Low Cost Carrier – a Worldwide Phenomena?! by Prof
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Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 …………….. | Low Cost Carrier – A worldwide phenomena?! by Prof. Dr. Sven Gross Hochschule Harz University of Applied Sciences 0 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Agenda 1. Hochschule Harz – University of Applied Sciences 2. Definition and Growth of Low Cost Carrier 3. Regional Developments 4. Recent Trends 5. Conclusions 1 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Location of Wernigerode/Harz 2 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Hochschule Harz • Established in 1991 • Two locations: Wernigerode and Halberstadt • More than 3.000 students • More than 200 instructors and employees • Cooperation with 64 universities in 23 countries • Cooperation with major regional, as well as national and international companies • Affiliated institutions link research, education and application • 20 full-time courses of study in three departments: Automation and Computer Science, Administrative Sciences and Business Studies 3 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Department of Business Studies Bachelor‘s courses of study: • Tourism Management • Business Administration • Service Management • Business Psychology Dual degree programs: • International Tourism Studies • International Business Studies Master‘s courses of study: • Tourism and Destination Development • Business Consulting Extra-occupational/post-graduate studies: • Strategic Tourism Management • Business Administration • Culture Marketing • Master„s course of studies in Business Informatics for the Public Sector 4 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Definition and Growth of Low Cost Carrier 5 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Definition • universal definition missing so far several terms are used – Low Cost Carrier or Low Cost Airline – Low Fare Airline, No Frills Airline, Discount Airline, Budget Airline … • Low Fare = low prices for flight tickets • Low Cost = low costs „Many attempts to define the low cost carrier model have tended to concentrate on a set of service or operation rules, such as lack of inflight food, direct distribution and a single aircraft type. But even the most successful LCCs tend to break some or all of these rules dependig upon the markets in which they compete. (…) But there is one overriding characteristic: simplicity. This is what drives lowest cost.“ (Flight Insight 2008, p. 28) Source: Gross/Schroeder 2005, p. 3 6 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Development of Low Cost Carrier • at first only „intra-state“ air traffic in USA possible, mainly within California and Texas • Southwest Airlines was and still is one of the pioneers in the low cost sector (mostly) profitable airline and has one of the highest PAX numbers worldwide • further provider followed: 1972 American TransAir 1984 Midwest Express • transatlantic flights = Laker Airlines (1972/1977), Braniff (1979), Virgin Atlantic & People Express (1983) concepts were not successful • pioneer in Europe: Ryanair (1985/1991) • Worldwide observable liberalisation are pushing the development of LCC Source: Gross/Schroeder 2005, S. 4.fff; Bjelicic 2007, S. 16ff. 7 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Development of Low Cost Carrier 8 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Development of Low Cost Carrier Region (country) Year low cost operations Year(s) in which market Share ofoverall began deregulation took place market 2006 North America USA 1971/1978 1978 ca. 29% Canada 1996 1996 ca. 30% Europe UK/Ireland 1995 1993 ca. 53% (2008) EU 1999 1995 ca. 39% (2007) EU Expansion 2002 2004 - Australia/New Zealand Australia 1990 1990 30+ New Zealand 1983 1994 .. Asia Malaysia 2001 2001 2 Singapore 2001 2001 <1 Japan 1998 1998 1 Source: Francis et al. 2006, p. 85 and own research 9 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Development of Low Cost Carrier Region (country) Year low cost operations Year(s) in which market Share ofoverall began deregulation took place market 2006 Asia China - Ongoing - Thailand 2004 2003 <1% India 2003 2003 < 5 % Rest of world Brazil 2001 1998 3% South Africa 2001 1999 ca. 10% Gulf States 2004 2003 <1% Source: Francis et al. 2006, p. 85 and own research 10 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 Charting low-cost start-ups Year Number of low-cost Year launches > 2000 22 Pre 2000 Airlines 50 2000 3 Subsequent closures 14 2001 4 Pre 2000 Survivors 36 2002 10 Post 2000 Startups 128 2003 13 Subsequent closures 38 2004 19 Post 2000 Survivors 90 2005 18 Total Airlines 178 2006 14 Total Closures 52 2007 14 Operating 2009 126 • more than 100 LCCs worldwide 