Discussion 

Archetype low cost carrier business models attempts to expand the business by making the fares low and increasing the profitability by reduction of the cost. The element chosen in this discussion is the serving of the short-haul routes often.

Short-haul routes and low cost

The short-haul low cost business model is predicted on the basis of adopting the best efficient technique like the point to point service, short turnaround times, efficient capacity of the carrier, capital utilisation and workforce utilisation and the fare unbundling unlike the large international networks. The Seat-Kilometre cost is one of the important indicators in terms of determining the cost in the short-haul air services (Marien, 2016). In order to reduce the cost the ratio of the passenger-kilometre to seat-kilometre, which is the load factor is ascertained. The load-factor helps the airline company in deciding the prices of the tickets. Pricing is done using the concept of bucket pricing. The prices are thereafter selected in a manner so that the fixed cost of the carrier is covered up and there is enough profit. Furthermore, the change in the technology and the extension of low cost engines (737 MAX and A321ER) in the short haul has also reduced the cost to a greater extent.

The reason global carrier networks cannot enter

The global network carrier cannot implement this business model because of the larger distance to be covered and the larger time it takes. There is involvement of different time zones and geographical areas in case of the global network carriers. The labour cost is also low in case of short-haul services. There is very less differentiation between the new aircraft entrants and the long-haul carriers in terms of aircraft utilisation (Bieger & Agosti, 2017).

References:

Bieger, T., & Agosti, S. (2017). Business models in the airline sector–evolution and perspectives. In Strategic management in the aviation industry (pp. 41-64). Routledge.

Marien, T. (2016). Seat Capacity Selection for an Advanced Short-Haul Aircraft Design. In 54th AIAA Aerospace Sciences Meeting (p. 1283).