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A service is an economic activity that creates value and provides benefit for customer at specific times and places by bringing about a desired change in, or on behalf of, the recipient of service

1. Intangible------- Cant see, feel. smell 2. Inseparability-- Produced and consumed simultaneously 3. Perish ability-4. Variability-----5. Ownership---Dies Change Right to use only

Complex and tricky thing as selling intangible idea or product

Complex and tricky thing as selling intangeble idea or product

Consumer behavior
Is the study of processes involved when individual or group select, puerchase , use or dispose of product, services, ideas or experiences to satisfy needs and desires Is the study of processes involved when individual or group select, puerchase , use or dispose of product, services, ideas or experiences to satisfy needs and desires

Invention of wheel--- mesopotamia Locomotive 1903

A low-cost carrier or low-cost airline (also known as a non frills, discount or budget carrier or airline) is an airline that generally has lower fares. Something offered to customers for no additional charge may be designated

as a "frill" - for example, free drinks or food.

No-frills is a term used to describe any service or product for which the nonessential features have been removed to keep the price low No-frills businesses operate on the principle that by removing luxurious additions, customers may be offered lower prices The term originated within the airline industry referring to airlines with a

lower operating cost structure than their competitors

While the term is often applied to any carrier with low ticket prices and limited services, regardless of their operating models, low-cost carriers should not be confused with regional airlines that operate short flights without service,

or with full-service airlines offering some reduced fares

What are No-frill Airlines?

No-frill airlines are airlines that offer low fares but eliminate all non-essential services, such as complimentary drinks, snacks, inflight entertainment systems, business-class seating, flying from remote airports, using one single type of aircraft, A/C interiors is fitted with minimum comforts, carry advertising inside to increase revenue, charge passengers an additional fee for carrying luggage, using the airport checkin desk, using wheelchairs or toilet

Some LCCs operate A/C configured with a single passenger class, and most
operate just a single type of aircraft In the past, low-cost carriers tended to operate older aircraft, such as the McDonnell Douglas DC-9 and older models of the Boeing 737 Since 2000, fleets generally consist of smaller, newer, more fuel efficient aircraft, commonly the Airbus A320 or Boeing 737 families, reducing training and servicing costs

Single passenger class Single type of aircraft Minimum set of optional equipment on the aircraft Simple fare scheme, such as charging one-way tickets

Flying to secondary airports

Flying early in the morning or late in the evening Fast turnaround times Unreserved seating Point-to-point service Ancillary revenue Direct sales of tickets Low wages Employees working in multiple roles Aggressive fuel hedging Charges for online check-in and priority boarding. No free meals and drinks No refunds or transfers to later flights Using a mobile stairway Fly their aircraft for more hours

Not every low-cost carrier implements all of the mentioned points Some try to differentiate themselves with allocated seating In-flight entertainment (LiveTV) in every passenger seat Discounts and tickets in promotion reducing costs and no-frills service

reclining seats
premium cabin assigned seating mood lighting

When talking about LCC, some quarters will react with cynical and sometimes preposterous views We've been asked before if a passenger must stand in a flight due to lack of seats or there will be chickens in the flight Such misconceptions are not surprising, given the fact that scheduled, lowfare flights are a relatively new phenomenon in the world We list down some of the most common misconceptions with regards to the LCC:

i. Are the aircraft safe? Absolutely! The number one priority for LCCs is safety, and thats a trait that we never compromise. LCCs complies with the highest international standards and procedures. ii. Are they flying old planes? We are rejuvenating our fleet with brand new Airbus A320 aircraft. Going forward, we will have the youngest fleet of any airline in Asia. iii. Do they have well trained and qualified personnel? Yes. Our cabin crew is among the best trained and best paid. iv. What service can one expect? A service that will get you from point A to B, safely, comfortably and on time.

