Facing the Low Cost
Revolution
Low cost
carriers have achieved enormous growth over the last few years
and are achieving significant traffic shares in many markets.
As a consequence customer behaviour and expectations are changing.
This is forcing airlines to adapt their strategy, and they have
to absorb lessons from the low cost way of doing business.
This
means that established methods and long held assumptions are
no longer appropriate and new solutions must be implemented.
Key business questions, which airlines must answer, include
the following:
- To what extent should the fare structure be adapted to face
the low cost challenge?
- Is the existing network appropriate? Are the existing assumptions
about frequency correct?
- Should network and pricing changes lead to a revised fleet
mix?
- What are the pricing and product implications?
- To what extent is cost saving a solution?
The answers
to these questions will vary significantly according to the
geography, size of each airline, along with the characteristics
of the key markets and the nature of existing and potential
competition.
The MSP Solutions Approach
The Strategy Audit will
examine the following topics:
- Methodology for price setting
- Pricing distribution
- E pricing
- Network analysis and review of route profitability
- Benchmark analysis of cost structure
- Branding issues
- Cost reduction strategy
- Analysis of alternative business scenarios
For each
of the above topics, the review will examine the current processes
and strategies, and will consider to what extent these must
be changed to face the new business environment.
The benefit to our clients
Key recommendations are
likely to fall into three categories:
- Short term tactical changes to improve competitiveness,
which can be implemented immediately or in next six months
with little or no investment and simple changes to procedures.
These changes are most likely to include changes to pricing
and organisation.
- Medium term developments that can be implemented within
the next 12 months, probably with moderate investment but
with substantial changes to procedures. Possible changes may
include network revisions and changes to sales and distribution
strategy.
- Long term changes that will require over 12 months for implementation
and which could involve significant investment and complex
changes to procedures. It is possible that recommendations
may include major steps such as fleet changes, staffing levels
and new IT requirements.
