How Low Can Low Cost Go? Wolfgang Kurth, advolar GmbHSlide 2
Content Why is the low-costs demonstrate diverse? What amount of the market is low-costs? Will low-costs continue developing? Is there any desire for full-benefit bearers? ConclusionSlide 3
Content Why is the low-costs display distinctive? Why is the low-costs demonstrate distinctive? What amount of the market is low-costs? Can low-costs continue developing? Is there any desire for full-benefit bearers? ConclusionSlide 4
The Low-Cost Business Model The minimal effort thought needs to begin in individuals\' psyche! Minimal effort implies... ... not just decreasing the ticket cost, … but rather basically changing customary business forms, utilizing request driven valuing, applying forceful promoting proceduresSlide 5
Business ModelsSlide 6
Difference Between LCC and FSASlide 7
European Airlines Unit CostsSlide 8
Labor EfficiencySlide 9
CEOs Don\'t Necessarily Have An Airline Background David Neeleman CEO JetBlue Airliner: yes Almar Örn Hilmarsson CEO Sterling Airways Airliner: no Joachim Hunold Chariman of Executive Board Air Berlin Airliner: no Dr. Joachim Klein CEO Germanwings Airliner: no Michael O\'Leary CEO Ryanair Airliner: no Herbert D. Kelleher ex CEO Southwest Airliner: no Christian Mandl CEO SkyEurope Airliner: no Onno van sanctum Brink CEO Transavia Airliner: no Ray Webster CEO Easyjet Airliner: yes Jozef Varadi CEO Wizz Air Airliner: yesSlide 10
LCC Mantras We are not a carrier, we are a culture. A culture established by confident people - and worked by devotees. We are not an aircraft. We are audience members, trailblazers and innovation makers. We are not an aircraft. ... (Melody\'s Credo) „When expelling aircrafts from the chest of national legislative issues, what remains is a basic business!" (Ray Webster)Slide 11
Content Why is the low-costs show diverse ? What amount of the market is low-costs? Can low-costs continue developing? Is there any expectation for full-benefit bearers? Conclusion How a great part of the market is low-costs?Slide 12
LCC Routes 2001 Caption : Ryanair easyjet Volareweb bmi Baby Hapag-Lloyd Express Germanwings Sterling Skyeurope jet2Slide 13
LCC Routes 2002 Caption: Ryanair easyjet Volareweb bmi Baby Hapag-Lloyd Express Germanwings Sterling Skyeurope jet2Slide 14
LCC Routes 2003 Caption: Ryanair easyjet Volareweb bmi Baby Hapag-Lloyd Express Germanwings Sterling Skyeurope jet2Slide 15
LCC Routes 2004 Caption: Ryanair easyjet Volareweb bmi Baby Hapag-Lloyd Express Germanwings Sterling Skyeurope jet2Slide 16
LCC Routes 2005 Caption: Ryanair easyjet bmi Baby Hapag-Lloyd Express Germanwings Sterling Skyeurope Jet2 and so forth, and so onSlide 17
LCC Market Shares By Country 18.9% (2005)Slide 18
Market Share Of European LCCsSlide 19
Growth Rates And Market Shares Europe: yearly development rate p.a. for LCCs, travelerSlide 20
Content Why is the low-costs demonstrate distinctive ? What amount of the market is low-costs? Could low-costs continue developing? Is there any desire for full-benefit transporters? Conclusion Can low-costs continue developing?Slide 21
Optimistic 30% Number of travelers of Ryanair & easyJet at premise of declared limits 19% 15% Pessimistic Market potential for European LCCs Prediction for the European Low Cost Market 2001E–2009F Market capability of the German Low Cost Segment 2001E–2009F Estimation framed by the utilization of US piece of the pie & fly out recurrence to the German populace PAX (m) PAX (m) real 1 Low case: Number of straightforward excursions in Europe achieve current UK/Ireland level (0.25 outings/capita) more than 8 years 2 High case: Number of no nonsense voyages in Europe achieve an indistinguishable level from at present in the U.S. (0.5 treks/capita) more than 8 years Source: Analyst Reports, Monitor AnalysisSlide 22
European Growth PotentialSlide 23
Significant Global Growth Potential 2) 3) 1) 4) 1) 2) 1) 2) 1) 5) 2) 2) 5) 5) 2) 1) OAG 2004, constant seats Intra European, no contract seats 2) Internet World Stats, 21.11.2005 3) WebSite101.com, 2004 4) Devinix.com, 2004 5) ICMA.com, 2004Slide 24
BEGINNING STAGE TRANSITION RAPID GROWTH STAGE TRANSITION MATURE STAGE VOLUME/GDP U.S. also, Europe GDP Latin America Middle East Asia Volume Africa TIME Business EnvironmentSlide 25
BEGINNING STAGE TRANSITION RAPID GROWTH STAGE TRANSITION MATURE STAGE VOLUME/GDP U.S. what\'s more, Europe GDP Latin America Middle East Asia Volume Africa TIME Business Environment ?Slide 26
Travel Intensity Without Significant LCC Market ShareSlide 27
Travel Intensity With High LCC Market Share More excursions due to less expensive go (at const. discretionary cashflow)!Slide 28
Yield Per Passenger versus Price Per Seat Index 1994 Constant DollarsSlide 29