Yield Management
v. Do they Fly on time? LCCs time performance is now above industry average. And it is continuously improving as we induct more brand new Airbus A320 aircraft into our fleet. vi. Do I have to stay through weekends to get the best fares? No such nonsense. Our tickets are point to point and fare is based on demand for a particular flight. There are no ridiculous restrictions to get the cheapest fare; you just have to be faster before anyone else snaps it up first. vii. Do LCC really offer the cheapest fare at all times? Yes. Our business model stipulates that our fare must be at least 20% cheaper than a competing FSC at all times. Anything less, in our view, will steer passengers to our competitors.

v. Do they Fly on time? LCCs time performance is now above industry average. And it is continuously improving as we induct more brand new Airbus A320 aircraft into our fleet. vi. Do I have to stay through weekends to get the best fares? No such nonsense. Our tickets are point to point and fare is based on demand for a particular flight. There are no ridiculous restrictions to get the cheapest fare; you just have to be faster before anyone else snaps it up first. vii. Do LCC really offer the cheapest fare at all times? Yes. Our business model stipulates that our fare must be at least 20% cheaper than a competing FSC at all times. Anything less, in our view, will steer passengers to our competitors.

1. High aircraft utilization Aircraft is kept flying as much as possible, the first flight starts as early in the morning commercially possible and the final flight typically ends at midnight A fast turnaround is critical to ensure time spent of the ground is minimal an airline makes money when the aircraft is flying, not when the aircraft is parked Air Asias turnaround time is 25 minutes; compare that against 1 hour for a FSC On average, AirAsias utilization per aircraft is 12 block hours per day, a FSC might do about 8 block hours per day

2. No frills Underlying business for a LCC is to get a person from point A to point B Everything else is considered to be luxury item or frill, of which can be acquired for a small fee Among many of the frills that AirAsia has do away are; No free food & beverages. Why give away something that you dont appreciate? Passengers are most welcome to purchase food & drinks at an affordable price from the cabin crew Free seating. There is no assigned seating. Passengers receive a generic boarding pass and they will have to take any of the available seats

2. No frills Ticketless airlines. Less hassle for the customer, who doesn't have to worry about collecting tickets before traveling, and cost-effective for the airlines (paper, printing, distributing). No refund. Airlines waste a lot of money when passengers do not show up for a flight due to refunds and rescheduling. Whether a passenger shows up or not, the cost of flight to the airline is the same. LCC are unforgiving to no show passengers and do not offer refunds for missed flights No loyalty programme. We believe our customers are loyal to our low fares, so who needs frequent flyer miles programme then

3. Streamline Operations Making the process as simple as possible is the key of a successful LCC.

Single type of aircraft. Pilots, flight attendants, mechanics and operations personnel are specialized in a single type of aircraft, which means, among others, that there is no need for costly re-training of staff, for maintaining a stock with parts for different types of aircraft, for knowledge and skills in order to operate and maintain different types of aircraft with their own characteristics, or for new work requirements. Single class seating. There is only one class seating, i.e first class, and passengers are free to sit where they choose. Should you want to have the privilege to choose your seats, you can by purchasing Xpress boarding. Standard Operating Procedures. SOPs are important to ensure same level of competence among all the staff. This way we can ensure the homogeneity of service throughout the company.

4. Basic Amenities Secondary airports. Low cost carriers mostly fly to and from airports that are not necessarily the busiest, for example, London - Stanstead rather than London Heathrow These are often referred to as secondary airports. Operating from so called secondary airports is cheaper than from the bigger major airports and they are also a lot less congested and turnaround times for aircraft are a lot shorter For instance, to minimize fees AirAsia fly into Clark Airbase which is 70km away from Manila as appose to flying into Manila Ninoy Aquino airport. Business Lounges. Forget about it.

