Are Flag Carriers Prepared to Face the Challenges Proposed by the Business Model of Low-Cost Carriers?

Abstract

[EN] Air transport is a business with rapid and significant progress and also with multiple ups and downs due to its heavy dependence on external factors. At the present time, the global airline industry provides a service to almost every country in the world, playing an integral role in the global economy but in the last ten years since the business models have been changing, leaving behind the old way of doing things. After the deregulation of air transport and with most of the world’s countries immersed in an economic recession, the new business model introduced by the low-cost carriers has shaken flag carriers’ supremacy. The old fashioned culture of the flag carriers impedes them to be competitive and react to the challenges and opportunities of this new scenario. Is Aer Lingus (as an example of flag carriers) prepared to face the challenges proposed by the business model of low-cost carriers (with the example of Ryanair)? Using this Irish case of study this dissertation’s aim is to analyse the evolution in the last ten years of these two carriers, in order to knowing the market situation of this carriers at the present and how might it evolve in the near future. The way that the dissertation is outlined, it could serve as a first approximation to a much deeper work extended to any flag carrier. To achieve this qualitative and quantitative research are applied for give the reader an idea of the situation of both companies and show the economic results of these and other over the last ten years. Data showed that Aer Lingus has so few passengers and need to look for alternatives that will allow it to compete with other airlines, because even Aer Lingus has achieved a good level of aircraft productivity in the other hand has the worst load factor of all analysed carriers. Labour productivity has to be taken into account because the staff cost is one of the most important in the company. This productivity is better than other flag carriers but don’t reach the level of the low-costs and also Aer Lingus’ average wage is the highest of all companies analysed. Fuel purchasing must be analyzed, outsourcing considered in ground operations or catering and airport fees renegotiation evaluated. In the last ten years, data denotes that Aer Lingus changed its model to face the hard situation suffered and it seems the company is not going to be allowed to grow until the global recession is over or at least start to finish, nevertheless it’s prepared for the future, because for a while realized that its business model became obsolete and begun to seek solutions long time ago