For many who travel by air, the major concern is getting to their destination in the shortest
time possible. But when you can do this at the lowest price, it is even better. The set of people
who fall into this category are enormous and enough to create some kind of market of its own.
As much as we love the treat that come from flying traditional airlines, these flights
strain our pockets. Low-cost airlines are standing in the gap to solve these problems.
You don’t have to bother about paying a lot for a flight when you can pay less and even
get to your destination in the shortest time possible without long layovers.
The initial idea for airplanes has been to increase luxury as much as possible,
and with the introduction of in-flight entertainment and exquisite cuisines on
airplanes in the 50s and 60s, airlines have sought better ways to entertain their passengers and
offer a better experience than their competitors. These all add up to making flights more expensive.
There are too many people whose objective is to save money, and they would rather
do away with the perks as long as it costs a notch less than they would usually pay.
The mission is to get to your destination in the shortest time possible and even pay less for it.
There is no better way to access this than looking at the first major low-cost airline
whose models were used set up other low-cost airlines we have today: Southwest Airline.
Southwest Airlines was founded on the notion of being the low-cost provider in their industry.
They keep the frills to a minimum and only fly routes where they can ensure
they can attract the number of passengers they need to fill up their airplanes.
As a customer, you can definitely pay less by flying Southwest than other airlines,
but usually only if you book far in advance and are willing to fly during non-peak hours and days.
By offering lower process during those flights, Southwest is ensuring that they get a full flight.
But for last-minute bookings, or even on routes that are in high demand,
you might find that Southwest charges just about what every other airline does. They
understand how to set their prices strategically to help them maximize their profits at all times.
When Southwest started operations in Texas,
other airlines filed a lawsuit against them for trying to undercut their prices. These airlines
were wary of the competition reduced prices would bring and the threat it posed to their business.
But in the following years, southwest grew rapidly. They grew from being an underdog
to major player in the industry, flying passengers to over 100 destinations in 45
states, extending south to Puerto Rico, Mexico, Central America, and the Caribbean.
Fortunately, many people would choose lower cost over in-flight luxury and that is why a lot of
people are flying today than ever. Southwest was the first official low-cost airline opening
operations in the 1960s. Since that time, many low-cost airlines have been created to
capitalize on the high demand for cheaper tickets. Today, it costs far less on airlines like Ryanair,
EasyJet, JetStar and AirAsia, than on Emirates, Lufthansa, British Airways and American Airlines.
You may wonder how of these airlines make so much money
charging that little amount on their flights. But trust me, they do make a lot of money.
So, the question is “how did these airlines grow so big in a relatively short time”?
The short answer is: by keeping operations simple. Simpler operations mean fewer things that can go
awry and botch up the whole process. Consider, for instance, Southwest’s fleet of jets. While other
airline fleets can employ 10 or more types of aircraft, Southwest uses just one: the Boeing 737.
This results in all manner of cost-saving efficiencies: “they only need to train their
mechanics on one type of airplane, only need extra parts inventory for that one type of airplane.
If they have to swap a plane out at the last minute for maintenance, the fleet is totally
interchangeable, all the on-board crews and ground crews are already familiar with it.
And there are no challenges in how and where they can park their planes on the ground,
since they’re all the same shape and size. Southwest also doesn’t assign seat numbers.
Which means that if a plane is swapped out, and a new one’s brought in with a different
seat configuration, there’s no need to adjust the entire seating arrangement
and issue new boarding passes. Passengers simply board and sit where they like.
Most other airlines charge to check bags these days. Southwest has resisted the trend.
Yes, this “bags fly free” policy is good marketing. But it also has operations benefits:
“When you charge people to check bags they try to carry more on, sometimes more than
can fit in the overhead bins. This results in more bags being checked at the gate,
right before departure. And that wastes time.” Southwest will accept your first two bags for free
provided that the bags do not exceed 50 lbs and 62 inches.