Emergence of Low Cost Carrier (LCC) industry has created new challenges for A/Ps to consider splitting up their services and offer a different product to different A/L since LCCs have different needs to have quick turnaround times, raise productivity, and cut down costs Their focus is on point-to-point services and avoid passenger/baggage handling systms LCC Needs and Requirements of Airport Terminals Service/facility LCC needs and requirements Overall terminal design Simple, functional with low construction/operating costs Check-in Fewer desks than full service airlines Airline lounges Not needed Security Efficient processes so boarding may not delay aircraft Transfer facilities Not needed Airbridges Preference for steps for quicker boarding and deplane Airfield buses Preference for passengers to walk to/from A/C to save costs Office accommodation Simple and functional

For small regional A/Ps, the arrival of LCCs has been useful to fill up underutilized existing infrastructure while A/Ls have benefitted from uncongested facilities which help them achieve fast turnarounds Such a strategy may have problems if demand grows to such a level that new facilities are needed and the A/P revenues are not sufficient to fund further investment

Examples of regional A/Ps include Liverpool and Prestwick in the UK, which have decided to focus purely on serving the LCC market and have developed the simplified facilities these A/Ls require Other examples include Finland, where Finavia, the governing body of the Finnish A/Ps, introduced a low cost concept at the small A/P Outside Europe, this practice is generally not so common Avalon near Melbourne in Australia is a rare example of an A/P that has been developed for the ops of the LCC Jetstar

In some cases, old unused military A/Ps have been developed primarily to serve the LCC sector This has been the case of London Manston A/P and Robin Hood Doncaster airport in the UK

Passenger numbers have gone from 90 000 in 1999 to over 4 million in 2007

A/P is served by three other LCCs, namely Blue Air, Iceland Express, and Wizz Air

During this time the A/P authorities have invested 17 million to give the A/P a capacity of 5 million passengers

Ryanair began services from the A/P in 1999 and then in 2002 it set up a base there and give services to 27 destinations

FrankfurtHahn (former US airbase) is another example where passenger terminal was a converted officers club

This is equivalent to an investment cost per passenger of 3.50 compared to 18.25 at Hamburg, 32.40 at CologneBonn, and 60.00 at Munich

This means that nonaeronautical revenue now accounts for 35% of all revenues

A/P does not charge a landing fee to airlines with fast turnarounds to minimize the fixed cost per turnaround and the passenger charge varies between 5.35 for less than 100 000 passengers and 2.48 for 2 to 3 million passengers

Rental space has increased from 180 square metres in 2002 to 3300 in 2005, whilst parking spaces have risen from 3433 to 9736

FrankfurtHahn (former US airbase) is another example where passenger terminal was a converted officers club

Beyond 3 million passengers, further discounts is offered for a turnaround time of 25 minutes

When an A/P serves both full service and LCCs, it is a difficult task to meet the different and conflicting needs of these two types of A/Ls

One option which is growing in popularity is to develop a specialized low cost facility or terminal with simple design & lower service standards than in conventional terminals

Alternative approach to handle LCC traffic is to have a competing terminal

Another option when two or more airports are under the same ownership

Certain costs associated with the R/W, nav equipment, fire/rescue, and security, will be same for all

Notable case is Ryanair that has lobbied for a separate terminal for its ops in Dublin for many years

In this case one specific airport can deal with the low cost traffic as is the case with Hahn airport in Frankfurt, Ciampina in Rome, and Stansted in London

LCC facilities & Terminals in EUROPE

Table gives details of some presently existing low cost terminals and facilities Some of these are refurbished existing facilities and some are dedicated new terminals Table-4.2 Examples of LCC Facilities and Terminals
Airport Date of opening Marseille 2006 Amsterdam 2005 Budapest 2005 Type of Passenger terminal capacity Refurbished l3.5 Piers off terminal 4 Refurbished N/A Gross area 7532 6150 7990 A/P charges policy Cheaper Cheaper Cheaper Airline users EasyJet, Flybe, Myair No airbridges Wizz Air, Sky Europe,

For example, Amsterdam A/P built which has a simple design with no airbridges and functions within a 20-minute turnaround time Marseilles had a separate low cost terminal that was converted from an old cargo facility Budapest has also developed an LCC terminal to accommodate Wizz Air and Sky Europe who have bases there, and in 2004 Warsaw A/P opened its Etiuda terminal, which originally had been an arrivals hall but more recently was used as a supermarket, furniture shop, and storage space At all these A/Ps, the passenger charge is lower for the low cost facility except at Amsterdam where there is a differential landing charge depending on whether an airbridge is used or not

