ULCC Airline Model
The emergence of the ultra-low cost carrier (ULCC) model has proven highly profitable and successful throughout the world over the past two decades. The model continues to gain momentum globally, leaving Canada as the only remaining G7 country that does not offer a true low-cost carrier option. Canada’s airline duopoly environment has created a lack of competition, resulting in little incentive for the existing carriers to offer competitive ticket prices to consumers. This makes Canada one of the most expensive countries in the world in which to buy an airline ticket. Canada Jetlines recognizes this opportunity and plans to start operations in 2018. Click here to learn more about the Jetlines story.
A ULCC, also known as a budget carrier or sometimes globally as a low-cost carrier, is a simplified air carrier business model that operates with a cost point well below larger hub-and-spoke airlines. It offers lower-priced airfares and stimulates its own market. The ULCC model traditionally focuses on standardization of plane size and seating options, point-to-point flight patterns, lower-cost airports and a business focus on cost control. Selling additional services to passengers such as in-flight food and baggage generates ancillary revenue. This model has proven to be highly profitable in other jurisdictions around the world and is becoming a growing portion of the global airline industry.
The ULCC business model provides unbundled services and maximizes demand and revenue using yield management to set base prices. It strongly focuses on cost controls with adherence 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 unserved or underserviced catchment areas 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 by selling additional services, such as in-flight food and baggage, to customers.