The Importance of Leadership to Achieve Business Excellence in Low Cost Airlines
Recent decades have witnessed the tremendous changes in the management of the airline industry as a result of the introduction of new kinds of airline services (Ehmer et al. , 2008). To incorporate these changes, and implement the newer airline services, business models are also increasing such that the best perceived business model is used to generate the highest revenues and market share (Rothwell, 2008). Nevertheless, identification of a good business model requires the stewardship of an efficient leader.
The purpose of this review is to compile information that correlates low cost airlines with effective leadership and the excellence business model. Low Cost Airlines Previously, prestigious airline services were quite expensive and affordable to a couple of people and businesses. However, the introduction of low cost airlines brought cost effectiveness in the airline industry as the line focuses on cost reduction. Nowadays, many people regard airline travel as a necessity (Rothwell, 2008). Low cost airlines use a strategy of pricing in order to obtain a considerable market share.
Examples of low cost airline companies include EasyJet and Ryanair based in the U. K and Southwest Airlines based in the U. S. Statistics from Statfor (2005) show that low cost carriers in Europe increased by 33 percent in the first half of 2005 and that the more 3,500 flight movements have been recorded. Pena (1996) shows that the American consumers benefit from the low cost services and this has led to increased demand and consumption of airline services as consumers are able to save an estimate of $6. 3 billion annually.
The initial focus of low cost airlines was to carry out short-haul services but these networks have since extended to medium-haul services as a way to become more competitive (Bomhof; Ehmer et al. 2008). According to Ehmer et al. (2008) the use of medium –sized aircraft leads to cost reduction in fuel use, staff, maintenance, and also reduced capital costs where discounted prices lead to placement of large orders. Consequently, low cost airline services promote high density seating and this lowers unit costs of all categories.
Unit costs are also reduced through direct online ticket sales, and elimination of free in-flight services like catering and onboard entertainment. Low cost airlines also exhibit a free seating policy and this assists in enabling customers to get on board quickly and thus reduce congestion and delays at the airports. In development of newer business models, low cost airlines are always willing to co-finance new routes promotion, and this leads to business expansion.
Excellence model and effective leadership in relation to low cost airlines The above illustrations show how low cost airlines are applying the business excellence model in order to establish a competitive edge in the market. In assessing business excellence Porter and Tanner, (2004: 10) suggest that the objectives and scope of the business must be defined and an excellence framework selected. Assessment and market research processes should wind with a review and action planning.
Yilmaz (2008) assert that a major challenge facing the airline managers’ in today’s industry is corporate sustainability. The business environment is complex, extremely competitive, has emanding customers and therefore requires effective leadership in order to pull through (Porter, & Tanner, 2004; Taneja, 2008). Effective leadership today requires that leaders introduce management in social, business, and environmental aspects. Leadership models have therefore come up to incorporate strategies that can steer the firm in the competitive environment.
These include the excellence model, Lean Six Sigma, Business Process Engineering and total quality management systems among others (Porter & Tanner, 2004: 3). According to Porter and Tanner (2004), effective leadership behaviour involves setting clear goals and values for the firm, creating customer focus, and empowering the organization and its people in the pursuit of excellence. The goal of low cost airlines is to reach the expanding customer base of airline travellers at cosset that are affordable as compared to the full flight carriers.
Deregulation of the airline industry and market liberalizations resulted to the emergence of low cost airlines (Wang, 2005). According to Citigroup’s Guide to business models, a business model is a critical step in the setting up of a new business. Low cost airline models can earn market share and increase profitability through low pricing and corporate social responsibility. According to Mason and Miyoshi (2009:1) main airline business models like the low cost airlines involve practices which can either improve or degrade the environment.
Through the excellence model of providing the most favourable prices for the consumers, the low cost airlines have intensified direct competition with the full flights (O’Connell & Williams, 2004). Veen and College (2004) assert that low costs can help small businesses to increase the customer base and thus the profitability and reduced costs of the business. The services at low cost airlines are at a higher demand because the harsh economic conditions have caused individuals to look for ways of reducing costs.
Low costs airlines do not provide for luxuries and still provide efficient services like speedy booking and flights as compared to full flight services. Bargainers are therefore more likely to get a better deal from low cost services. Conclusion Low cost airlines are an excellent business model that strives to meet the needs of the harsh and volatile economic environment of the 21st century. There is an increasing demand of airline services and low cost airlines reduce luxurious costs to provide services that are affordable to the widened customer segment.
However, success in particular low cost airline firms solely depend on the effective leadership of the management. References Bomhof, L. n, d. The airline business model: Heading towards virtualization or integration. Aerlines Magazine e-zine edition 25: 1-2 Citigroup Guide 3. n. d. “Guide 3: Building a business model for success,” Citigroup Ehmer, H. , Berster, P. , Bischoff, G. , Grimme, W. , Grunewald, E. , & Maertens, S. 2008. “Analyses of the European air transport market,” Topical Report: Airline Business Models, vol. 1(1): 1-41. Mason, K. , & Miyoshi, C. 2009.
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