LCC facilities & terminals in South East Asia

Table-4.2 Examples of LCC Facilities and Terminals
Airport KLumpur Singapore Date of opening 2006 2006 Type of terminal New terminal New terminal Passenger capacity 10 2.7 Gross area 35290 25000 A/P charges policy Cheaper Cheaper Airline users Air Asia,Pacifi c Air, Tiger Airways

There are two LCC facilities in South East Asia (Singapore A/P, Kuala Lumpur A/P) opened in 2006 At both the A/Ps, the passenger charges for the low cost terminal are lower and the rental charges at Singapore are half of those charged in the main terminal There is Plan for providing similar facilities in Bangkok, the Philippines, Indonesia, Dubai, and Delhi In Mexico, at Monterrey A/P, Terminal C is an LCC terminal Southwest in the US has low cost facilities at BaltimoreWashington, and at JFK A/P in New York

5. Point to point network Point to point network. LCC shuns the hub-and-spoke system and embraces the simple point-topoint network Almost all AirAsia flights are short-haul (3 hour flight or less) No arrangements have been made with other airline companies on connecting flights, on possibilities of flight transfers, nor on having the luggage labeled and passed through from one flight to another

6. Lean Distribution System Distribution costs are something that FSC most often ignore. Very often, FSC relies on travel agents and from their posh sales office Furthermore, FSC always blows the budget by complicating their distribution channels by integrating their systems with multiple Global Distribution Systems LCC will keep their distribution channel as simple as possible and will cover the whole spectrum of the clientele profile For example, AirAsia can cater to the most sophisticated European traveler via internet and credit card sales. And at the same time, AirAsia has an established system to sell our tickets to the most remote and technology deprived locations, such as in Myanmar. (a) Internet Sales. The bulk of sales (65%) are done via the airlines website, whereby the fares are paid using a credit card. This is the most cost effective distribution channel

6. Lean Distribution System

(b) Sales office. AirAsia only has a few sales offices. We only establish a call centre if we are confident the sales derived from the centre will be worth it. Furthermore, we are not fixated with having our sales office in the posh side of town. (c) Travel agents. LCC avoids reliance for sales via travel agent as much as possible. This means that the airlines do not pay any commission to a travel agent, which would otherwise have been reflected in the fares. Also, as they do not use travel agents, they do not use, nor participate in the world wide reservation systems and thus save costs, which again are reflected in their pricing.
(d) Call centres. Ticket sales can be done via telephonically; this is a simple and cost effective method

Full service airlines argue that LCC terminals are discriminatory against carriers that operate in the main terminals and all A/Ls should have access to the new terminals They also argue that A/Ps should be focusing on the reduction of costs for all its A/L customers and there should not be differential pricing These A/Ls have made a number of legal challenges For example, at Geneva A/P where easyJet is a major A/L, there were plans to convert an old terminal into a low cost terminal but Air France-KLM objected and claimed that the lower passenger charge would give the LCCs a competitive advantage but Swiss Federal Court rejected this but Geneva has abandoned its low cost terminal development project At Marseilles A/P, Air France-KLM claimed that the differential charges between the main terminal and the low cost terminal were unreasonable. This resulted in Marseilles A/P discontinuing its separate charges in the main terminal and adopting a single 3.54 fee which is nearer to the 1.22 fee of the low cost terminal At Amsterdam, Air France-KLM has also opposed the differential pricing, particularly as there is only a separate pier and not a separate terminal

For A/Ps, LCC terminals are an effective and cost-efficient way of coping with

increasing demand, if the current terminal capacity is already well utilized

However if there is still capacity in the main terminal, the more favourable option must be to get A/Ls to use this terminal Worst case scenario is when a significant traffic shifts from the old terminal to the new terminal, leaving the original terminal underutilized at a time when overall costs have increased There is also a more general issue related to non-aeronautical revenues as most of the low cost terminals have commercial facilities but revenue from them is lower than what would have been generated in the main terminal