ULCC Airline Model
Jetlines will use the proven and profitable commercial aviation ULCC model to attract new passengers with low airfares, and plans to retain these passengers by demonstrating a “passion for service”. A ULCC, also known as a budget carrier or sometimes globally as a Low Cost Carrier (LCC), is a simplified air carrier business model that operates with a cost point well below larger hub and spoke airlines, and thereby provides lower priced airfares and stimulates its own market. The ULCC model focuses on standardization of plane size and seating options, point to point flight patterns, using lower cost airports options, provides a business focus on cost control while ancillary revenue is achieved through customer up-sales for additional services. It has proven highly profitable throughout the world and is growing significantly as part of the total airline market.
Jetlines plans to be the first ULCC operating in Canada. Jetlines plans to build strong primary and secondary routes by operating scheduled point-to-point all jet air service with primary bases at the Vancouver International Airport (“YVR”) and the Hamilton International Airport (“YHM”), with a secondary base at the Winnipeg International Airport (“YWG”). Jetlines plans to operate flights throughout Canada, the United States, Mexico and the Caribbean, starting with six Boeing 737 aircraft in the first year of operation and expanding to 40 aircraft over the first eight years of operations.
The ULCC Business Model
The ULCC, also known as a budget carrier, is a simplified air carrier business model that offers “unbundled, with value added” services, and maximizes demand and revenue using Yield Management to set base prices. The ULCC model strongly focuses on cost controls which require ULCC’s to adhere to the following:
- Standardization of plane size and seating options,
- Using a reduced seat pitch if required,
- Fly Point to Point routes in lieu of a hub and spoke system,
- Use primarily underserviced and secondary airports,
- Refrain from interline agreements, code share agreements and the use of travel agencies,
- Sell directly from the company website;
- Cap full-time employees substantially below that of the mainline carriers,
- Unbundle all items; deploy strategies for maximizing ancillary revenue through customer up-sales for additional services.
The ULCC has the lowest CASM-X (Cost per available seat mile excluding fuel). Typically, ULCC’s can operate between 30-50% lower than the traditional hub and spoke (legacy) carriers. While LCC’s employ some of the strategies ULCC’s employ, they do not employ all of them.
The ULCC model has proven highly profitable and successful throughout the world over the past two decades. Jetlines completed a comprehensive global compilation of airlines and their success rate over the past 20 years in order to determine the viability and track record of various airline models. A total of 899 airlines operated at some point during the past two decades. The success and longevity of the ULCC model stood out. The ULCC model continues to gain momentum globally, while the Canadian market continues to be serviced primarily by two airlines, neither of which operates as an LCC or a ULCC. Based on global statistics, Jetlines believes Canada presents a compelling opportunity for entry of a ULCC.