- + D Page view | A Read aloud | 1 Add text IV Draw Highlight 136. Comprehensive Business Review Concepts and Cases with Capstone Business Simulation Strategy: Low Cost versus Legacy Definitions Get Cloudy EasyJet-the British-born low-cost airline that launched in the mid 90s with the slogan "flights as cheap as a pair of jeans"-announced record profits of 6686 million in 2015. That was 18% above its previous year's results and its fifth record profit in a row. Southwest Airlines, the US low-cost airline that started it all in the easyJet 1970s with hostesses in orange hot pants and white go-go boots, also finished 2015 with record profits of $620 million. It was Southwest's 43rd consecutive year of posting a profit. While these low-cost carriers (LCC) are making profits, legacy airlines are struggling to cut costs and increase margins. Low fuel costs have helped the legacy airlines" bottom line in recent years, but profitability has been far more variable than for LOC. Disrupting the Market Low-cost airlines disrupted the traditional air travel market, changing the concept of a domestic flight from a luxury to a commodity. They focused on short-haul flights, leaving the costly long-haul flights to the legacy carriers. As the low cost carrier market has matured, however, the gap between low cost and legacy airlines services has narrowed significantly. In recent years, legacy airlines have watched their markets erode and they cut costs and services in an attempt to match the competition. Meanwhile, the no-frills airlines have become successful and begun to introduce a few fancy ruffles, if not fully fledged frills like assigned seats and perks for business passengers. The LCC sector took offin new markets as well. According to the Center for Asia Pacific Aviation, the region's LCC fleet increased % from 2013 to 2015 in Southeast Asia, from 400 10 600 aircraft AirAsia, the leading Asian LCC based in Malaysia, was voted World's Best Low Cost Airline at the Oscars of the aviation industry, the Skytrax Awards, for the eighth year in a row in July 2016 witholomeost cartiers (LCCs) are making profits, legacy airlines are VW A Head aloud D) Add tedt V Draw Highlight struggling to cut costs and increase margins. New Profit Model Low can developed a profit model for the malowy Specifies they feet most by using one of een with minimale de cumplene havet back pockets to me weight. 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(Ted Overloh even slightly closed between cost and legacy airlines Analyst by the commun Mas showed copy carries more to move through the moment came but that www from 36 cent premium in 2006 w.myasm.ca/Ims/pluginfile.php/213096/mod_resource/content/2/Case%20study%201%20-%20Strategy.pdf - + 2 | D Page view | A Read aloud Add text V Draw Highlight Major Shake-Ups, and More to come The shake-up has led to several dramatic shifts. Delta and Northwest Airlines have merged. Legacy airlines like Lufthan have acquired their own L.CC (Burowing). United failed in bullding a low-cost brund (Ted). Over time, the price pop bas even slightly closed between low cost and legacy airlines. Analysis by The Economist in May 2013 showed it cost a typical legacy carrier 2,5 cents more to move one sent through the air for 3 km (0.6 miles) than it cost a low-cout carier--but that was down from a 36-cent premium in 2006 "The cost gap between traditional and budget airlines has fallen by an average of 30% in six years, partly because legacy airlines have abandoned old differentiators like free baggage and inflight catering on short-haul flights." For customers, the price of a flight has dropped more than 20% since 1995. Customers are winning for airline shareholders, the story is less clear. Airline stocks are down an average of more than -15% in mid-2016, and if you include all of 2015 the average is worse than-20," according to Forbes.com. With cost cutting being the only game in town for airlines, further innovation in the industry is likely Suggestions like containerising passengers and crew in portable cabin pods that are loaded into the plane in minutes is one suggestion, Whatever technologies are employed, however, the overall impact of the LOCs means the search for lower costs will continue until the next big disruption in the industry, Capstone is designed to give users a holistic Law of managing a company. These mini-cases are an aid meant to forge clear links between the real and simulated management experience Case Strategy selecting and adhering to a strategy how low cost carriers changed the profit model in the air travel industry Question to answers from case study 1. Describe in your own words, what the case talks about? 2. Discuss and analyze the parallels between the tactical decisions you make in the simulation and the decisions these managers have to make? Due: Week 52 pages. APA format)