INNOVATIVE CONCEPTS

1
INNOVATIVE CONCEPTS
2
LOW FARE AIRLINES
Whats So Innovative About Low Fare
Airlines?
3
LOW FARE AIRLINES A US INNOVATION
The Beginnings Deregulation Why Everyone
Wants to be in the Airline Business Every
Pilot Knows Better than His Current
Management How to Run an Airline Surplus
Planes Surplus Pilots Available
Infrastructure Capacity
4
LOW FARE AIRLINES EARLY MODELS
Characteristics Minimal Investment Point-to-Poin
t Thick Markets No Infrastructure Investment No
Unions No Frills No Systems Investment Second
Hand Airplanes
Low Cost Structure to Compete with Established
Airlines which had Imbedded Costs
5
LOW FARE AIRLINES EARLY MODELS
6
LOW FARE AIRLINES EARLY MODELS
SOUTHWEST
WHO IS LEFT?
7
LOW FARE AIRLINES SOUTHWEST (AND THE SOUTHWEST
MODEL)
Southwest Route Map In the Beginning . . .
8
LOW FARE AIRLINES SOUTHWEST (AND THE SOUTHWEST
MODEL)
. . . and Today
9
LOW FARE AIRLINES SOUTHWEST (AND THE SOUTHWEST
MODEL)
Growth in Passengers Carried, 1983 - 2000
10
LOW FARE AIRLINES SOUTHWEST (AND THE SOUTHWEST
MODEL)
Growth in Net Profit, 1983 - 2000
11
SOUTHWEST DISPELLING THE MYTHS
Myth 1 Southwest Is Not Unionized Myth 2
Southwest Serves only Secondary Airports Myth
3 Southwest Isnt A Business Persons
Airline Myth 4 Southwest Doesnt Serve
Food Myth 5 Southwest Is A Point-to-Point
Carrier (It Has No Network)
12
SOUTHWEST THE MODEL
What Produces Southwests Success?

• People Properly Motivated
• Productivity of Human and Real Assets
• Punctuality
• Perennial Focus on Costs
• KISS

• Ticketing
• Pricing
• Boarding

13
LOW FARE AIRLINES NEW US MODELS
jetBlue AirTran Frontier
Properly Capitalized Solid Management Hub and
Spoke or Large Markets New Airplanes at Outset
or Early On
14
LOW FARE AIRLINES A EUROPEAN VIEW
Youre European -- Whats the European View of
Low Fare Airlines?

• A Fad or A Fixture?
• Too Crowded Infrastructure
• Europeans Will Never Give Up Their Meals
• Cultural Differences Make Short Leisure Hops
  Like in US Unrealistic in Europe

15
LOW FARE AIRLINES THE EUROPEAN MODEL
Early Models
Debonair Virgin Express Ryanair EasyJet
16
LOW FARE AIRLINES THE EUROPEAN MODEL
Ryanair / EasyJet
Low Costs Low Investment Hungry Secondary
Airports Point-to-Point System
17
OTHER INNOVATIONS
Airline Within An Airline Delta
Express Shuttle by United GO Purpose To
Compete with Low Fare Airlines To Stop
Erosion of Market Share Stays Away from Hubs,
Except Shuttle by United In Europe, No
Success BAs GO -- Went KLMs Buzz is Hardly
Heard LH Decided Not to Play
18
OTHER INNOVATIONS THE VIRTUAL AIRLINE
PILOTS
AIRPLANES
MAINTENANCE
SYSTEMS
All Thats Left Is the Marketing
19
OTHER INNOVATIONS AIRPORT PROCESS PRE-BOARDING
Current Situation Airports Crowded,

Customers Unhappy and Tense

Stress/Crowd Relievers Self-Help
Measures
- E-Check-In
- Check-In Kiosks
20
CASE STUDY / WORKING GROUPS
You Have 25 A319/320s or B737s Over Next Three
Years
Tell Us

• What Type of Airline?
• (a) If Network, Which Alliance Would You Join?
• If Network, Where is Hub and What are the Routes?
• If Low Fare, What Type of Operation and Route
  Details?
• Plan Schedule
• If Low Fare, Explain Operations and Low Cost
  Measures
• If Network, What Would You Recommend to the Other
  Members to Change the Alliance?

21
INNOVATIVE CONCEPTS
Mo GarfinklePresident, GCW Consulting
Center MBA ofDonau-Universität-Krems
15 September 2001