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Competitive Environment Between Traditional and Budget Airlines

All the traditional industries operating in conventional ways are today facing quite hard challenges from their new competitors who offer services at lower budgets. Generally, any traditional business industry for providing full service with a touch of conventionality and high quality has to keep the prices high for their services. That is why when people get the other choices at lower budgets they readily accept and adapt to that. The services they get in return are generally not full like the traditional one but people do not mind that as the quality is generally reasonable. The same thing can be said for the airlines as well. Traditional airlines in recent times have faced significant losses from their businesses and some had to file for bankruptcy. But their low-cost or budget counterparts have managed to carve a niche in the field. They have managed to create a business model which has given them a sustainable business advantage.

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Comparison between traditional and budget airlines

There has to be a comparison between the traditional and the low cost or budget airlines to find out the reason for such differences in profitability in the same field of business. Before comparing let us define the low-cost or budget airlines first. Low-cost airlines are those which offer services at lower costs of tickets. But they cover much fewer services than the traditional airlines within that price and to make up the reduced fare of tickets they offer services like food, priority boarding, seat allocation or baggage handling for additional charges and this, in the long term has worked extremely well for them and given the edge f the competitors.

Below a comparison has been drawn between the two poles of airline service providers. The comparison is in tabular form.

Traditional Airlines Low Cost or Budget Airlines
The traditional airlines have separate classes in the same aircraft Generally, a single passenger class is maintained in the flight
Different types of aircraft are present in the fleet Only single type of aircrafts are present in the fleet mainly the A320 or Boeing 737 type of planes
Central or primary airports are used for landing Secondary airports are used for landing and takeoff as these airports support the airlines through subsidies
Price range higher Price range lower generally targeting the economy range of people
Prices cover the in-flight entertainments within the flight Prices do not cover any in-flight entertainment
A greater range of baggage weight is permissible Permissible weight range of baggage is lower which fetches additional charges on additional baggage
Routes are longer covering sometimes involving transfer at hubs Generally point to point direct flights are encouraged
The price of the flight includes meal within the flight The price does not include any meal and meal is offered with extra charges
Ground staff for maintenance of aircrafts are large in number Minimal level of ground staff is present for the maintain of the aircrafts
They buy aircrafts directly from the manufacturers The aircrafts are mainly leased to source the fleet

The business model of budget airlines: source of sustainable business advantage

The budget or low cost airlines maintain a business model which they call the “no frill services”. They are able to minimize the investment by reducing the cost of ground staff and the entertainment and meal services within the flight. The target is the general economy class which does not mind the lack of additional services and is happy to get the destinations covered in lesser price and lesser time.

The routes are generally short and the times taken to cover these distances are not much. So this time can be easily managed without the in flight entertainments. Leasing aircrafts, taking secondary airports, avoiding transfers at hubs and maintaining single flying class all are means of reducing cost. Extra earning for meals, extra baggage and no return of fares in case of missed flights keep the profitability up. The worthiest invest is made by heavy advertising in all sorts of media has also proved useful for these airlines. The business model is headed to sustained profitability. The traditional airlines need to adopt some features to be able to stay in competition with these budget airlines.

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