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The No Frills Airlines Essay

1573 words - 6 pages

In contrast with the charter airlines, which existed long before deregulation, the airlines dealt with in this section came into being at the same time or shortly before. As their slang title suggests, they are based on a very convenient price/service relationship, making savings on the second of those factors.These airline companies target that section of individual travellers who, if travelling with other companies, would go for Economy Class at the lowest prices available: the advantage that the no-frills alternative offers is the equal or lower fares, based on the use it or lose it principle, that is to say there is no possibility of changing the reservation, that being the point at which the flight ticket is bought. This is also the principle employed for the best individual fares on scheduled flights.Their strategy is based on the minimising of management costs and on the potential offered by yield management. With regard to the reduction of management costs, this relates to on-board personnel and thus the reduction of service on board to the minimum, but above all it concerns the issuing of tickets which on average costs between 15 and 30 dollars for printing, distribution and agency commission : thus the no-frills companies normally sell so-called ticketless travel. A corollary of this policy is the prevalence of direct sales, but only one no-frills company claims to have no relations with travel agencies, reservation systems or any interline agreement: in general the no-frills companies also operate through the traditional sales channels, but to a limited extent. In practice the typical method they use to sell and issue entitlement to travel is as follows: the traveller books by telephone and pays by credit card, the company produces a simple sheet of paper listing the details of the travel booked and paid for and sends this to the traveller who produces this when boarding.However, above a certain volume of business, ticketless travel present problems to the company itself, as demonstrated in the case of Ryanair, the most important no-frills company in Europe, which has not adopted the ticketless travel option, preferring to use traditional ticketing systems accompanied by a particularly sophisticated yield management system.The case of Ryanair suggests that the no-frills model is a market entry model which will be phased out when the new company is established. Over a certain size, the no-frills company adopts operating methods similar to those of the scheduled airline companies, maintaining a fierce competitive approach to pricing, while the latter are adopting strategies similar to those of the larger no-frills companies in terms of reducing management costs and yield management. However, if there is a tendency for the distinction between scheduled and no-frills companies to become less significant in terms of operating methods, the difference in fares remains significant: the aforesaid TTI study looks at the fares of the three...

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