Low Cost Carriers - Evolution, Strategies and Performance

Seminar paper from the year 2003 in the subject Business economics - Business Management, Corporate Governance, grade: 1,7 (A-), University of Cologne (Business Planning and Logistics), course: Global Competition in the Aviation Industy, language: English, abstract: In the last three decades low-cost carriers (hence forward referred to as LCCs) havecaptivated travellers by making the world smaller through cheap short-haul flights. Travellers in the United States have benefited from this concept since the 1970s;whereas, the development in Europe has been much more recent. Lately, LCCs havebeen quite a hot topic especially since the terrorist attacks on September 11, 2001. Many LCCs have amazed investors with their financial performance, as theysuccessfully earned profits in a time when most conventional carriers reported majorlosses. In Europe, LCCs have entered the market in order to gain market share and totake part in the success of the business. In Germany, the LCC market has taken off withthe emergence of two new carriers in the end of 2002. To best understand the low-cost concept, the evolution of LCCs in the United States andin Europe is examined in the second chapter. Furthermore, the background of the mostsuccessful LCC Southwest, still being the role model for other LCCs, is presented. Inthe third chapter the competition theory of Michael Porter is discussed in order to beable to analyse the competitive strategies followed by the LCCs in the chapter four. The fifth chapter gives a brief outline on the most striving marketing strategies amongLCCs. Marketing strategies are examined in the fifth chapter. The performance of LCCsis analysed in the sixth chapter, and a comparison to the performance of conventionalcarriers is conducted. An outlook for the future can be found in chapter seven.