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Legacy Airlines, Full service - Network Airlines-low cost carriers (LCCs), refeed to as budget airlines - Charter Airlines.

From Full Service to Low Cost and Charters: How Different Categories of Airlines work ? - By Ahmed Haouaria

03 Jan 2020
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Today’s airline industry is totally different from what it was back in 1978. At that time, the industry looked like a public service, led by government agencies. Nowadays, airline business market, is constantly developing with levels of service and price determined by customer. 

Even if published numbers may be bigger, according to The International Air Transport Association (IATA) the global association of airlines, between 770 and 800 companies are globally operating scheduled flights and recognized as commercial airlines. The number is increasing rapidly in all types of airlines.

As a consequence, the business has improved and fares became competitive. Deregulation opened the business to the newcomers, who are in most cases low-cost carriers. The fast growth of the business into new world markets in connection with the appearance of new carriers developed extraordinary competition in airline industry. 

One of the main advantages of deregulation is that customers have cheaper fares and more possible travel options. 

This article is intended to present a broader explanation about Airlines types to students pursuing Flight attendant’s studies and readers in search of Airlines information simply presented. 

In every industry, the business model chosen by a company might be different than its competitors. Airlines are with this regard no special case. Within aviation industry, airlines are generally classified into three categories: 

  • Legacy Airlines, also known as Full service or Network Airlines;
  • low cost carriers (LCCs), also refeed to as budget airlines and;
  • Charter Airlines.

While no two airlines are exactly the same in term of business model and related services, almost all of them will be categorized into one of these three types.

For practical use I will try in this post to summarize the main features of each airline category based of the following components: 

  • Business model summary 
  • Network specificities 
  • Aircraft types
  • In-flight services/Customer service 

1- Legacy airlines

The kind of super heavyweights of the airline industry, you often hear about in the news and economic sphere. In USA, as considerable reference, we have the biggest number of commercial air carriers: 59 among which 17 are considered as majors based on United States Department of Transportation definition considering major legacy airlines, those that post more than $1 billion in revenue in a fiscal year.

Most of time, legacy carriers are members of airline alliances, fly over a wide domestic and international route network, offer better cabin service, including meal service and in-flight entertainment, as well as their own airport lounges. Legacy carriers will also offer multiple classes of service, First Class, Business Class, and Economy Class. They also tend to offer established frequent flyer loyalty programs.

Legacy carriers will also use a main hub and spoke route network, and will naturally have a broad different aircraft types fleet. 

Pilots recruitment is primarily determined by aircraft fleet and utilization and related national regulations. Based on ICAO regulation, all civil aviation aircraft require licensed pilots, captains and first officer. The majority of today’s airlines fly fleets of, narrow-body jets and wide-body jets to serve a variety of short, medium and long-range routes with aircraft size and seat capacity optimized to respond to passenger demand.

Over the last 10 years, the increase in aircraft utilization resulting from operational productivity improvements has driven a substantial growth in the average crew ratio and is expected to remain at a similar level over the next decade.

For Legacy carriers customer service excellence is key. Thus, they are constantly looking for people with the highest possible positive attitude. Not only referring to simply smiling and looking cheerful, but above all genuine natural positive attitude emerging from cultivated positive mindset.

The kind of Flight attendant who can easily deliver excellent customer services. Performing to achieve such excellent customer service is a benefit for everyone. The rewards for such a great achievement is customer satisfaction and therefore loyalty. 

For most regular flyers, Cabin Crew reflects the spirit of the whole service of the airline. The entertainment system or perhaps good food may have some influence, but most people looks for the human touch and request effective communication. This could not be effective without polite and pleasantly disposed crew. Flight attendant are engaged as airline ambassadors, they represent the airline’s values, its spirit and its missions.

As a major USA airline and one of the best ranked airlines United Airlines is a great case study in term of service excellence. The company summarizes its customer service care policy as described bellow:

Listen to the customer. The key word is LISTEN. 

Not look. Not hear. But listen. If you look or just hear, then you hardly engage any of the content. It’s very important to get a clear idea of why the customer is saying what he’s saying.

Other key supporting components of United Airlines customer policy are:

Identifying the key issues mentioned by the customer.

Addressing the issues,apologizing, when you’re rong.

Thanking the customer for his/her Feedback.

2- Low cost LCC’s

Legacy airlines are nowadays facing the most aggressive ever competition from low-cost carriers (LCC’s), now covering almost 50% of all European flights for example.

