When it comes to low-cost airlines, many consumers love and hate them.
The reason for "love and hate" is that compared with ordinary airlines, low-cost airlines have a poor sense of service and experience, such as generally not providing consumers with free meals, and additional charges for baggage check-in. However, under normal circumstances, low-cost airline tickets** will be relatively lower, so high cost performance has also become the choice of many consumers.
At present, the main domestic low-cost airlines are Spring Airlines, West Airlines, Lucky Airlines, Ruili Airlines, etc.
Red Star Capital Bureau has noticed that low-cost airlines actually have a very mature business operation model. Judging from the results, the "money-making" ability of low-cost airlines is not bad at all, and even the profitability of the leading low-cost airlines far exceeds that of ordinary airlines.
Behind this, it is the way of "saving money" of low-cost aviation enterprises.
Data with picture according to Visual China.
1) The user's "poor" experience and the ultimate "savings".
Low-cost airlines refer to airlines that can provide a large number of cheap fares for a long time by canceling some traditional air passenger services and controlling operating costs lower than ordinary airlines.
That said, the core "money-making" approach of low-cost airlines is to reduce costs, while also splitting services as much as possible to charge for them.
Looking back at consumers' various "complaints" about low-cost airlines, it is easy to understand from the enterprise level.
For example, consumers perceive the experience of low-cost airline aircraft as poor.
On airplanes, low-cost airlines generally do not provide free meal service, checked luggage, etc., and at the same time, flight attendants will also sell food, souvenirs and other products during the flight.
From the airline's point of view, this is to simplify cabin services and reduce airline spending in this area, and simplifying services also helps to improve flight turnover, thereby reducing unit costs.
*: Spring Airlines official website.
Another example is that consumers think that the comfort of seats on low-cost airlines is too low.
Usually, low-cost airlines have relatively compact seats, and even the elimination of the seat recline adjustment function may cause discomfort to passengers during long flights.
From the perspective of airlines, the above methods can increase the number of seats on the aircraft, increase the carrying capacity of the aircraft, and dilute the unit cost.
It is worth mentioning that as early as 2009, Wang Zhenghua, chairman of Spring Airlines, also mentioned the concept of "air station ticket".
Although this idea was not realized in the end, the idea of "flight ticket" still reflects the fact that low-cost airlines are trying their best to transport more passengers.
In addition, some consumers "complained" that low-cost airlines were not very convenient to fly.
Normally, low-cost airlines will choose to stop at the terminal and boarding bridge far away from the airport, or use the shuttle bus to board and disembark passengers.
From the airline's point of view, this can reduce the need to rent more expensive facilities at the airport, which is also a partial savings, but it also increases the sunk cost (such as time cost) of the consumer.
In general, when choosing a low-cost airliner, consumers may not enjoy better service, sit more uncomfortable, and may spend more time boarding and disembarking, but fortunately, in terms of **, low-cost airline aircraft are still attractive.
*: Same-way travel.
According to the data of China Post**, the unit freight rate of Spring Airlines is about 30% lower than that of the three major airlines, of which the passenger kilometer revenue of Spring Airlines in 2019 is 03620 yuan, 28 lower than the average of the three major airlines4%。Considering the large passenger load factor of Spring Airlines, from the perspective of seat kilometer revenue indicators, the company's seat kilometer revenue in 2019 was 03285 yuan, 20 lower than the average of the three major airlines7%。
In other words, the average price of Spring Airlines' air tickets** is indeed lower, and from the perspective of consumers, if they do not have high requirements for service quality and comfort, and only need to arrive at their destination on time, low-cost airlines are still an attractive choice.
2) It is "more ruthless" to itself
In addition to being "ruthless" to consumers, in order to reduce costs, low-cost airlines are more "ruthless" to themselves.
For example, low-cost airlines try to be as simple as possible in the selection of aircraft.
Normally, low-cost airlines will purchase the same type of aircraft series, which can reduce the purchase or lease cost, simplify the training and management process, and at the same time enable the overall fleet to form a large-scale cost advantage in terms of maintenance and aviation material reserves. Spring Airlines, for example, mainly uses Airbus A320 family aircraft.
