1. LCCs Change Airline Industry
Established network carriers
Aircraft manu- facturers
Tourism industry
Airports
Unions
New tariffs
New products and sales channels (emphasis on the web / catering against payment)
Agressive marketing in favour of the consumer
Charter airlines obtain a different meaning
Package tours versus individual tours
Dynamic packaging
Hotel portals
Airports serve as gateways for regions / integration into the region
Growths of airports mainly due to LCCs
Requirements adjusted to LCCs
Unions realize significance of LCCs (according to Verdi 70% of all LCCs are unionised)
Business model is reflected in the collective labour agreements
altered requirements
growth due to LCCs

2. Agenda Low-cost Carriers
Trends In The Aviation Industry
Low-cost Carriers
Characteristics Of The Low-cost Business Strategy Of Airlines
Low-cost Business Strategies In Other Trades
Summary

3. Example: Airport Frankfurt Hahn
Frankfurt Hahn - the first German low-cost airport
No glamourous passenger terminals (e.g. no sophisticated docking units and computer reservation systems)
Therefore, investment costs for a terminal are significantly less than € 5,00 per passenger
The current capacity for approximately 5 million passengers per year was created for less than € 17 million (compared to an average of € 100 million needed at other German locations for a similar scale)
Compensation of lower income from airport fees with higher revenue from the non-aviation sector (e.g. rental income from the licence holders in the two terminals, parking fees)
Source:

4. Example: Touristik Express
Touristik Express: Germany´s first low-cost travel agency
Shop-in-shop concept
Trademarks: Wall with offers (taxi-design), Large photo with vacation theme, Red consultation counter
No seats
No display window / no display window decoration
No catalogues but demonstration of daily offers of different tour operators

5. Example: interRent Characteristics of interRent
Booking via (98 %) or call center
Fast reservation system with integrated yield management
Payment per credit card only
Complaint rate 0 %.
One-way rental not permitted
No cost-intensive incentive-program
Only one type of car (new VW Golf)
Client cleans the car himself (in- and outside)or he books the cleaning
Penalties if clearly communicated rules are violated
Source: company information

6. Example: interRent Cont.
Fences between HLX / IR & EC
Source: Company information

7. Example: wibromed Establishment into the pharma-market through
Realisation of an innovative discount-strategy
Creation of a transparent pricing and purchasing policy
Voluntary customer retention (no contractual or
contractual-like customer-supplier-relationships)
Realisation through
Delivery concept, no in-house logistics
Cost savings through lean structure
Only one delivery of goods per day
Restriction of the stockkeeping on fast moving, on prescription available original products
Optimisation between purchasing- and stockkeeping costs
Direct pass-on of the cost advantages to the customer
Source: company information

8. Example: Mobile Phones
The international management and technology consultancy BoozAllen Hamilton expects low-cost providers to enter the market for mobile phones
With the rising saturation of European markets for mobile phones low-cost providers are expected to enter the market
Booz Allen Hamilton expects a cost reduction up to 30-40%
These cost reductions can, for example, be realised through:
Sales via the internet
No costly customer service
Concentration on basis products such as voice communication and sms-service
Example of an already existing low-cost provider of mobile phones: the Danish company „telmore“
Source:

9. Example: Gas Station Gas Station Raiffeisen-Markt Wissingen
Bahnhofstraße 28
49143 Bissendorf
Gas station belongs to a supermarket
Fueling 24/7/365
No buildings, no staff
Cash payment or payment by credit card at the
machine next to the petrol pump
No Shop, no sales of car-related articles
No extras (except air), e.g. no water to clean the wind shield

10. Agenda Low-cost Carriers
Trends In The Aviation Industry
Low-cost Carriers
Characteristics Of The Low-cost Business Strategy Of Airlines
Low-cost Business Strategies In Other Trades
Summary

11. Summary Re-engineering of processes
(not only doing the same at less cost)
Pass-on of cost savings to customer
Stimulate demand, increase LF
Efficient use of expensive recources e.g. A/C, labour
Reduction of CMI costs
Pass-on of cost savings to customer

12. Summary Re-engineering of processes
(not only doing the same at less cost)
Pass-on of cost savings to customer
Stimulate demand, increase LF
Efficient use of expensive recources e.g. A/C, labour
Reduction of CMI costs

13. Different strategies of LCCs and FFAs
Summary Cont.
Different strategies of LCCs and FFAs

14. Different strategies of LCCs and FFAs
Summary Cont.
Different strategies of LCCs and FFAs

15. Correlation Between Price And Sales
Purchasing patterns have changed over the years
< 1990
There was only a small market for very expensive and very cheap products while there was a large markt for middle-priced products.

16. Correlation Between Price And Sales
Purchasing patterns have changed over the years
< 1990
There was only a small market for very expensive and very cheap products while there was a large markt for middle-priced products.
> 1990
There is a decreasing market for middle-priced products while there is a significant „high end“ market and a huge market for cheap products.

17. Produktlebenszyklus im Einzelhandel

18. Market Segmentation - Example: Food Trade
Cheap discounters (Aldi, Plus)
Rather price-orientated customers
Location: selected, centrally accessible locations
Only few fresh products
Large consumer markets ( Wal-Mart, Real, Marktkauf)
Price- and brand-orientated customers
Location: periphery of high density areas
Fresh products
Small supermarkets (Spar, Rewe, Edeka, Tengelmann)
Rather brand-orientated cutomers
Location: high distribution density especially in urban areas
Counter with fresh products
Specialised shops (Käfer, Dallmayr, Gosch)
Only brand-orientated customers
Location: city centre
Only fresh products
Qualified service
price
brand
Source: SevenOne Media GmbH

19. Market Segmentation - Example: Food Trade Cont.
Discounters and large consumer markets are the winners
Discounters
Supermarkets
Warehouses
Self-service warehouses / Large consumer markets
Others
Quelle: „Wollen die Deutschen nur noch billig?“, Hans Reischl, Vorstandsvorsitzender der Rewe-Zentral AG, Köln,
fvw-Kongress, 22. Oktober 2003, Köln

20. Market Segmentation: Examples
Discounter / Warehouse
Furniture
Car service
Chocolate
Drugstore
Telephone companies

21. Thank you for your attention!