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What is the reason forthe existence of low-cost airlines?

Category: Social Sciences Paper Type: Report Writing Reference: APA Words: 4000

LLA or low-cost airline development is also referred to as no-frills and it is associated with three factors which include: 1. The aviation industry is actually a cyclical sector—demand is associated with different economic cycles and fixed costs are related to airplane ownership’s high levels. 2. Air transport’s price normally remains a limiting aspect or factor for the majority of the population. 3. In the aviation sector, liberalization enables free development of new services and packages, and thus can promote new airline development. It still is important for low-cost airlines to find consumers in a market context with the capability of surplus production. These elements are answered directly by low-cost airlines. They benefit directly from liberalization’s third package in Western Europe. After their development, low-cost airlines gained significant attention from people and it served to increase their awareness as well. At present, European people have the necessary information about low-cost airlines which enables them to make decisions about which airline to choose and purchase services from. In society, a specific place has been established by low-cost airlines which is hard to be affected by other airlines. Their perceived image plays an important role in keeping their revenues stable.

Low-cost airlines are decrease their costs through the use of a standardized fleet (enabling a better flexibility in the assignment of crew and generating savings in spare stock parts, qualification, and training) of several cost-efficient carriers or aircrafts (generally B73), raising the seat number on the aircraft, and enhancing the seat number in accordance with the necessary crew. The service is standardized by them and there are no extra costs that passengers generally have to bear when traveling through other airlines. They also eliminate the possibility of meeting with travel agents and making reservations.

Low-cost airlines also benefit passengers in such a way that they can make reservations through the internet as EasyJet sells almost 95 percent of its seats through the internet or by telephone. The only limitation is that point-to-point tickets are available and connections cannot be made which simplifies the handling of luggage and turnaround of planes. Tickets are not printed and seating is free while secondary airports are used since they charge significantly less and there are no flyer programs.

The rule is the non-integration into alliances. In addition to it, when flights are delayed or canceled, travelers normally don’t get any compensation, nor can they travel through other carrier flights. Hotel accommodation is also not offered to them. Actually, this is the consequence of preferring low-cost airlines over other airlines. They don’t belong to IATA due to which they don’t have to comply with the standards of quality like finding a solution for travelers when a flight is canceled. However, the EU launched a new regulation in order to improve the rights and treatment of air travelers in case boarding was denied and the flight was canceled (Button, 2012).

In Western Europe, low-cost airlines have already gained an important place, especially Ryanair and EasyJet, whose objectives are more important than their foreign networks. Of course, the market is not healthy and a number of airlines will still lose their place in the market. Still, a high potential is highlighted by different studies with respect to available airports. In addition, the accession of new member countries in the European Union has extended the number of airlines and territories because of liberalization.

A weakness of aircraft, low incomes, and low wage costs in these countries are additional elements that favor low-cost airline development. In general, several levels characterize networks. Meanwhile, North-South flights are large and frequent recourse to regional or urban airports results in the creation of networks by low-cost airlines that diverge from the traditional ones which might compete through a secondary airport or might be significantly innovative for the niche market. In general, this observation has made authors claim that it is on the level of an airport that the influence of liberalization is most potent. Managers of the airport don’t feel the need to plan the supply now which is decided by governments but they are compelled to gain the attention of carriers for making profits.

Society has been affected by low-cost airlines in a number of ways. The very first effect is that people can now travel more often than they used to do. For example, people travel to different places by car rather than by air because the cost of traveling by air is significantly more than the cost of traveling by their car. Now, low-cost airlines enable people to travel through the air at low costs because there are several services which they don’t provide in comparison with other private airlines. For example, in-flight meals are not provided by low-cost airlines but in return, fares are kept very low. The second effect is that the economy of a specific region is increased with an influx of tourism. The society in which low-cost airlines operate to experience economic growth because of enhanced tourism. The last effect is that LLC has positively influenced people which has made them a potential customer base (Mikulić & Prebežac, 2011).

As stated by Xiaowen&Anming (2010), when an airport offers airlines the option of sharing the revenue of the concession, then the implications of the welfare as well as the competitiveness in the research paper. We find that the airlines as well as the airports are allowed by the sharing of the revenue through doing research or studying a non-congested airport whose the charge of aeronautic is also regulated for internalizing a positive demand externality among service of the concession as well as the services of aeronautics that can improve the welfare. Therefore, a negative effect on the competition of the airline may be caused by the sharing of the revenue. The revenue may strategically be shared along with its airline dominantly as well as the market power of these firms or companies can further be strengthened. The welfare may be or may not be improved by such kind of that sharing of revenue. It discusses the straight as well as vertical relationships of the airline like the implications for the general airport (Zhang, 2010).

