels of efficiency are important to substitute on some of the areas affected by reduced fares. On this score, it becomes necessary to consider the fact that some of the issues explored in this study are basically aimed at exploring the kind of structures that underpin matters of strategy and revenue with regard to the low cost carriers. Literature Review Multiple studies have attempted to explore the manner in which the low-cost carriers have affected the global airline industry. Academic inquiries have attempted to explore the different kinds of strategies employed by companies that entered the budget airline sector. Studies show that various strategies have been followed by a mixture of results by different countries and across different times (Mentzer, 2000, p. 34). Generally, the literature shows that some companies have performed well while others have been met by a range of different challenges, which threatened their survival. However, the overall assessment indicates at a positive trend of growth as companies seek the different ways of engaging with the complex and diverse nature of the market. In this regard, it becomes necessary to explore some of the dominant themes that attend to the emergent, development, and challenges of cheap airline services across the globe (Buck & Zheng, 2004, p. 72). Some of the dominant themes covered in the literature include strategies employed by cheap airline carriers, the impact of cheap airline carriers on economic systems, relative levels of market, challenges, performance, and criticism of some of the approaches applied. Strategies and Practices According to some studies, low cost carriers opt for smaller planes in order to save on the maintenance costs (Koenigsberg, Muller & Vilcassim, 2008). They also limit the amount of inner luxuries in order to make room for more passengers. There are no facilities like special rooms and the seats are also fixed such that there are no recliners on board. Some of these airlines have their personnel playing multiple tasks in order to save on the personnel wage bill. It is important to consider the fact that these airlines engage multiple processes of saving on costs in order to shield themselves from the possibility of losses that might result from the mismatch between the levels of income versus operational expenditure. Other low cost airlines only operate on one-way basis in order to maximize amounts of trips. Timing is also a matter of strategy since it involves the scheduling of the flights programs during hours that are not packed in order to avoid congestions, which often result in delays. Others also tend to operate on end-to-end schedules in order to avoid the inconveniences and logistical challenges involved in connections. Other scholars have also associated low cost carriers with direct flights, which are normally cheaper to operate and waste significantly lesser amounts of time as compared to the other flights (Levine, 2006). Studies conducted on the relevance of direct flights and their comparative advantage have shown that most of the low cost flights spend lesser amounts of time between airports as compared to the other category of expensive airliners. Hoffman (2007) studied the manner in which Ryanair evolved from a troubled and low-key beginning to a position of regional dominance on the European market. According to Hoffman (2007, p. 46), the gradual growth of the process was made possible through a consistent pattern of innovation and the engagement of various processes, which were meant to engage meaningfully with the demands of the global market. The study notes that Ryanair began with old and cheap flights that were regarded as cheap and without the levels of sophistication that is associated with the low cost airlines in most parts of the world. The desire to increase the value of their services and enhance their profile on the market was determined by the fact that most of the dominant players in the industry had raised the stakes of quality and therefore enjoyed the competitive advantage on the score of quality (Rae, 2001). In order to retain its hold on its market niche, it became necessary for the company to develop strategies that would help it balance between costs and value. Other studies point out that the desire to curve strategies around the principle of total quality management underpinned the development and transformations that took place in Ryanair within the space of time of a decade (Brock, 2000; Pender & Baum, 2000). While still maintaining its low prices, Ryanair managed to transcend from its original state of old flights to acquire a new fleet, which earned it some significant growth in profile on the level of standards and general profile. Further, Hoffman observes that the airline witnessed a phenomenal growth in its stock value and reported a consistent growth in profits to levels that gave strong hints to the development and growth of the industry. At the supreme point of its growth curve the share price of Ryanair was rated higher than that of British Airways. This point, according to a range of studies, gave evidence to the fact that the European airline market was generally receptive to the low cost airline services. On this score, it is often considered that some of the issues that supported the growth of the industry were basically informed by the determination of a range of strategies that responded favorably to the demands of the low-level market segments. However some studies point out that the progress and growth illustrated by Ryanair was basically a manifestation of the different processes that impact negatively on certain aspects of the industry. These studies point out at claims of stringent rules that often deny customers the choice of other alternatives and which in the long run often turns out to be expensive. It is important to perceive the strategies employed by these airlines as some kind of a totality. Essentially, these strategies deny the customers some of the privileges and comforts that are often associated with airline travel (Salanti, Malighetti & Redondi, 2012). On this score, it makes sense to determine some of the issues that relate to the specific criticisms leveled against Ryanair with regard to their strategies and practices. Some of the issues involve complaints that the airline fails in the areas of customer care and the resolution of disputes relating to the provision of services. The handling of luggage is one of the issues that has been featured in the criticisms leveled against the airline. Some of the issues that engage the development of the airline industry is the moderation of the strategies in