Courses

Understanding Airline Management

Chapter : Introduction to Airlines


An airline is an organization that provides air transport services for traveling passengers and freight. Airlines lease or own their aircraft with which to supply these services and may form partnerships or alliances with other airlines for mutual benefit. Generally, airline companies are recognized with an air operating certificate or license issued by a governmental aviation regulatory body. Airlines vary from those with a single aircraft carrying mail or cargo, through full-service international airlines operating hundreds of aircraft. Airline services can be categorized by variety of parameters such as area of operations, type of license, size of fleet and types of aircrafts operated, type such as passenger or cargo and finally on their business models such as full service or low cost model.


Airline Classification: Classification based on area of operation and the type / size of fleet would term the airlines as being intercontinental, intra-continental, domestic, regional, or international. Based on the type of license, they can be classified as Scheduled, Non-scheduled or a Charter operator. They may also be classified as either a passenger or a cargo airline. Based on their business model they will be called as full service airline or a Low Cost Carrier (LCC).


Passenger Airlines: Primary objective of the passenger airline is to transport passengers and their baggage. However, since the aircraft also has additional capacity to carry mail and cargo in the belly of the passenger aircraft and these airlines also carry some amount of cargo. Depending upon their area of operations they are called as International or domestic airlines. Some airlines operate short haul commuter aircraft from smaller cities and provide feeder traffic to the other airlines. Such airlines are called as regional or commuter airlines. A typical international airline operates a fleet of large number of aircrafts numbering in hundreds and operates long haul wide body aircrafts on its international network. These airlines are either owned or promoted by the governments or owned by large corporate. These are the heavyweights of the airline industry. Typically, these are also the largest employers among airlines.

Domestic or national airlines might serve certain regions of the country, but may also provide long-distance routes and some international destinations by operate medium- and large-sized jets.


Cargo airlines‎: Air transport is a vital component of many international logistics networks, essential to managing and controlling the flow of goods, energy, information and other resources like products, services, and people, from the source of production to the marketplace. There are airlines specifically catering to these markets having their scheduled flights on high density sectors and are in a position to move oversize cargo which otherwise cannot be carried on passenger flights.


Charter Airlines: Air charter is the business of renting an entire aircraft. While the airlines specialize in selling transportation by the seat, air charter companies focus on individual private aircraft and itineraries, urgent or time-sensitive cargo, air ambulance and any other form of ad hoc air transportation. Charter airlines offer a large variety of aircrafts including business jets and helicopters. Charter airlines operate as non-schedule flights as they operate under rules different from those governing scheduled air flights. They do not operate with a fixed time table and are chartered for specific purposes or for groups. Charter flights are organized by tour operators to supply transport to various holiday destinations. Package holiday companies often charter aircraft specifically for the holidays they sell for short seasons to the holiday destinations. They also tend to operate on a weekly rotation and are generally only sold as one or two week durations, however some operators will sell odd durations and one-way flights close to the departure date depending upon their availability.


Government-owned airlines / Flag Carriers‎: A flag carrier is an airline registered in a given state, enjoys preferential rights or privileges accorded by the government for international operations. It may be a state-run, state-owned or private but state-designated airline. A flag carrier may also be known as a national airline or a national carrier, although this can have different legal meanings in some countries.


Advantages to Flag Carriers: The heavily regulated aviation industry also meant aviation rights are often negotiated between governments, denying airlines the right to an open market. These Bilateral Air Transport Agreements specify rights awardable only to locally registered airlines, forcing some governments to jump-start airlines to avoid being disadvantaged in the face of foreign competition. Some countries also establish flag carriers for nationalist reasons, or to aid the country's economy, particularly in the area of tourism. In many cases, governments would directly assist in the growth of their flag carriers typically through subsidies and other fiscal incentives. The establishment of competitors in the form of other locally registered airlines may be prohibited, or heavily regulated to avoid direct competition. Even where privately run airlines may be allowed to be established, the flag carriers may still be accorded priority, especially in the apportionment of aviation rights to local or international markets. Many airlines have been corporatized as a public company or a state-owned enterprise, or completely privatized. The aviation industry has also been gradually deregulated and liberalized, permitting greater freedoms of the air. One of the features of such agreements is the right of a country to designate multiple airlines to serve international routes with the result that there is no single "flag carrier".


Low Cost Carriers (LCC)‎: A low-cost carrier or low-cost airline is an airline that generally has lower fares and fewer comforts. To make up for revenue lost in decreased ticket prices, the airline may charge for extras like food, priority boarding, seat allocating, and baggage etc. The term originated within the airline industry referring to airlines with a lower operating cost structure than their competitors. Low-cost carrier business model practices vary widely. Some practices are more common in certain regions, while others are generally universal. The common theme among all low-cost carriers is the reduction of cost and reduced overall fares compared to legacy carriers.

