Category Archives: Business

Low-Cost Carriers: Skybus Airlines is the latest start-up to offer cheap fares

In the US airline industry, there’s a new kid on the block. Starting soon, start-up budget carrier “Skybus Airlines” will commence service, carrying passengers from Columbus, OH, to a handful of cities such as Burbank, CA; Richmond, VA; and Kansas City, MO [1].

Skybus plans to offer at least ten seats on every flight for $10 until December 15. Low-cost carriers, as the designation suggests, can offer rock-bottom fares by keeping their operating costs low. For Skybus, this includes eliminating the option of booking tickets through a call-center, and thus the expenditures associated with paying call-center employees. Tickets must be booked through the Internet instead.

Skybus isn’t the first airline to conceive of a low-cost business model. In fact, the concept has been around since the early 1970s when Southwest Airlines developed the first blueprint in the airline industry for cutting costs. Since then, start-up carriers that dream of soaring to profitability in an industry where competition is fierce still refer to many of the model’s original pillars.

Following are the components that Southwest Airlines devised to keep costs low:

  • Short-haul routes
  • No-frills service (e.g., meals, in-flight entertainment, seat assignments)
  • Standardized fleet (Boeing 737)
  • Use of secondary airports
  • Steady growth and expansion
  • Ticket-less reservation system and simple fare structure
  • High aircraft utilization
  • Higher seating density
  • Attempt to attract price-conscious consumers (not business travelers)

One of the reasons that low-cost carriers (LCCs) operate short-haul flights is that it enables these airlines to offer a no-frills service, which customers can tolerate for an hour or two, but not much longer. Also, by eliminating some of the services typically found on full-fare carriers, such as hot meals and entertainment, LCCs can save a tremendous amount of money.

Using a standardized fleet helps to keep maintenance and crew training costs low–so does flying into secondary airports such as Frankfurt-Hahn (as opposed to Frankfurt Airport), where fees for gates and landing slots are generally lower than at large, congested airports.

Steady growth and expansion is another key factor in reducing costs. If an airline expands its operations too quickly, it will face increased depreciation costs in the future. Depreciation refers to the drop in value of physical capital (e.g., the airplanes) as the physical capital ages. Rapid growth also lends itself to more competition over routes and landing slots, which hampers LCCs chances of profitability in certain markets [2].

Airlines can increase their revenue by keeping their planes in the air. LCCs like Southwest Airlines maximize aircraft utilization by decreasing total turn-around time or the time it takes an airplane to land, reload passengers, and take off for the next flight. The use of secondary airports and the elimination of seat assignments (to save time during boarding) are a few of the strategies employed to optimize turn-around time.

Finally, LCCs can keep costs low by increasing density in comparison to full-fare airlines. LCCs do this by offering a one-class cabin (i.e., removing first and/or business class), which allows a 737 to hold 20 or more additional passengers. LCCs typically rely on revenue generation that results from capacity-the number of passengers-rather than yield-the amount of money earned per passenger-which is considered to be a “revolutionary” approach in the airline industry [3].

Defining Your Web Strategy: Creating an Online Presence for your Business

Whether you have an existing business or are starting a new one – more than likely you need a web site to help market and/or sell your products and/or services. Creating an online presence is no small task but can be done well if you follow four phases. You need to:

  • plan it out based on your business requirements
  • build it (or buy it)
  • promote it
  • maintain it

Phase 1: Planning

Planning is the most important phase of the web strategy. Without a proper plan you are flying by the seat of your pants and that never works well. There are several activities in the planning phase:

  • Take an inventory of what you have now for an internet presence (if you have one).
  • Take an inventory of what your competitors are doing. Create a matrix of functions and features that you can evaluate each site on.
  • Define your top level business requirements – what do you want to achieve with an internet presence (these requirements must be measurable and achievable).
  • Define the audience (s) you want to target.
  • Then define your success metrics (how will you determine if your business requirements have been met?).
  • Define all top level Roles and Responsibilities for this strategy. These are the people that have ultimate responsibility for the strategy and the resulting internet presence.
  • Once you know what you want to achieve, break it down into manageable sub-projects. Don’t try to do it all at once. A phased development approach enables you to get a site up fairly quickly with some features and functions available while you monitor its performance and work on the next set of functions/features.

Phase 2: Building your site

This is the phase where you start gathering the details of what you are going to build, how you will build it and then the actual build. It is usually broken down in sub-phases as follows.

  • Complete detailed functional and business requirements
  • Develop the Information Architecture for the site. This is a blueprint for how the site is laid out. The Information Architecture is done once and updated as necessary for each sub-project defined.
  • Define the content requirements and starting pulling the content together.
  • Complete the Creative Design – this is how the site will look.
  • Develop the technical design or if buying a solution, define the technical and functional requirements needed and complete a product evaluation and selection process.
  • Build or buy your site and complete each sub-project accordingly.
  • Don’t forget to test your site for usability and for functionality.

Phase 3: Promote

You can have the best web site on the internet, but if no one knows it’s there – what’s the point? Things to consider in your marketing strategy:

  • Online advertising with Google/Yahoo
  • Search Engine registration and optimization
  • Affiliate Marketing
  • Cross Channel Selling
  • Privacy Policy
  • Blogs
  • eNewsletters

Phase 4: Maintain

How do you maintain your site? It’s an on-going process of monitoring and modifying as necessary to ensure you are meeting your business requirements. Complete regular reviews of the web statistics for the site. What are the peak visitor times, where are people coming from and where pages are they leaving from? How long are they spending on your site and what are they looking at the most? This information will tell you what parts of your site are working and what aren’t. It will also help you determine where your marketing is working.

Maintenance also means keeping up with regular technology patches and updates. Fixing bugs that may have been missed during testing phases and updating information architecture as necessary are also part of this phase.

A Strategy needs to be closely Monitored

Creating an online presence can be a lot of work. Defining your web strategy means planning what you want to do, building your site, promoting it and maintaining it. It’s important to understand that a web strategy is cyclical in nature. This means that once you define it, you need to revisit your plans on a regular basis to ensure the strategy is still in line with the business needs, and that you are meeting your expected goals. You may also want to modify parts of your strategy to take advantage of changes in internet technology.