ways that accord with the competitive nature of the industry. This study notes that the desire for creating competitive advantages forced the cheap airline services to engage in multiple strategies in order to maintain some kind of a unique profile to maintain its space on the market. This perspective is also corroborated by the evidence of other studies that show the consistent changes in strategies of the low cost airlines, which have occurred in the past decades. Adjustments to the levels of passenger comfort have been managed through a consistent pattern that is consistent with the business ideal of customer satisfaction. This process is usually necessary towards the general objective of upsetting the control of the established airliners on the global airline industry. More studies have shown a connection between the level of attachment between the business practices of established industry players and the rapid innovations that have taken place in the cheap airline services. According to these studies, these changes have been more manifest in the European and American markets as compared to other parts of the globe. Some studies note that this aspect of business reality is sufficient proof of the diverse nature of the business processes as understood within the process of change. Minkova (2012) further points out that the transformation of the low cost airlines services is manifest in the Eurozone as compared to other regions of the world. According to these views, certain synergies on the Eurozone market have provided more impetus for the development of this industry. An analysis conducted by Pleul (2008) offers a range of strategies by which airline industries could survive on the highly competitive European airlines market. The study begins with an assessment of some of the supporting structures, which are often associated with aspects of performance as understood within the framework of performance and development of the airline industry. Generally, some of the issues that attend to the growth of the airline industry relates to the choice of the market. Pleul argues that low cost airline business requires an assessment of the characteristics of the market in order to develop the most effective strategies that could harness the synergies and special advantages of the market. In essence, the study points out that some of the issues that attend to the development of the industry relate to the specifics of the market. Some markets are generally flooded in a way that makes it impossible or difficult for the operation of the low cost airline industry. The opinions expressed in this study mirror other perspectives that have been developed by other analysts who contend that the choice of the kind of connection network is a vital factor of strategy. The choice of network affects the costs of operation of any airline. Generally, some networks are more lucrative than others are. The choice of network is usually determined by the nature of destination and the kind of advantages that are to be found in these specific destinations. On this score, it becomes necessary to consider the fact that some of the issues that have been considered in choosing destinations also affect other parts of the economy. Such issues include tourism and trade. Destinations associated with tourism and high levels of global trade are usually suitable for the determination of global issues that relate to matters of general interest. In some sense, it is important to consider the fact that some of the destinations have resulted in significant losses even for airlines that do not fall under the category of low cost airlines. In this regard, some of the issues that attend to matters of general interest concern the engagement of issues that concern the development of strategies meant to shield losses. Impact on the Market A range of studies and inquiries on the idea of cheap airline services converge on the fact that budget flights have increasingly become necessary in the modern world particularly due to the increased levels of mobility in the context of globalization and the liberalization of the market economy (Filar, Manyem & White, 2001). In this regard it becomes necessary to consider the fact that globalization has made it possible for people to engage business, educational activities, tourism, and other discourses and processes in various parts of the world. Generally, some of the issues that attend to the increased traffic of humans across the globe include the need to break into the unexplored segments as a strategy of competition. Ring and Doring (2009) argue that the low cost carriers have eliminated the barriers of class in air travel accessibility. This observation originates from the fact the conventional airline services were deemed as expensive and accessible only to the higher classes. The two authors give evidence to support the fact that the cheap airline business continues to grow and expand in relevance and value in Europe and the rest of the globe. Initially, the market presence of the budget airlines was limited to a few carefully selected destinations. However, the studies conducted by Ring and Doring (2009, p. 24) show that the airlines have continued to expand to alternative destinations including areas that were earlier thought to be commercially unviable. According to this resource, the cost per unit advantage is one of the major contributing factors to the growing popularity of the airlines. The cost per unit advantage is one of the enabling factors to lower prices that form the defining feature of the low cost carriers. The introduction of the no-frills airlines created a stimulating effect on the markets in ways that engaged actively with the forces of competition that were witnessed on the markets. On this score, it might be argued that some of the issues relating to technology could be assessed from the point of view of the market responses. According to Ring and Doring (2009. P. 4) the low cost carriers had the effect of creating multiplying the range of services available on the international market. The airlines provided alternative range of services that supplemented the kind of services that were on offer from the conventional airlines. In this manner, it became important for the airlines to adopt certain specific approaches that determined the level of their profile on the highly competitive global markets. Strategists within the industry were driven by the desire to create new market segments in order to circumvent the competition from the dominant players in the low cost carrier industry. Liberalization had leveled the playing field in ways that contributed