The LCC’s normally operate a single passenger class in a single type of aircraft reducing training and servicing costs. There are minimum set of optional equipment on the aircraft and fares are only point to point fares with unreserved seating. • flying to cheaper, secondary airports & operating at non-prime time to save costs • fast turnaround times • No transfer of luggage to other flights • Generates ancillary revenue from a variety of activities • Web based ticketing and reservations • Optimize the staff efficiency


LCC Pricing: The pricing policy of the low cost carriers is usually very dynamic, with discounts and tickets in promotion. Like other carriers, even if the advertised price may be very low, it often does not include charges & taxes. With some airlines, some flights are advertised as free. Depending on the airline, as many as ten percent of the seats on any flights are offered at the lowest price, and are the first to sell. The prices steadily rise thereafter to a point where they can be comparable or more expensive than a flight on a full-service carrier. Sometimes the advertised price may be very low, and does not include charges & taxes. Perhaps as low as ten percent of the seats on any flight are offered at the lowest price, and are the first to sell. The prices steadily rise thereafter to a point where they can be comparable or more expensive than a flight on a full-service carrier.


LCC Fleet Strategy: The fleet strategy of low-cost carriers include, ordering aircrafts in large numbers to get huge discounts and due to this they sell their aircrafts just a few years after delivery at a very high price. That saves a lot in operative costs. Aircraft often operate with a minimum set of optional equipment, further reducing costs of acquisition and maintenance, as well as keeping the weight of the aircraft lower and thus saving fuel. Their seats do not recline, do not have rear pockets, to reduce cleaning and maintenance costs. Some LCC aircrafts do not window shades and pilot conveniences may be excluded. Often, no in-flight entertainment systems are made available. It is also becoming a popular approach to install LCD monitors onto the aircraft and broadcast commercials on them, coupled with the traditional route - altitude - speed information. Most do not offer reserved seating, hoping to encourage passengers to board early and quickly, thus decreasing turnaround times. Some allow priority boarding for an extra fee in lieu of reserved seating, and some also allow only the emergency exit rows to be reserved, again at an extra cost. The emergency exit seats have longer leg room.


An airline is an organization that provides air transport services for traveling passengers and freight. Airlines lease or own their aircraft with which to supply these services and may form partnerships or alliances with other airlines for mutual benefit. Generally, airline companies are recognized with an air operating certificate or license issued by a governmental aviation regulatory body. Airlines vary from those with a single aircraft carrying mail or cargo, through full-service international airlines operating hundreds of aircraft. Airline services can be categorized by variety of parameters such as area of operations, type of license, size of fleet and types of aircrafts operated, type such as passenger or cargo and finally on their business models such as full service or low cost model. 


Airline Classification: Classification based on area of operation and the type / size of fleet would term the airlines as being intercontinental, intra-continental, domestic, regional, or international. Based on the type of license, they can be classified as Scheduled, Non-scheduled or a Charter operator. They may also be classified as either a passenger or a cargo airline. Based on their business model they will be called as full service airline or a Low Cost Carrier (LCC).


Passenger Airlines: Primary objective of the passenger airline is to transport passengers and their baggage.  However, since the aircraft also has additional capacity to carry mail and cargo in the belly of the passenger aircraft and these airlines also carry some amount of cargo. Depending upon their area of operations they are called as International or domestic airlines.  Some airlines operate short haul commuter aircraft from smaller cities and provide feeder traffic to the other airlines.  Such airlines are called as regional or commuter airlines. A typical international airline operates a fleet of large number of aircrafts numbering in hundreds and operates long haul wide body aircrafts on its international network. These airlines are either owned or promoted by the governments or owned by large corporate. These are the heavyweights of the airline industry. Typically, these are also the largest employers among airlines.

Domestic or national airlines might serve certain regions of the country, but may also provide long-distance routes and some international destinations by operate medium- and large-sized jets.


Cargo airlines‎:  Air transport is a vital component of many international logistics networks, essential to managing and controlling the flow of goods, energy, information and other resources like products, services, and people, from the source of production to the marketplace. There are airlines specifically catering to these markets having their scheduled flights on high density sectors and are in a position to move oversize cargo which otherwise cannot be carried on passenger flights.