Current LCC Det. Spec. Correlation Note: $ 1.0 mio in a/c aquisition cost ~ $ 8.0 – 12.0 k/month in rent rate or > 160.000 free flights/month on Ryanair !* in view of 80 a/cSlide 30
LCCs Get Below The Baseline Leaner Specs - diminish the a/c aquisition cost - decrease the stock expenses - lessen the weight => the fuel blaze - diminish the support costs yet may influence the leftover esteem! Window shades: app.10 kg * Seat actuator: app.45 kg* Gasper fans: application. 30 kg* TTL.: 85 kg = application. 11.000 ltr. fuel p. a/c and year * B737-700, 4000 b\'hrs/yearSlide 31
Reducing Turn Around Time Boarding through Forward and Aft Entry DoorSlide 32
Reducing Turn Around Time Relocation of Forward Entry DoorSlide 33
Outsourcing To The Customer: On Board Luggage „Super Size" Overhead Compartments: - More lodge gear lessens costs identified with stuff stacking processees (registration, stacking and off-stacking and so on.) - No things related air terminal charges - Passenger convienence - decreased lost things rateSlide 34
Outsourcing To The Customer: Check-In Yesterday: Check-In counters - Long lines Passenger bother Expensive Check-In counters Labor intensiv (cost, quality) Today: Check-In booths - Shorter lines - No Check-In counters => bring down expenses - No Check-In staff => bring down expenses yet - Investment in hard-/programming - Maintenance Tomorrow: Online Check-In - No lines - No counters => bring down expenses - No registration staff => bring down expenses - No equipment => bring down expenses - No support => bring down expensesSlide 35
Content Why is the low-costs demonstrate distinctive ? What amount of the market is low-costs? Can low-costs continue developing? Is there any desire for full-benefit bearers? Conclusion Is there any desire for full-benefit aircrafts?Slide 36
Low Fares Trigger Demand half For what reason would you fly all the more regularly? 40% 41% 30% 20% 17% 10% 11% 8% 6% 0% updates plan wellbeing low passages more security others ground FFP\'s load up Source: IATA Online Survey 2003Slide 37
Tourists Are Most Sensitive To Airfare Business voyagers are more touchy to aircraft and timetable Portion of explorers naming variable as "most important" 17% 25% 10% 7% 19% Airfare Schedule Airline 30% Airplane 36% 57% Tourists Business explorers Source: Boeing-supported explorer studySlide 38
Airfares are Less Important on Longer Flights But flight length is a key figure figuring out what is imperative to vacationers Portion of voyagers naming component as "most important" 11% 16% 2% 18% Airfare 19% Schedule Airline Airplane 52% 19% 63% Flights of under 2 hours Flights of over 5 hours Source: Boeing-supported voyager studySlide 39
Impact Of LCCs On FSAs Southwest section into the Sacramento-Portland MarketSlide 40
In The US Stage Length Is IncreasingSlide 41
Stage Lenght Is Increasing In Europe As Well 2000 2001 2002 2003 2004 2005 Source: Davy European Transport and Leisure, 15.2.2005Slide 42
LCCs Develop Different Market Strategies Pure Low Cost Carriers Year round movement Independent voyagers Balanced directional streams Grow the market Avoid contract markets (for now!) Hybrid Models Mix of business and recreation "Individually" administrations Compete in some sanction markets - Hot dinners, - Lounges, - Paper tickets - Business traveler - Branding - Low Frequency - Branded dinners - Main Airports - Frequency - Branding - Low-Fares - Frequency - Grass stripsSlide 43
Trends In The Airline IndustrySlide 44
Trends In The Airline IndustrySlide 45
Trends In The Airline IndustrySlide 46
Trends In The Airline IndustrySlide 47
Trends In The Airline IndustrySlide 48
Migration Of Business Models Charter Airlines Full Service Airlines LCCsSlide 49
Migration Of Business Models Full Service Airlines ? Sanction Airlines Hybrids LCCsSlide 50
Content Why is the low-costs demonstrate distinctive ? What amount of the market is low-costs? Will low-costs continue developing? Is there any expectation for full-benefit transporters? ConclusionSlide 51
Conclusion Re-building of procedures (not just doing likewise at less cost) Pass-on of cost reserve funds to client Stimulate request, increment LF Efficient utilization of costly recources ( e.g. A/C, work) Reduction of unit expenses Pass-on of cost investment funds to client Stimulate request, increment LFSlide 52
Different Strategies Of LCCs And FSAsSlide 53
LCC Business Model Within FSA Economy Class Business Class Short/Medium Haul Long Haul Push coordinate deals channels Use limited time charges Apply agressive advertising Improve resource usage Improve work efficiency Eliminate ornaments Simplify passage structure Improve traveler benefits Fast Tracks at A/Ps Personalized administration Post flight CRM No switch Up-review check in administration Modify Loyalty Program to keep client with A/L on short/medium pull .:
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