Question

Your boss, Penny Dirks, has asked you to analyze the airline industry using Porter's Three Generic Strategies. Which of the following companies are using a cost leadership strategy?
A.Southwest, Horizon, Frontier, JetBlue
B. British Airways, Singapore Airlines, Virgin Atlantic
C. Sky Taxi - a rent by the hour personal plane service
D. All of these choices

Answer 1

Answer:

The correct answer is A.

Explanation:

Low cost companies, such as Southwest, Horizon, Frontier and JetBlue, are already one of the first options when organizing a trip. Flying is easier and more accessible every day, partly thanks to the low prices that airlines offer us, but also more uncomfortable, so you may ask yourself: what tricks do airlines use to make flying so cheap now?

1. Point to point routes. Low-cost companies do not offer transshipment services (network), so they save the cost of moving luggage from one plane to another and do not have to worry about the costs of connections between their routes.
2. Staff costs. When operating point-to-point flights and only short and medium radius, low cost never pay hotels to their crews to spend the night outside the airport where they are destined. Pilots and cabin staff always return to their base. In addition, their salaries are usually lower than those of traditional airline personnel.
3. Small airports. Operating in small airports and far from the main urban centers allows these airlines to avoid traffic jams, thus saving fuel and time.
4. Homogeneous fleet. Low cost usually use modern fleets and similar models, allowing them significant savings in maintenance.
5. Reduced services. These low-cost airlines do not serve meals, cut seat space and eliminate seat allocation, which saves a lot of time, but also money.
6. Additional income. Most low-cost airlines promote a wide range of gifts and lotteries on board, which gives them significant extra income.
7. It pays for everything. The reservation of tickets, billing at a counter and the right to carry a suitcase in the hold of the plane is paid with low-cost airlines.
8. Less expenses at the airport. Many low cost even give up having customer service offices, replacing them with call centers that involve a high cost of calling.
9. Public incentives. Many public administrations grant great economic aid to these low costs to prevent them from stopping to fly to their airports.
10. Very high rotation. Companies basically care about two things: get the maximum number of flights and fill the planes to the maximum. A plane is only profitable when it is flying, so more flights, more profitability.