to the synergies of progress. Jones (2005) examined the various ways in which Easy Jet has grown and developed on the European market. According to his observations, the rise of this airline could be likened to the rise of Ryanair under similar circumstances. Just like Ryanair, Easy Jet has managed to revamp its image by acquiring new flights and opening up new international destinations. This is often regarded as an indication of the conducive operational conditions in the field of low cost carrier business industry. Easy Jet demonstrated its aspiration for a wider international market through the spread of its services into Spain, Scotland, and Portugal. The success of this expansion encouraged the airline to increase its commercial presence in parts of Eastern Europe including Slovenia, Hungary, and Estonia. According to Jones (2005) the expansion and growth of low cost carriers has had the effect of promoting tourism across Eastern and Western Europe. The expansion of the tourism sector was aided by the fact the middle-class earners could afford to tour destinations because of the convenient and cheap terms of service. Traditionally, tourism was regarded as a preserve of the more privileged classes in many European societies. Analysts have attempted to associate the high earnings of the tourism sector in many European countries to the successes of the low cost carriers. However, other scholars contend that the low cost carriers have negatively affected the volumes of earnings on the global market. This is because other airlines began looking for ways in which they could lower or subsidize some of their services. The general effect was the lowering of earnings across the board. Challenges Minkova (2011) explored the strategies employed by the low cost carriers in Europe from the dimension of models, impacts, and challenges of the low cost carriers. This study established a form of association between the kind of strategies employed by European low cost carriers and the eventual levels of performance on the competitive airline industry in the region. According to this study, competition from the established and long-running commercial airliners such as British Airways and Virgin Atlantic remains one of the major challenges that afflict the position and growth of the low cost airline industry on the market. Generally, it might be argued that some of the challenges explored in this study capture the dominant challenges that attend to the growth of the sector. Minkova (2011, p. 41) observes that the cheap airline services have continued to expand and invent innovative approaches meant to shield them from the obvious challenges of the rising costs of operation, the market dominance of established airlines, the challenges of the unpredictable global financial markets, and other macro-economic challenges. Blaha (2003) studied the evolutionary development of the cheap airline services in terms of the attendant challenges and opportunities. The author observed that the progress of the cheap airline services is basically are gradually overcoming their initial challenges and moved into other areas of engagement that appertain from the general growth of the sector. Initially, investors into the low cost carrier business engaged the strategy of reduced advantages and comforts to the passengers (Blaha, 2003, p. 141). Methodology of the Research This section discusses the methodology of the study from the point of the structural organization and procedures of the study. The section will show the sequence of the processes that informed the research as explained in the different processes that relate to the structure. The methodology section will include a range of sections including research objectives, theoretical framework, research approach, research design, techniques and procedure, and the ethical considerations. Objectives of the study To explore the various strategies used by cheap airline services to survive on the highly competitive global environment. To determine the fundamental factors that guides the development and growth of the cheap airline services on the global market. To explore some of the cases of cheap airline services in light of their challenges, opportunities, and threats from a multiplicity of perspectives. To relate the various approaches taken by the cheap airline services and the effects on economic developments with the sector and other related sectors. To study the development of the global cheap airline services from the perspective of the various aspects development, challenges, and opportunities. Theoretical Framework This study shall adopt the Porter’s five forces analysis as developed by Michael Porter. This framework of analysis seeks to determine the competitive nature of the market and the viability of its value for purposes of investment. The five forces include competition, threat of substitute product, established rivals threats, threats posed by new entrants, the bargaining power of suppliers, and the bargaining power of customers (Roy, 2011). An analysis of cheap airline services within the framework of Porter’s five forces analysis will necessarily involve an assessment of the manner in which the markets are affected by threats and the relationship with both the consumers and the suppliers. Airline customers, just like any other customers in different fields are guided by various determinants. These determinants include matters of preferences, tastes, financial power, and the attractions of the product. As such, it is important to consider this facts in terms of their relationship to Porter’s five forces analysis. Competition from seasoned players has always influenced the trends, performance, nature, and development of the market. In essence, this aspect of the market will be reduced into the basic influences and threats that attend to the influences and forces on the market. It will be appropriate to consider the fact that some of the fundamental principles of business are resident in the mechanisms that apply to the levels of competition as understood within the entire airline industry. On this score, it becomes necessary to consider the fact that some of the development and challenges of the low cost carrier services are necessarily associated with high degrees of competition, structural factors of the markets, and other macro-economic factors that require the interpretation of through Porter’s five-point analysis. Research Approach This study will be guided by an inductive approach. In essence, the study is qualitative in nature. The study will seek to explore the insights of the nature, growth, and development of the