Can the low cost boom in aviation reach long distance destinations? : MBA thesis in marketing

University essay from Högskolan i Gävle/Avdelningen för ekonomi

Abstract: Aim The commercial success of some low cost airlines presents the low cost model as very attractive. Until now their main focus has been on short-haul routes, but it is no surprise that they show an interest in entering the long-haul routes market as recent trends are very promising. The aim of this study is to analyze whether the low cost business model is applicable for long-haul routes, which parts of the model are transferable to long-haul services, what competitors responses might be and whether there is potential for low cost airlines operating in Scandinavia to gain frequent, well paying and demanding business travelers on their future long-haul routes. Method In this study a survey method with structured questionnaire distributed by e-mail has been used to collect the primary data. The main source of secondary data has been airline industry literature, newspapers, magazines and data provided by aviation statistical organizations. The empirical part of this study is conducted as a quantitative and qualitative study. Intention of empirical part is to find detailed information and describe business travelers’ behavior, corporate travel policies, business trips pattern and attitude towards low cost airlines. Conclusions The cost savings that low cost airlines achieved in the short-haul market will be much more difficult to achieve to long-haul services. In terms of areas where airlines can achieve cost leadership labor costs is certainly the best area to attack. To be successful, low cost airlines would have to adopt some elements of the traditional business model. But the success of long-haul low cost airlines will not only depend on achieving cost advantages. Availability of leisure time for long-haul trips and response of competitors will be other factors. Suggestions for future research A deeper analysis of low cost long-haul airlines potential could be possible with survey among leisure travelers and VFR (visiting friends and relatives) segment. Contribution of the Study This study has arrived at the conclusion that in order to be successful on long-haul routes low cost airlines would have to keep most of the features of traditional airlines. Low cost long-haul airlines would most probably be successful in pure leisure routes, ethnic markets, during peak season and on dense point to point destinations.

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