The low-cost carrier LCC’s business model has grown considerably over the past two decades. Successful pioneers include the USA Southwest Airlines considered as the oldest Lo Cost airline in the world launched in 1971, Ryanair in Europe and Air Arabia, the biggest LCC’s in Middle East and North Africa.  Let’s take for example the UK’s market. It is held not by British Airways, a major world airlines airline but by EasyJet, a low-cost company. The model focuses on business and operational practices that drive down airline costs which is a major advantage over legacy airlines: the LCC operation cost bases are notably lower. And even when legacy carriers create low-cost branches to get into competition, they have difficulties to apply properly the model. To be successful as a LCC an airline has to be born LCC.Main cost-saving practices include operating at secondary airports, flying a single airplane type, to optimize both engineering and crew training cost, increasing airplane utilization; Six legs per day is average. They also practice direct sales policy, essentially using online platforms and offering a single-class product. Such strategies helped LCCs reduce unit operation costs by 20 percent to 40 percent compared with network carriers. 

Below a list of what is generally not included in a regular flight ticket and charged as extra passengers depending on their specific needs:

  • Focus on short-haul and medium-haul services.
  • No free meal service is offered. Inflight menus including meals, soft and hot drinks; alcoholic drinks, are available for purchase either online or onboard.
  • The “free seating” policy since it encourages passengers to board quickly and thus also helps to avoid delays. ON TIME PERFORMANCE is key.
  • In case a passenger wishes a specific seat, generally in the 5 rows, with more space between the seat rows, this has to be paid for. This means savings on the boarding system as well as additional incomes.
  • Use of small airports as they usually charge lower fees than the established ones and are more willing to co-finance the promotion of new routes. 
  • Very limited baggage included in the airfare. This means that passengers generally need to pay extra luggage fees. Another income sources. 
  • Supplementary charges for things such as payment by credit card online. This often seems obvious to airline passengers, but they are charged additional fees in low cost airline business models.

The sum of such extra fees is highly considered by the companies as ancillary sources with potential extra revenues. Thus, the LCC model has significantly stimulated travel demand, proved efficiency throughout the world and has driven air travel development. In Europe Ryanair is, definitely, exceptional and becoming a benchmark source for other low cost airlines. With load factors reaching 95% the company has a remarkable ability as a cost killer.

EasyJet and the Hungarian Wizz are some way behind in cost-effectiveness, but, using the same experienced strategies,  they are  bringing to their space  huge numbers of passengers, even those who were traditionally legacy airlines clients. 

3- Holiday, Leisure Charter Airlines

Holiday or leisure carriers are airlines that focus on the transportation of groups of tourists. In the past, the term “charter airline” was commonly used to describe these airlines as the business models dwell on holiday excursions offered by companies offering holiday trips packages all over the world including hotels, transportation to hotels and airports, different holiday activities, etc.

Holiday flights were then not sold directly by the airline to the passengers but were included in charter packages offered by Tour Operators TO’s. 

Charter airlines sign financially suitable contracts with different travel agencies for the transport of a given number of passengers to specific locations throughout. It becomes the travel agency’s responsibility to fill the aircraft with passengers. Like LCCs, charter carriers focus on direct point-to-point flights using similar fleets of medium to large aircraft with high-density seating. However, charter operators, unlike LCC’s usually offer full tourist class onboard services including meals, non-alcoholic drinks, in- flight entertainment on shared video screens, newspapers and magazines. The main differences between LCCs and leisure carriers can be observed in the fields of network and yield management. While the yield management of LCCs follows an increasing price curve, leisure carriers generally charge average cost prices, complemented by seasonal surcharges or discounts and by occasional promotional fares. As holidaymakers usually stay one week or longer at their destinations, a temporal concentration of demand to a certain destination on few flights per week is usually accepted, while LCCs usually offer at least daily frequencies on most routes. Furthermore, most leisure travelers are prepared to cover longer distances to their departure airport, allowing the airlines to spatially concentrate passenger flows on flights from few departure airports. A couple of airlines focusing on ethnical traffic, for example from Germany to Turkey, operate in a similar way. 

The majority of the charter carriers are owned by tour companies, which incorporate tour operator, travel agencies, airline, and sometimes hotels and ground transportation. They are more focused to get revenues from the leisure business they offer to their customers and sometimes they can have losses in their flight operations but they overcome this with the profits get it from the tourism activities. Some charter airlines rent available seats to other airline companies when the aircraft is not full. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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