Secondly, low-cost airlines will also schedule flights more compactly.
By increasing the average daily flight frequency, the daily flight time of each aircraft can be maximized, the daily utilization rate of aircraft will be improved, and the fixed costs will be further diluted.
Also taking Spring Airlines as an example, according to the China Post ** Research Report, the daily utilization rate of Spring Airlines' fleet in 2019 was 1124 hours, higher than the industry average of 191 hours, the daily utilization rate of Spring Airlines' fleet in the first half of 2023 was 811 hours, 041 hours.
In 2019, Spring Airlines operated 444 times, higher than the average of the three major airlines 177 times.
In addition, in terms of marketing expenses and management costs, Spring and Autumn Aviation is also able to save money.
Taking Spring Airlines as an example, in terms of sales expenses, Spring Airlines uses e-commerce direct sales as its main sales channel. In 2022, among Spring Airlines' sales channels other than charter flights and seats, e-commerce direct sales (including OTAs***) accounted for 976%, corresponding to a sales expense ratio of only 215%, further reduced to 126%。
In terms of management expenses, through scientific performance appraisal and reasonable control of the man-machine ratio, the financial report shows that the management expense ratio of Spring Airlines in 2022 will be 225%, further reduced to 118%。
In short, where you can think of it, low-cost airlines are desperately trying to "save provinces". In the end, judging from the results, Spring Airlines also achieved surprising results.
According to the financial report, in the first three quarters of 2023, Spring Airlines will start with 26The net profit attributable to the parent company was 7.7 billion yuan, ranking first among the seven major A-share listed airlines.
Correspondingly, in the first three quarters of 2023, China Eastern Airlines and China Express Airlines lost 26 net profits attributable to their parent companies0.7 billion yuan, 6In addition to 9.7 billion yuan, the net profit attributable to the parent company of Air China, China Southern Airlines, HNA Holdings and Juneyao Airlines was 79.1 billion yuan, 132 billion yuan, 88.5 billion yuan, 113.4 billion yuan.
*: Corporate financial reports, Red Star Capital Bureau.
In addition, Spring Airlines' load factor is also one of the highest in the industry.
According to the financial report, in the first half of 2023, Spring Airlines' average load factor was as high as 88%, more than 10 percentage points higher than the average load factor of the three major airlines.
In general, low-cost airlines attract consumers through low **, and then through their own extreme money-saving methods, they finally achieve a higher profit level, which is also a unique business model of low-cost airlines.
3) Will low-cost airlines become a new trend?
From the perspective of the industry, in fact, the concept of low-cost airlines first originated in the early 90s of the 20th century before the United States launched aviation business to Europe, and then began to spread to the world.
Today, the market share of low-cost airlines is rapidly increasing, and more and more consumers around the world are willing to accept the operating model of low-cost airlines.
According to the Asia-Pacific Aviation Center, from 2013 to 2022, the global market share of low-cost airlines on intraregional routes increased from 298% to 343%, and the market share of international routes has increased from 95% to 179%；The market share of domestic routes in the Asia-Pacific region increased from 237% climbed to 273%, the market share of international routes increased from 53% to 165%。
In terms of domestic situation, according to the statistics of the Asia-Pacific Aviation Center, the market share of China's low-cost airlines in 2020 is only 111%, which is at a low level.
With the rapid development of China's economy and consumption upgrading, people's demand for air travel is also increasing.
Especially in second- and third-tier cities and short-haul outbound travel, low-cost airlines have huge market potential, and providing affordable air services will help meet this market demand.
However, it is important to note that while China's low-cost airline market has huge potential, competition is also becoming increasingly fierce.
Domestic and foreign airlines are actively entering this market, launching various preferential policies and special services to attract more passengers.
Therefore, for low-cost airline companies, how to stand out from the competition and provide more attractive services at the same time will also be an important challenge for them.
Red Star News reporter Liu Mi.
Edited by Yang Cheng.
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