70% of today„s LCCs have been set up since 2000 (90) • a majority of the start-ups have launched in emerging markets, in particular Asia • since 2004: 28 new LCC in the Asia-Pacific region, 18 in Europe, 11 in the Americans, 5 in Africa and 3 in the Middle East Source: Sobie 2008, p. 54; Centre of Asia Pacific Aviation 2009, p. 59 11 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 LCCs Worldwide (February 2007) Europa (58) Canada (4) Aegean Airlines Blue Air FlyMe SmartWings Canjet Air Arann Blu-Express German Wings Snalskjutsen HMY Airways Air 2000 BMI Baby Globespan Snowflakes Sunwing Air Baltic British European Helvetic Airways Sterling Westjet Air Berlin Budget Air Iceland Express Sun Express Air Finland CentralWings Inter Sky Thomson Fly USA (10) Air Scotland Clickair Itali Airlines TUIfly Air Tran Air Service Plus Condor Jet2 Transavia Allegiant Air Air Southwest Corendon Meridiana Virgin Express ATA Alpi Eagles Easy Jet Monach Airlines VLM Airlines Frontier Baboo Evolavia Ryanair Vueling Airlines JetBlue Airways Belle Air Excel Airways Scanjet Windjet Midwest Airlines Blue1 Fare4U SkyEurope WizzAir Spirit Airlines Southwest Latin & South Middle East, Asia, South Pacific (26) USA 3000 Airlines Ted America (13) Adam Air Jetstar Asia Aero California Mexico Aero Pacific Jetstar Australia Alma de Mexico Air Arabia Kingfisher Airlines Aviasca de Mexico Africa (5) Air Asia Lion Air Avolar Mexico 1 Time Air Blue NokAir Azteca Mexico Atlas Blue Air Deccan One-Two-Go Bra Brazil Jet4You Air India Express Paramount Airways Click Mexicana Kulula Bangkok Air SkymarkAirlines Gol Brazil Mango Cebu Pacific Air SkynetAsia Airways Interjet Mexico Freedom Air SpiceJet LAN Express (Chile) Go Air Tiger Airways Ocean Air Brazil IndiGo Valuair Viva Aerobus Mexico JazeeraAirways Virgin Blue 12 Volaris Mexico Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 The Graveyard – Europe Aeris bankrupt 2003, Agent Air never started, Air Bosnia bankrupt, Air Andalucia bankrupt 2005, Air Catalunya bankrupt, Air Exel bankrupt 2005, Air Freedom bankrupt 2003, Air Holland bankrupt 2004, Air Littorel bankrupt 2004, Air Luxor bankrupt, Air Madrid bankrupt 2006, Air Polonia bankrupt 2004, Air Wales bankrupt 2006, Airlib Express bankrupt 2003, Azurra Air bankrupt 2004 BasiqAir changed name in Transvia 2004, BerlinJet bankrupt, Bexx Air bankrupt 2004, Buzz sold by KLM to Ryanair, Centralwings (bankrupt 2008, Poland), Clickair and Vueling by Iberia (2009) Dream Air never realized their dream, Duo bankrupt 2004, DutchBird bankrupt 2005 EastJet bankrupt End 2006, EU Jet 2005, Europe Exel Aviation Group bankrupt 2005 Fairline Austria bankrupt 2004, Fly Eco will probably never start, Flyglobespan(bankrupt 2009, Scotland), Fly Me (bankrupt 2007, Sweden), Fly Nordic taken over by Norwegian (2009) Fly West Website disappeared 2005, Flying Finn bankrupt 2004, Free Airways never started, Fresh Aer bankrupt Germania Express taken over by Fly DBA 2005, GetJet Poland never started, Go Fly sold by British Airways to EasyJet, Goodjet bankrupt, Hellas Jet bankrupt 2005, Hop never started, never a website! (2004), Jet Magic bankrupt 2004, Jetgreenbankrupt on Wed. 12 May 2004 after 1 week flying!, JetsSky never started, probably a scam! (Jan 2004), JetX stopped scheduled flights 2005, Low Fare Jet bankrupt, Maersk Air merged with Sterling 2005, My Air (bankrupt 2007, Italy), Now bankrupt 2004, Silesian Air never started, Silverjet (bankrupt 2008, UK), SkyEurope (bankrupt 2009, Slovakia), Skynet Airlines bankrupt 2004 (booking engine too slow!), Spirit of Balkan never started, Sterling (bankrupt 2008, Danmark), Swedline Express bankrupt 2006, V Bird bankrupt 2004, VolareWeb bankrupt 2004, White Eagle sold entire 737 fleet ...!!! Source: http://www.etn.nl and own research 13 Prof. Dr. Harald Mustermann | Wirtschaftsinformatik WS 06/07 The Graveyard Africa Civair bankrupt 2004, Flamingo Airlines bankrupt Asia + South Pacific Adam Air (Indonesia, bankrupt 2008), Air Nauru bankrupt, Air One (India) never started, Athena Air (Malaysia) never started, Awair taken over by Air Asia 2005, BackpackersXpress never started, Citilink Fake low-cost airline discontinued by Garuda Indonesia in 2006, Diet Jet (Thailand) never started, Impulse Airlines bankrupt, Oasis (Hong Kong, 2008), Origin Pacific Airways bankrupt 10 Aug 2006, Sky Asia (Thailand) never started, Smartjet Airways never started, probably a scam!, Transgulf Express (Gulf Area) never started, Viva Macau (March 2010) Canada Canada West Air never started, etsGo bankrupt 11 Mar 2005, Tango Airlines Fake low-cost airline discontinued by Air Canada in 2004, Zip Fake low-cost airline discontinued by Air Canada in 2004, U Air bankrupt early 2006 USA America West merged with US Airways, ATA bankrupt 2008, Eos Airline