ABSTRACT
A major priority must be vigilance on costs. While at times of crisis airlines take draconian measures not just to contain various categories of costs but to reduce them, in periods of profitability and optimism about the future there is a tendency to be less rigorous in controlling non-fuel costs. British Airways/International Airlines Group adopted an economically sounder approach, which was to buy an existing successful low-cost carrier (LCC), Vueling, and to allow it to operate at arm’s length. As an alternative, smaller network carriers may try to position themselves as offering a ‘superior’ product and service to justify their higher fares; easier to do, but success may be uncertain and in the past up-market positioning has in general not saved airlines when competing with LCCs. Large size combined with an extensive widespread network appears to be a key success factor for LCCs.
