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Submitted by zurracapon on February 11, 2008
Category: Miscellaneous
Words: 1320 | Pages: 6
Views: 84
Popularity Rank: 95,901
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During the past ten years we have witnessed the birth of a new way of making business, low cost airlines. The way these work is quite simple, they offer low prices in exchange for suppressing many of the traditional services offered to customers. Other characteristics that sustain these kind of companies are; “unique travel fee; frequent and short flights; suppression of intermediaries (tiquets are bought online); use of secondary airports (minor operatively costs); less number of employees needed; reduction of the number of aircraft models (simplification of the maintenance)” .
Nevertheless, before we enter to discuss our particular case we think its necessary to point out some of the main features of this new and booming industry. The first that catches our attention is the fierce rivalry that exists, “ where competitors are tempted by industry conditions to use price cuts or other competitive weapons to boost unit volume”, and the huge power that buyers enjoy, because “the item being purchased is sufficiently standardized that costumers can both find other suppliers easily and switch to them at virtually zero cost ”.
However, after its initial boom now its time for the sector to face a new challenge, deal with the new problems that are arising while being loyal to the basis of the new business model. In this context, we are going to choose a Spanish low cost company, and analyse the main problems it has to face, and what we think it should be done in order to overcome these. The chosen company is Vueling, created 3 years ago, with 57 routes, with more than 8 million passengers, and which during the last months has seen how the value of its shares reached their minimum price, at the same time that it quantified massive losses.
Nevertheless, most low cost companies share this situation. During the past years low cost companies have increased a lot their offer and, in order to fill the planes got...
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