ABSTRACT
Mr Bonderman’s analysis summarises the essential determinants of a successful low fare business model. To achieve it requires a ruthless and relentless focus on cost cutting and increased operational productivity, combined with an ability to generate and maintain a cash surplus and a cautious but steady fleet and route network expansion. The mastery of these techniques has made Southwest and Ryanair industry leaders and rendered them virtually unassailable in their respective markets. There are no secret or nonreplicable elements of the Southwest/Ryanair approach: the key is to have the drive, discipline and desire to be the lowest cost service provider and the lowest priced airline in the market. Other approaches do exist and these have also proven successful. Most notably, easyJet has a proven record of profitability and market growth, despite not being the lowest cost or price provider. However, easyJet also does not realise the sizeable profit margins of its main low fare rival, Ryanair. For instance, in 2000 easyJet realised a net profit of £22 million on operating revenues of £263 million (8.4 per cent). By comparison, Ryanair achieved a £65.3 million net profit on revenue of £304.6 million (21.5 per cent).