Charter Airlines:  Air charter is the business of renting an entire aircraft. While the airlines specialize in selling transportation by the seat, air charter companies focus on individual private aircraft and itineraries, urgent or time-sensitive cargo, air ambulance and any other form of ad hoc air transportation. Charter airlines offer a large variety of aircrafts including business jets and helicopters. Charter airlines operate as non-schedule flights as they operate under rules different from those governing scheduled air flights. They do not operate with a fixed time table and are chartered for specific purposes or for groups. Charter flights are organized by tour operators to supply transport to various holiday destinations. Package holiday companies often charter aircraft specifically for the holidays they sell for short seasons to the holiday destinations. They also tend to operate on a weekly rotation and are generally only sold as one or two week durations, however some operators will sell odd durations and one-way flights close to the departure date depending upon their availability.


Government-owned airlines / Flag Carriers‎:A flag carrier is an airline registered in a given state, enjoys preferential rights or privileges accorded by the government for international operations. It may be a state-run, state-owned or private but state-designated airline. A flag carrier may also be known as a national airline or a national carrier, although this can have different legal meanings in some countries.


Advantages to Flag Carriers: The heavily regulated aviation industry also meant aviation rights are often negotiated between governments, denying airlines the right to an open market. These Bilateral Air Transport Agreements specify rights awardable only to locally registered airlines, forcing some governments to jump-start airlines to avoid being disadvantaged in the face of foreign competition. Some countries also establish flag carriers for nationalist reasons, or to aid the country's economy, particularly in the area of tourism. In many cases, governments would directly assist in the growth of their flag carriers typically through subsidies and other fiscal incentives. The establishment of competitors in the form of other locally registered airlines may be prohibited, or heavily regulated to avoid direct competition. Even where privately run airlines may be allowed to be established, the flag carriers may still be accorded priority, especially in the apportionment of aviation rights to local or international markets. Many airlines have been corporatized as a public company or a state-owned enterprise, or completely privatized. The aviation industry has also been gradually deregulated and liberalized, permitting greater freedoms of the air. One of the features of such agreements is the right of a country to designate multiple airlines to serve international routes with the result that there is no single "flag carrier".


Low Cost Carriers (LCC)‎:A low-cost carrier or low-cost airline is an airline that generally has lower fares and fewer comforts. To make up for revenue lost in decreased ticket prices, the airline may charge for extras like food, priority boarding, seat allocating, and baggage etc. The term originated within the airline industry referring to airlines with a lower operating cost structure than their competitors. Low-cost carrier business model practices vary widely. Some practices are more common in certain regions, while others are generally universal. The common theme among all low-cost carriers is the reduction of cost and reduced overall fares compared to legacy carriers.


The LCC’s normally operate a single passenger class in a single type of aircraft reducing training and servicing costs. There are minimum set of optional equipment on the aircraft and fares are only point to point fares with unreserved seating.

  • flying to cheaper, secondary airports& operating at non-prime time to save costs
  • fast turnaround times
  • No transfer of luggage to other flights
  • Generates ancillary  revenue from a variety of activities
  • Web based ticketing and reservations

Optimize the staff efficiency


LCC Pricing: The pricing policy of the low cost carriers is usually very dynamic, with discounts and tickets in promotion. Like other carriers, even if the advertised price may be very low, it often does not include charges & taxes. With some airlines, some flights are advertised as free. Depending on the airline, as many as ten percent of the seats on any flights are offered at the lowest price, and are the first to sell. The prices steadily rise thereafter to a point where they can be comparable or more expensive than a flight on a full-service carrier. Sometimes the advertised price may be very low, and does not include charges & taxes.  Perhaps as low as ten percent of the seats on any flight are offered at the lowest price, and are the first to sell. The prices steadily rise thereafter to a point where they can be comparable or more expensive than a flight on a full-service carrier.


LCC Fleet Strategy: The fleet strategy of low-cost carriers include, ordering aircrafts in large numbers to get huge discounts and due to this they sell their aircrafts just a few years after delivery at a very high price. That saves a lot in operative costs. Aircraft often operate with a minimum set of optional equipment, further reducing costs of acquisition and maintenance, as well as keeping the weight of the aircraft lower and thus saving fuel.  Their seats do not recline, do not have rear pockets, to reduce cleaning and maintenance costs. Some LCC aircrafts do not window shades and pilot conveniences may be excluded. Often, no in-flight entertainment systems are made available. It is also becoming a popular approach to install LCD monitors onto the aircraft and broadcast commercials on them, coupled with the traditional route - altitude - speed information. Most do not offer reserved seating, hoping to encourage passengers to board early and quickly, thus decreasing turnaround times. Some allow priority boarding for an extra fee in lieu of reserved seating, and some also allow only the emergency exit rows to be reserved, again at an extra cost. The emergency exit seats have longer leg room.