Impact of Low-Cost Carriers on the Competitive Position within the EAI - Essay Example

Customers are demanding additional benefits at low cost, whereas suppliers like Oil companies are seeking high prices for fuel. The dynamics of the industry are such that the rivalry amongst competitors is high. Since the customer base has shrunk as a result of the world recession, therefore airlines are competing to attract customers towards them by offering differentiated services. Moreover, recent investment by the government on the infrastructure of railways and road network has lead to a situation in which the threat of substitutes is high for this industry.

The results of these two strategic analysis tools show that the airline industry is overseeing a period of an unprecedented level of competition and operating environment. Therefore, each airliner needs to come up with operational excellence that allows it to run low-cost operations, which has become imperative for the industry participants. How the Airlines are maintaining low-cost operations: Airlines, which have adopted a low-cost operational mode, have been very stringent when it comes to spending their resources.

They have expanded their operations into new regions only when they were confident that they had the resource to support this initiative. These carriers never go into a head-to-head battle with long-distance carriers. Moreover, these airlines try to keep their debt position very strong by not taking too much debt to fund their fleet operations. These airlines have designed an operational method that allows them to be short-haul, high frequency, and low fare and point-point carriers. In addition, these air carriers have identified a market niche that is the best fit for their style of operations, which enables these airlines to serve them efficiently and economically.

Most importantly, these airlines have ripped away the costs associated with extravagant customer servicing. Such costs are associated with frills, lunch, and ticketing material. All such costs have been taken away from the operations of these airlines. Conclusion: Harsh economic conditions coupled with the rising cost of fuel have made it imperative for airlines to streamline their operations. Airlines have to come up with a cost structure that is effective and efficient. This cost structure should be incorporated in the operational design of these airlines so that the airline can generate profits from its operations.