According to Baum (2006), the revolution of low cost that it has been impacted on Western Europe, North America as well as increasingly, a formation that has created the opportunity, the examination initially as well as the other parts of the world for all the sectors of the community. In other words, it is surely true within the terms of the price into the effect of the appearance of low-cost carriers majorly, the air routes as well as the shot haul in general has been for the reduction of the prices that are highlighted very importantly around all of the providers of the services. Therefore, the features are being operated into the traveling by air at very low cost which all the same the prices, can make the hurdles for accessing a particular section of the community. It is looked at by such kind of articles at the operating feature of the airlines on the low cost as well as these are evaluated in the sense of the exclusion criteria socially. It is concluded the access by the article based on the exploratory study of consumer the customers and consumers in Scotland as well as Glasgow, for the airlines that are providing the services on the low cost is significantly very easy in both of the terms such as the perceptual as well as practical for the customers with the relationships of flexibility for leisure as well as working, and also access to the technology as well as the required systems based on the finance to get of the best ever opportunities for travelling (Baum, 2006).

The Low-cost carriers (LCCs) are one of the fastest-growing as well as becoming a more significant part of the component of the industry of the airline since they take the initiative for the operations in the years of 1970s. Air transportation is being linked closely by the tourism of particular industries in the world. The features are being operated into the traveling by air at very low cost which all the same the prices, can make the hurdles for accessing a particular section of the community. For the development of countries like Turkey, it is very significant as the industry of tourism. In the world, it was started by the liberalization of the industry of the airline just after the deregulation in the United States of America within the year of 1978. Furthermore, it is given the right for the private enterprises within Turkey by the first package of the deregulation within the year of 1983 as well as after 2002 second parts are given the operatable without having any kind of limitation. Business Model of LLC as well as many of the changes the model of the charter of the business to LLC are chosen by several Turkish airlines as well. As everyone knows that turkey is very beautiful as well as the most important country for tourism and it is considered the main destination area for tourists across the world as well as the industry of tourism performs a very significant role in the economy of the country. The industry of the airline industry as well as the tourism conjoining to each other and for the growth immediately. The service is given greater or more than twenty million of the passenger as well as the revenue in billions of dollars in the American currency by LLC for the economy of the Turkish nation (SARILGAN, 2016).

According to Vania Costa (2015), an era was created in the sector by the liberalization of air transport. The penetration of the carriers which offers tourism at the low cost produced the dynamism as well as the behaviors of the demand were changes consequently as well as the supply of the services of the air transport. It was increased at the Portuguese airports from the passengers around seventeen million by the volume of the traffic within the year 2002 to more than 30 million in the year of 2012 as well as cumulative growth around 75% is represented. Furthermore, the determining factor for the growth was the commitment to low-cost carriers (LLC) in the year of 2012. So these kinds of low-cost carriers have recorded the share of a market that was 33%. The research focuses on analyzing the evolution of low-cost carrier’s air traffic in the region of Portugal as well as the significant effects of the evolution of LCC air traffic on the economic development of the region. We recognize the actual advantages, the net welfare as well as the cost in the development of the area drive by the routes of low-cost carriers of Porto, Funchal, Faro as well as Lisbon among the years of 2005 and 2012. Moreover, the existence of the net impact positively is proved by the methodology by LCCs on the local economy as well as straightly through the creation of job as well as the enhanced usage within the sector of tourism as well as the indirectly through the enhanced requirement from the other related sectors (Vânia Costa, 2015).

The airline markets have been transformed due to the low-cost carrier business model. It can be used to creating cheaper flying rather than driving. It is usually used to open particular significant opportunities for a new market.  The EU airline industry’s strong liberalization is occurring with the particular introduction of the third package of the particular measures of the third regulation in 1993. The EU airline access has been granted to the various other EU markets according to its particular provision. The airlines that are operating in EU it means these all can establish itself in any country and these are operating services in EU markets and these operate from and to EU member states which are usually not the states of the airlines in its origin as well as it is used for determining their own fares. The frequency levels, capacity and schedule along with the entire effective economic restrictions that have been removed easily.

The business model of the LLC is established based upon the combination of the high frequency and low cost. In order to gain a competitive advantage the lower-cost gas becomes the essential strategy. In order todefine the combination of LCC there is no particular definition and it has not been explained that whatLCC is included and in order to defined the airlines and its strategy commonly andparticularly there are common understanding concepts that can be easily explained. This al usually depends on its particular characteristics. In this particular report the fares of the European low cost are airlines are indicated in explanative manners. The variances among the LCC airlines and traditional airlines are explained in a good way (Mandić, 2017).

Infect nothing more is offered by the low-cost airlines but the seats in the aircraft are better as compare to its cost. It can be able to provide cheaper air tickets if they can be easily observed only if they are serving from several months in advance. The cost of these airlines is usually less than the traditional airlines and sometimes these airlines offer lower services as compare to traditional airlines. Even the low-cost airline are not offered the beverages and food to their valued customers during the flight and they committed for it with their customers.  If the customers paid lower cost their comfort could be reduced as compared to the other air carriers.

