Low-cost airlines have the potential
to excel in their markets and become the leading providers in their competitive
areas. From the days of People Express Airlines, to the likes of Southwest and
Virgin America, successful low cost carriers offer unprecedentedly low prices
while maintaining an impressive rate of growth.
With tickets often priced at a third
of the cost of competing airlines, low-cost carriers sure manage to attract
crowds – but what are successful low-cost carriers doing differently than their
unsuccessful low-cost carrier counterparts? What strategies are the CEO’s of
these airlines using to generate revenue from their passengers?
10
ways that low-cost airlines can increase their revenue
(even while offering passengers
those ridiculously low air fares):
1. Fleet Utilization and Uniformity:
For larger low-cost carriers that
offer dozens of flights every hour, revenue can be maximized through fleet
utilization and uniformity. Having the same type of airplane in a fleet helps
larger low-cost airlines save time and money on training pilots, flight
attendants, and technicians. Standardizing practices across the fleet also
increases operational efficiency and contributes to optimum performance. These
airlines are able to have airplanes flying the majority of the time, with minimal
breaks in the schedule for maintenance and other routine checks.
2. Custom Cabin Configuration:
Another tactic low-cost airlines can
use to keep costs down is to custom order cabin fittings and accessories
to reduce the total weight of the airplane. After all, less weight equals less
fuel burned (which equals big savings!)
Some examples of low-cost airline
cabin configurations include: removing window shades or installing lightweight
seats with no extra frills like TV screens, charging ports, or bulky armrests.
3. Reduced Turnaround Times:
The most successful low-cost
airlines are all about maximum efficiency! One of the biggest time and money
saving techniques low-cost airlines can deploy is adjusting their internal
processes to reduce turnaround time. Turnaround time is the time needed to get
all of the passengers off, load and service the airplane for its next flight,
and board a new set of passengers for the upcoming journey. Low-cost airlines
can deploy several staff members at the same time to drastically reduce
turnaround times to around thirty minutes for each flight. This means more time
in the air and consequently more profits!
4. Flight Attendants:
Low-cost airlines can save money by
scouting out young talent to become their flight attendants. Appointing young
and enthusiastic individuals who are at the beginning of their careers, is a
great way for airlines to leverage an excellent team (with all the necessary
training and superb customer service) without having to fork out top salaries.
It is a win-win situation as it provides young flight attendants with the
opportunity to log many hours and gain valuable experience working with a
fast-paced airline; helping them build their resumes as soon as they have
graduated!
5. Direct Sales:
Another important competitive
advantage low-cost airlines should leverage is the use of direct sales
channels. Low-cost airline passengers generally buy tickets directly from the
airline, cutting off any middlemen and thereby reducing overall costs. Thanks
to the internet and automation in passenger reservation technology, purchasing
a ticket has become a paperless practice, which saves money and counts as an
important environmentally conscious business approach.
6. Excellent Customer Service:
Low-cost airlines should take pride
in their quick and witty customer service. Some low-effort, high-return
customer service activities that low-cost airlines could offer include: giving
kids the opportunity to meet the pilot after their flight, sending out coupons
for free flights after delays, running social media campaigns for free-tickets
(to fill seats that might otherwise be left empty), and attentively responding
to passenger needs through Facebook and Twitter.
7. Choosing Smaller Airports:
One of the most important things low-cost
airlines can do to keep costs down is to choose smaller airports to fly into
(or out of). Every airport charges an airline many fees including: service
fees, loading fees, unloading fees, parking fees, and fuel costs (to name a
few). Smaller airports generally charge less, and if they are in the same
proximity to the major city or destination, it makes a lot of sense for
low-cost airlines to choose them.
8. Ancillary Revenue:
Ancillary revenue generation is an
important asset for low-cost airlines that can help them improve their profits
in the long term. An example of ancillary revenue generation that requires
minimum investment is the use of boarding groups instead of assigned seating.
There is no doubt that travelers, especially business travelers, would prefer
to board the airplane before the rest of the passengers get on. Southwest did a
successful run with priority boarding groups called “Business Select” which
allowed corporate travelers to get ahead of the remaining passengers. This
service can be included against an extra cost in the ticket and help generate
revenue from an existing yet unexplored source of income.
9. Let Passengers Print Their Own
Ticket:
Low-cost airlines can reduce their
expenses by advising passengers to print their itineraries at home, saving the
airline the wage of an additional employee to preform the task as well as the
cost of the necessary supplies.
10. Innovative Revenue Generation:
Low-cost airlines can get quite
creative in order to generate extra revenue. Snacks and drinks can be offered
to passengers for a fee, and passengers have to pay extra for checked luggage.
Some low-cost carriers use the space on the overhead bins to place carefully
targeted ads in order to generate revenue. In some cases, the entire airplane
is “sponsored” by a company and painted in a unique livery.
