Transferring the Successful Business Model of Short-Haul...

Transferring the successful business model of short-haul low-cost airlines to the long-haul market – why does it not work? Universidad del Pacifico Globalization, Multinational Corporations Foreign Direct Investment Research Paper 3.12.2012 1 1. Introduction In terms of financial achievements the airline industry has not performed well over the past decades. It has even been stated as ‘an example of how not to run business in the 21st Century, when looking at hard numerical facts’ (Button Ison , 2008). However, there have been exceptionally flourishing cases, especially in the low -cost short-haul airline industry. Companies such as Ryanair in Europe or Southwest Airlines in the USA have gained considerable†¦show more content†¦This is vital for their survival as the capital n eeded for aircraft purchases is a heavy burden for the balance-sheet of all airlines. Conventional full-service airlines on the other hand generally have a more complex offer including short- and long-haul flights which require several types of aircrafts incurring considerable costs. 2.3 Human Resources Another factor used by short-haul LCCs to increase efficiency and lower costs is their use of human resources. Not only do LCCs tend to hire younger cheaper staff but also, according to 3 Flouris Walker (2005), a pilot of an average low-cost carrier flies approximately 25.1% more hours and has 12.5% more work days than a pilot at an average full -service airline. In addition they state that LCC pilots have a salary base of 60% and receive the remaining 40% based on performance. These figures highlight the LCCs’ efficient use of available resources in comparison to full-service airlines. Furthermore, in terms of flight attendants, these are generally ‘home-based’, flying only peripheral routes to their home in order to facilitate scheduling and cut costs such as overnight hotel stays for personnel (Morrell, 2008). Cleaning personnel is also kept to a minimum since the clean-up in between flights is done by flight attendants and a full clean up is not done every day. This is very much facilitated by the fact of notShow MoreRelatedLow Cost Strategies a Failed Business Model?9157 Words   |  37 Pages   LOW COST AIRLINES: A FAILED BUSINESS MODEL? Kenneth Button University Professor Director of the Center for Transportation, Policy, Operations, and Logistics, and Director of the Aerospace Policy Research Center School of Public Policy George Mason University (MS 3C6) Fairfax, VA 22030, USA. E-mail: kbutton@gmu.edu â€Å"You fucking academic eggheads! You don t know shit. You can t deregulate this industry. You re going to wreck it. You don t know a goddamn thing!† Robert L. 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