They have to offer the maximum utilization of the passenger cabin and the larger number of seats. There are several other disadvantages of these air crafts that are usually considered as low-cost airlines; it includes the landing of the less frequent airport. It alludes the greater savings for these companies but in this case the additional cost has been paid by the customer due to the great distance of the airport from the particular city center it becomes round about 50 kilometers away from the center of the city. In the Republic of Croatia there is no doubt such kinds of air carriers required but all of these are considered as the primarily ideal for the person who has excessive time and they haveno problem to travel in all of thistransportation. Sometimes these customers have to suffer from the long traveling as from 20- 24 hours due to the availability of low-cost transportation (Babić, 2006).

EU airlines focus on establishing particular standards for the protection of the passengers rather than the classes of the traveling and it includes the choices of the airlines.Additionally, the particular rules are set by the regulation along with its common rules for the purposes of the passenger’sassistance and compensations.  It has been indicated by the regulatory authority that the minimum amount must be compensated and due to it the legal certainty can be increased by reducing the cost of the litigation. In order to inform the passengers for their particular rights the air carriers are obliged for the sanctions for infringements of the Regulation. For the detailed evaluation; the regulation 261/2004 was subjected for explanative evaluation in which the areas of the improvements are particularly highlighted in order to ensure that the rights of the passengers are particularly protected. It has been indicated by the evaluation that the few of the air carriers are not following the rules that are complying with the authority of the regulation. In terms of the improper and inadequate mechanisms for complaint handling the ineffective enforcement is employing. The effective EU rules are still harming due to the limited sanctions for non-compliance (Ceps Eu, 2019).

Despite the rapid growth of the number flights as well as seats that are usually supplied by the LCC (low-cost carriers) the services provider’s output has been uncertainly contracted and stagnated. Therefore, the main carriers are observing itself for one of the less dominating market positions for their particular home market. In terms of the routes and traveling distance the customer cannot wastes their time lost out whole the incumbents have been marginally reduced in these markets as an essential point of view and perspectives? Therefore; there are the least numbers of markets that are engaged in serving from London towards the major carriers that ar4e experiencing capacity of the reductions that are mostly similar just because of theses carriers feed for the passengers for their long haul network. It particularly looks like it seems to suggest in the principals of the short-haul markets as well as the developments of the low cost by which the network carriers are not forced for the retrenching. It mostly occurs in the smaller markets in which the incumbents are mostly similar to the capacity for reducing the face of the increased competition. (Albania, 2003).

The budget of the EU airlines reached a boom according to the booming of the profi6t of the industry. It has been revealed by Chris Tarry who was a founder of the aviation consultancy that the peak profit hit by the aviation industry during 2015- 2016.

Pels, Njegovan, & Behrens (2017) explains that in Europe, low-cost airlines can be a substantial generator and employer of economic prosperity. A very important role is played by the European Union assigned to airport transportation and regional airports as an economic welfare source, depending on their ability to improve cohesion and accessibility among the member states. It is argued by the European Region Assembly that the collaboration and cooperation between regions and low-cost airlines are effective by significantly contributing to regional development and European integration. Increased economic growth is being experienced by regions in different sectors like tourism and the development of medium and small-sized organizations is being witnessed in different commercial sectors.

Upturns have been observed by local economies due to increased employment, more money is spent by visitors locally and mobile businesses consider air services an attraction. Mobile businesses consider cost-effectiveness very important and they prefer low-cost airlines. Accessible airports, on an aggregate demand side, are capable of exerting a multiplier effect on a region through tertiary and secondary multiplier effects. In spite of economic significance that an airport might have for a specific place, the topic has been studied only a little. Actually, an issue in performing impact analysis is that traffic at the airport leads to the development of economy and economic development also leads to an increase in traffic at the airport. The causation direction isn’t clear due to which impact analysis cannot be performed (Pels, Njegovan, & Behrens, 2017).

In Europe, air transportation’s liberalization has brought significant radical alterations to the structure of air travel markets. First of all, erosion has been led by significant competitive pressures in average yields which are earned on seats. The impact on fares has been reinforced by the development of low-cost airlines that provide affordable services through the use of high punctuality standards, secondary airports, and safety. Through these components, low-cost airlines are capable of stimulating new demand other than diverting the present traffic. For instance, it has been determined that shifts are represented only by thirty-seven percent of low-cost airline passengers while fifty-nine percent represent new demand. It is indicated by the empirical evidence that local economic development has been supported by low-cost services, often by raising the tourism in the region.

 It has also been determined that occupational and economic effect resulting from a low-cost service's launch was quite significant. A single scheduled flight of Ryanair served to generate over 200 jobs which created a significant impact on local tax revenues and regional economy for local administration. Low-cost services can result in a positive effect on the economy which can also decrease seasonal fluctuations and changes in traffic flows. Off-season travel can be made more attractive by LCC services (A, 2013).

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