Low Cost and the value of customization

Gerardo Manzano, Europair’s CEO, on low cost airlines

Gerardo ManzanoThe air transport industry has undergone a greater and more profound transformation during the last 20 years than almost any other industry.
It has survived the radical changes brought about by legislation, the economy, geopolitics, technological advances in manufacturing, and new technologies. Consequently, it is perhaps in the sphere of economic activity where there is greater confusion among the different options and services on offer. Particularly of note is the fact that when a passenger is considering a purchase, price is often the only factor taken into account.

Since the arrival of “Low Cost Carriers” (LCC), this business model has reflected many of the changes in a single formula that, in the light of the data, has been a real revolution. The combination of effectively taking advantage of new technologies, correctly interpreting changes in societal behaviour patterns and keeping one step ahead (of the competition), adds up to an especially brilliant tactic and another huge success  for these types of low-cost airlines.

It is impossible not to praise their achievements: every day, millions of passengers are witness to the apparently limitless success of the low-cost flight business, which continues to grow in terms of passenger numbers, flight routes, aircraft, and ultimately, in value.

That the LCC model is innovative is without question. It is in reality a very ingenious and timely reworking of an existing business model. For many years, air charter companies collaborated closely with tour operators, operating hundreds of aircraft on myriad routes. This may seem dated, but millions of passengers travelled in this way until quite recently.  A product was created based on flying between two cities, with additional “ground services”. At that point in time, it made for a very attractive price.

The metasearch Skyscanner has recently published a study showing that the final price of a low-cost flight can go up by 21% when examined in detail.

What is the reason for this increase? Quite simply, customisation. Any commercial business can lower the price of their product provided it is standardised and offered in huge quantities. The LCC business model greatly reduces the cost of creating a product, resulting in an unexpectedly low market price. But creating a customised product for a range of clients is expensive. That’s why these price differences are found in LCCs. If the passenger is willing to buy what is offered off the shelf, the price will be considerably lower than for a customised purchase.

Low Cost versus traditional traffic · Flights

Tendencia

Source: Eurocontrol (aggregated data for the 17 largest European countries based on operations)

Our job as air charter specialists is to offer the most appropriate transport solution at the best – not the lowest – possible price point; that’s to say, the price that fits the design of the desired product.

It is therefore always important to consider the depth of detail needed and the particular requirements of any flight. It is neither possible to compare prices between a traditional and a low-cost carrier, nor is it appropriate to compare offers without scrutinising the detail of each one. There may be unexpected or hidden costs such as taxes, fuel price adjustments, etc. Ultimately, we must ask ourselves if we prefer the peace of mind that comes with choosing the reliable, solid and consistent option that will make our trip a success, or a rollercoaster of jolts and surprises..

But if the key factor in the passenger’s decision is the price, they would do best to book one of the several daily scheduled flights operated by both LCCs and network airlines in hundreds of airports around the world. They offer a standardized product with an adjusted price that may be close enough to what the passenger would have chosen for themselves.

Esta entrada también está disponible en: Spanish

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