Originally Posted by
Rated De
For those interested, the "low cost model" is a blue print requiring adherence to strict operating criteria. These include, but are not limited to:
- Fleet commonality
- Point to Point flying
- Secondary airports
- Very specific flight time limits
- Very tight turns (allowing increased utilisation.
Europe has started and lost many Low Cost Airlines. Seed Capital usually equates to around $40-60 million, and the rush is on to ensure that the cash flow is quickly built to provide returns. That they struggle to adhere to the core requirements is likely in part to exuberance and competitive pressure such that the failure rate, even when using leased fleet is high. The successful models adhere usually to most if not all of the conditions, those like Southwest focus on the effective relationships between staff, with respect a cornerstone. That Southwest has done as well as it has for as long as it has, is the subject of many research projects. The factor missing in Ryanair is the focus on relationships, thus while it has lower unit cost, it lacks the TFP (factor productivity) multiples of Southwest. Focus on relationships and respect seems to add a factor that others have (largely) failed to replicate.
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Ryanair started and operated in a highly unionised, individual National airline govt supported model. It had to operate in a different way. US is a completely different market where airlines can just declare Chapter 11 and wipe out salaries and pensions and start again.
Every EU Govt was (still is) supporting its own "National" airline and doing this by various means like Slot control at major airport (LHR for BA, CDG for AF, FRA for LH), requiring Govt employees to only use a certain airline (all the previous), using ATC to discriminate on certain carriers and airports (NATS in UK for LHR), subsidising via various schemes like large payment in case needed to use them for military transfers (AF), PSO routes to prevent competition (Alitalia / Aer Lingus). In UK BAA had a monopoly in airports in London which was deemed never an issue until 1 day after Ferrovial bought BAA. Union rules and demarcation on what people could do. Apex fare rules that blocked lower prices. Competition rules that skewed to support home town airline................ Ryanair supposed monopoly when it attempted to buy Aer Lingus but BA can add more slots at LHR with little issue. There is more.
These are only some of the constraints used against any Airlines seeking to compete.
Low cost, high intensity model works but you need to tailor it to different markets and Ryanair laughed at and abuse because WTF wants to fly to Carcasonne, Hahn, Charelroi etc etc. The myopia that you will never fly to big airports showed that people hadn't really got a clue because as a business grows and evolves it will change. The ability to evolve and change quickly is how it became sucessful.
AF's Joon was always a bad idea as they lack the entrepreneurial ability to work and adapt quickly, same as most bureaucratic bloated old companies but made a half hearted attempt without really understanding what they are doing.