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Lean, Mean and Low Cost – Unravelling airline industry secrets

So how many of us have seen these stunning airline promos – ‘Fly from Chennai to Bangkok at just Rs.4999’ ? Made you want to pack your bags, but wait.. wondering if the airline can actually afford it or if it has a trick up its sleeve?

Holidays are now slowly moving from local hill stations to exotic international locations for many Indians. The booming travel industry can attribute its success to two phenomenons.The aspirational one being Social Media and  smart-phones that take the best pictures of your holiday and inspire others to travel. But the biggest God-send to both the industry and the tourist would be Low Cost Airlines that have made us budget happy!

Prices that get you packing! 

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The last decade has seen a spurt in the number of LCCs (Low Cost Carriers), but a few have stood the test of time and upped the game. Contrary to popular belief, they are indeed profitable and sometimes these LCCs are better off than the big brands in the airline industry.

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The LCC idea is not a new one, Southwest Airlines founded 1971 in the USA brought out tickets that were cheaper than a car-ride – they continue to rake in profits. Ryan Air, an Irish low cost airline has enviable industry-leading profit figures and still offers fares which sometimes defy logic! How do these LCCs manage to pull off such a heist and how does their business model support it?

At PickYourTrail, we hate travellers paying high flight prices. We are forever on the lookout for ways to solve the mystery of Airline Prices and more importantly how do we do it at scale? Send us a note if you want some help... 

In this blog, we have put together a few key learnings of having planned 1500+ trips across 100 cities. Here we unravel the the lean and mean business model of the LCC…

Pre Purchase Optimisation 

  • Go online for tickets

Leisure travellers today are the biggest customers online and are tech savvy to the boot. Airlines like Ryan and Air Asia have directed their efforts at this group and boosted their ‘Direct Online sales’ tactics. Going online indicates – lower distribution costs (travel agent commissions, etc).

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  • Cash and Carry model

Full cost airline companies offer free seat blocking and periodic payment settlements. However LCCs predominantly work on cash and carry model which helps in better cash flow management.

  • Sandwich? Pay extra…

When you travel low cost, your ticket fare is only for transporting you from point A to point B. Who can resist grabbing a bite or watching a movie while on a flight? The LCC upsells everything from inflight meals, baggage and even seat selection! Attractive pricing comes with a catch…

  • Fly Point A to Point B only!

LCCs do not offer multi-city or one-stop flights. Cost saving for the airline here comes in the form of lesser baggage routing and low technical infrastructure on ground.

Fleet optimisation  

  • Unified Fleet type

Sticking to one aircraft model for the entire fleet is a masterstroke that the LCCs deploy for optimising cost. Air Asia deploys only Airbus 320 and Ryan Air deploys only Boeing 737s, unlike Lufthansa and Emirates that have multiples aircraft types. Single model benefits include Lower Maintenance through common spare-parts, Bargaining power on aircraft pricing and Unified training for crew. Check out their annual savings!

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  • Young Fleet

LCCs have significant savings in fuel consumption as they maintain a very young aircraft fleet. They achieve this by retiring older crafts through leasing or buy-back offers from aircraft manufacturers. After all they do have  the say in the industry.

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  • More flight take-offs

LCCs believe in keeping aircrafts in the air (revenue generating phase) as much as possible. They manage to do so by doing multiple short haul routes and optimising landing/taxi duration via non peak hours landing. This results in higher $$/hour  and better productivity.

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On ground optimisation 

  • Automated Check-in

Travelling low cost? Be sure to web check-in and print boarding passes before you come to the airport. Some LCCs such as Ryan Air penalises customers for airport check-in with an hefty $45 fees. Most LCCs have automated check-in and baggage drop counters. Lower number of ground staff gives massive savings.check in

  • Multi tasking staff

LCCs have done away with separate staff for check-in counters and boarding gates, its multi-tasking that rules the day. Cabin crew even double up in in-flight service and pre-flight preparation.

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  • Cheap Airport base

LCCs such as Ryan Air and Air Asia use low-traffic airports such as Luton, Beauvais, Don Muang as their base and thereby have a significant bargaining power in terms of landing, take-off and parking fees.

  • No Frills boarding

Almost always, Aero bridges are avoided for boarding, thus saving cost. People just walk on the taxiway to board the planes. Also since many LCCs have free seating, passengers queue up in advance at the gate to grab the best seats. This results in very quick turn around time from checkin to boarding.

In Flight optimisation

  • Flight Load Factor

LCCs aircraft is designed to maximise passenger load – 198 people when compared to the full cost carrier’s 168 people! Additionally given the fare price point, they are able to increase their load factor per flight.

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  • No Frill Seating

Flying low cost sometimes would mean no comfy push back seats or in-flight entertainment. A great place for the LCC to cut on maintenance cost and quicker turnaround time in pre-flight preparation!

  • Co-Branding Opportunities

Many a times LCC flights look like flying billboards! They offer plenty of branding opportunity right from seats, overhead luggage compartment and outer aircraft branding. They leave no stone upturned to monetise every square inch of the flight.

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Watch this space as we solve more mysteries around the travel industry…

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