low cost carrier industry from a global perspective. This insights will be used to furnish information about the nature of the market from the perspective of the challenges and opportunities that attend to the general aspect of growth. On this core, it becomes important to consider the fact that some of the issues that affect the industry have not been explored. The inductive approach in this study will seek to determine the truth values in the states objectives of the study. The process will be used to explore the insights into the market strategies used by the various players in the cheap airline services industry. The approach will also be used to determine the nature of development that has attended to the cheap airline services in different parts of the world. On this score, the study will attempt to determine some of the specific challenges that relate to the development of the low cost carrier industry. Research Design This section deals with the structural organization that would be followed in carrying out the specifics of the study. It spells out the manner and methods that shall be followed towards the pursuit of the goals spelt out in the design. Purpose The purpose of this study is to describe that nature of development, growth, and challenges of cheap airline services across the globe. The descriptive nature of the study will make it possible to expose the internal nature of the cheap airline services industry and attempt to establish meaning in relationship with certain fundamental issues that relate to specific aspects of its growth as spelt out in the objectives of the study. These descriptions will expand the understanding of issues that relate to the industry in a comprehensive manner. Strategy This research will enlist the use of questionnaires as the strategic of obtaining responses from relevant people from the field of cheap airline services. Open-ended questionnaires will be used because the objective of the nature of the study that basically qualitative in nature. The questionnaires will be open ended in order to allow the respondents to explore on the various aspects of the subject without structural limitations such as is found in closed-ended questionnaires. Techniques and Procedures This section of the study lays down the various techniques and procedures that will be used to gather data and information necessary to address the objectives of the study. The section explores the manner in which primary and secondary data shall be handled. Secondary Data Secondary data to be used in this study will basically involve published studies that attend to the subject. The study will engage the use of some pieces of information in ways that will furnish the understanding of some of the inner meanings and insights that attend to the piece of work. In essence, it will be necessary to examine the manner in which some of the attributes of business connect with the specific aspects of information obtained in books, journals, dissertations, and theses or any other relevant sources of reliable secondary data. This data will be organized in accordance with the major themes identified and matched with some patterns of theories to determine the kind of relationships. Primary Date Primary date will be obtained through questionnaires and interviews administered to the sampled respondents. Structured interviews will be administered to the respondents to determine their views and opinions to certain aspects of the cheap airline services with specific attention put on the objectives of the study. The semi-structured interviews will be used to guide the respondents on critical areas of the study while giving room to offer wide opinions on the subject matter. Primary data will be analyzed and presented in the form of tables and other graphic illustrations. Ethical Considerations This study was mainly focusses on cheap airlines services. One of the ethical factors that attend to this kind of study is that it involved an element of classified information. Exposure of some of some information about specific airlines might imperil of jeopardize their business interests. In order to protect the integrity of the sources and the identity of companies, the study will substitute real names with letters. Furthermore, no names will be used on the questionnaires. This will help in upholding the recommended ethical requirements of the study and help safeguard the safety of the sources. Conclusion This study explored the nature, growth, development, and challenges that attend to the cheap airlines services around the world. The study explored a range of literature that supplied crucial information on some specific aspects of trade as determined by the opportunities and challenges of the low cost carriers. The major themes The study examined some specific cases such as Ryanair and Easy Jet to explore the different ways in which they have been influenced by various forces and the manner in which they have attended to these forces. The study employed the use of qualitative approach to determine the insights relating to the nature of cheap airline services. Porter’s five-point analysis was used to examine the position of the cheap airline services on the market. The analyses was used to explore the manner in which the low cost airline services were affected by certain market forces including external threats and market opportunities. Works Cited Bisignani, G 2006, AIRLINES, Foreign Policy, (152), P. 5. Blaha, V 2003, Low Cost Carriers - Evolution, Strategies and Performance, GRIN Verlag, New York. 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Koenigsberg, O, Muller, E & Vilcassim, N 2008, easyJet® pricing strategy: Should low-fare airlines offer last-minute deals? Quantitative Marketing and Economics, 6 (3), pp. 279- 297. Levine, M, E 2006, Why Weren't the Airlines Reregulated? Yale Journal on Regulation, 23 (2). Pp. 269-297 McCartney, S, The Middle Seat: Airlines Revive Minimum Stays On Cheap Fares, Wall Street Journal, 19 Aug, 2008. Mentzer, M, S 2000, The impact of discount airlines on domestic fares in Canada, Transportation Journal, 39 (4), pp. 33-42. Minkova, V 2011, Low Cost Carriers - Business Model, Impacts of its Expansion and Challenges: Analysis of the European Low Cost Carriers, GRIN Verlag, New York. Pender, L & Baum, T 2000, Have the frills really left the European airline industry? The International Journal of Tourism Research, 2 (6), p. 423. Pleul, A 2008, How to Survive the Skies Over Europe - European Lowcost Carriers, GRIN Verlag, New York. Rae, D 2001, EasyJet: a case of entrepreneurial management? 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