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WAEA 25th Annual Conference & Exhibition
21-24 September 2004
Washington State Convention & Trade Center

LOW-COST CARRIER MODEL

" IFE is an essential element of the total business product of both legacy and low-cost carriers," stated Donald Schenk (Airline Capital Associates, Inc.).

Low-cost carriers are defining the standard of flying today, and legacy carriers must restructure to compete, he said. The three largest low-cost carriers in the US offer IFE or are considering it, and legacy carriers must consider IFE as a vital part of their product, he emphasized.

Although legacy carriers, especially in the US , are experiencing financial difficulties, Schenk said, IFE can be made profitable for these airlines. Income from IFE should be separated from an airline's credit status, and profits realized from IFE should be shared with the content providers and the bank.

The business model for legacy carriers currently is based on market dominance, pricing leverage, global reach, and the ability to offer passengers a full range of inflight services to reinforce product differentiation. The low-cost carrier's image is based on value pricing, an efficient use of resources, and reduced inflight services.

" IFE is the entire passenger experience," stated Peter Greenberg (NBC/The Travel Channel), adding "if you are a legacy carrier, you can't be a low-cost carrier."

Passengers on a low-cost carrier have very low service expectations, so they are more easily satisfied, Greenberg said. The same is not true for those flying legacy carriers, especially passengers in premium class.

When legacy carriers become obsessed with cost to the exclusion of value, "they've lost it," Greenberg said. "They could then just use the slogan: 'sit down, shut up, we're going'."

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