The firms within the market engage in price wars where they cut prices to grab a larger market share. The firms maintain their customers’ loyalty by offering the low air fares and brand themselves through advertising. Some customers may stick to an airline provider for some reasons such as convenience, flexibility and brand loyalty. Therefore, when another firm sells at a higher price, it doesn’t mean that the customer will switch airlines. However, it also isn’t mean that the customers won’t switch because are no restrictions or switching costs involved.
Essay Example on What Is Your Assessment Of The Long-term Attractiveness Of The Industries Represented In Pepsico’s Business Portfolio?
A factor which may cause customers to switch is when the price difference is too high to tolerate. In this market there is a significant barrier to entry because of the high set up cost. It is also difficult to penetrate the market because of the 3 major firms which accounts for a huge market share. The LLC market also shows some characteristics of monopolistic competition because of there are many other LLC airlines. There are also no legal barriers to entry because there are legal restrictions to enter the market.
Moreover, the governments show that they want to encourage competition in this industry when the Irish government rejected a takeover of Are Lingua by Ryan in 2009 (Reuters). Conduct Ryan conducts its business by cutting costs and lowering air fare prices. The company cuts cost through many ways such as using secondary airports, reducing the weight of their airplanes, reducing staff costs, removing bookings through travel agents and removing in-flight meals. The company commits to the basic service to their customer which is flying them from one place to another without delays.
Any ore than that, the customers will be charged. Ryan charges the customers for various things such as in-flight meals, payment handling fees, wheelchair usage and online check-in (BBC 2009). The company also charges their staffs for training and interview sessions to reduce staff costs (Creator 2005). Since Ryan aims to provide the lowest air fare prices, they maximize airplanes capacity by removing business class and first class space. There are no pricing agreements arranged between other LLC operators, therefore, the prices of tickets varies. Non-price competition also exists in the LLC market.