Other carriers use a hub-and-spoke system, in which planes are funneled into a
couple of major connecting airports before branching out to their final destinations.
This allows more geographic coverage. A passenger coming from Iowa can’t get a direct flight on
United to Tokyo, but she can reach Japan through United’s Chicago hub. Hubs also lead to backups,
though, as planes queue up awaiting turnaround: cleaning, refueling, and so forth.
“You might have 25 or 30 planes all arriving at a hub around the same time, which lead to
a lot of ground time, but airlines only make money off their planes when they’re in the air.
Hubs also create a single point failure: because if something goes wrong at the hub, all the routes
will be affected. Using Emirates as an example, if there’s bad weather at its hub in Dubai,
airplanes can’t leave or come in, and this will lead to hundreds of cancelations.
Southwest’s flights are generally point-to-point. The plane lands, goes through turnaround,
and often heads right back where it came from. With less interdependence, the network can survive
a problem at a single airport. The system is designed to facilitate short-haul flights,
not international travel, Southwest targets the domestic business commuter, not the globetrotting
jetsetter. They can turn around planes in about 25 minutes, which is industry leading.”
A simpler network also means less luggage getting lost in the shuffle.
Southwest has a 99 percent completion rate on bags, meaning they “show up on the other side.”
Despite that the airline industry is notoriously brutal,
Southwest Airlines has been recording profits for 48 years consecutively, in a business sector where
profits can be excruciatingly tough to come by. With the launch of their website in 1995,
Southwest became one the first airlines to adopt online interface for their operations.
This would go on to contribute to their growth in the long run.
You may want to take a look at the statistics.
Southwest.com is the largest airline site in terms of unique visitors. In 2006, 70 percent of
flight bookings and 73 percent of revenue was generated from bookings on southwest.com.
In fact, passengers were made to pay extra fees for not booking their flights online.
This contributed to their reputation as innovators, and proactive risk managers,
in the use of fuel hedging to prevent losses due to hike in fuel prices.
Fuel represents over 20 percent of an airline’s operating cost. What Southwest airlines do to
save money on fuel is that they strike a deal with oil producers to sell fuel to them
at an agreed price over a stipulated period. By doing this, any fluctuations or hike in fuel price
will not affect them adversely. It could even raise their profit margin.
Southwest is primed for intense research and good management. A pattern other low-cost
airlines have followed. Being a low-cost airline, they look out for ways to make
even the tiniest of gains to stay afloat. When the opportunity to save money presents itself,
they jump on it. One typical instance is in 2008, when Southwest contracted with Pratt and
Whitney to supply the proprietary Ecopower water pressure-washing system, which allows the airline
to clean grime and contaminants off engine turbine blades while the aircraft is parked at the gate.
Frequent use of the Ecopower system is estimated to improve fuel efficiency by about 1.9%.
The kind of success recorded by low-cost airlines has forced traditional airlines to tap into the
low-cost market. Even some U.S based airlines have tried the same and recorded big losses.
United Airways created Shuttle, Delta created Delta Express airlines, Air France
created Joon. Yet, they are all failed. The major reason they failed is because of
labor unions. For years the mainline carriers had been a premium operation. This means their pilots,
cabin crew and maintenance teams were all highly paid and had a strong history of union service.
When these airlines wanted to operate low-cost services,
they had to ask the unions to pay less to help their bottom line.
Many refused to budge and made these ‘low-cost’ carriers not low-cost at all.
Additionally, many of the aircraft used were not suitable for low-cost operations.
Other low-cost operators were using fleets of high-density configurations
that easily packed more passengers on board, and were more resilient to fuel price hikes.
When fuel prices rose, the mainline flag carriers were knocked out of action.
Today, the big three have found a different way to compete with low-cost carriers. They unbundled
their economy fares, charging extra for baggage and seat selection to boost their bottom line.
Have you ever flown in a low-cost airline? Please tell us your experience in the comment section.
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