Microeconomics Case Study

Low-cost Carriers in US: Pricing Pressures for Major Airlines

OR

Abstract:
The entry of low-cost carriers into commercial aviation had a legacy of factors – both environmental and operational – that contributed to their business models. If the Airline Deregulation Act of 1978 helped them scale their operations, their 'no-frills' approach eased their entry strategies. The success of their business model can be inferred from the fact that they survived one of the worst downturns (the September 11 terrorist attacks) in the history of commercial aviation, while the major airlines were desperately seeking for bankruptcy protection.

Pedagogical Objectives:

• To discuss how the low cost carriers exerted an enormous pricing pressure on the major airlines with their low fare, point-to-point services.
• To discuss the major airlines’ fight-back, which eventually extended their operations to the low cost segment.

Keywords : Low cost carriers, The major airlines, Airport hubs, The 1978 Airline Deregulation Act, Southwest Airlines, People Express Airlines, New routes and new airlines, Competitive Strategies Case Study, Operating revenues, Operating costs, The grip of bankruptcy, Major carriers adopting the low-cost model, In-flight food services, JetBlue's savvy approach, Delta's Song and United's Ted, Union concessions