A Budget Airline In Hong Kong

A Budget skyway In Hong KongBudget air lanes have sustain a trend in aviation industry over a few decades all over the humanity, however, as a Asian innovati cardinaltary city- Hong Kong hasnt have one yet, on that pointfore a research need to be forget me drug up to look for on its feasibility. This project proposal aims to do to accomplish a research by developing a plan beforehand. Firstly, the background of reckon air passages and problem statement would be stated surface, thus a literature review would be carried aside in range to find out its research value, after that, the researchaim and objectives could be set up as a research goal, furthermost solely non least, research order and project plan could be discussed on how, where and when to carry out this research.2. Background/ problem statementBefore deregulationIn the United State before 1978, all air hose rider services were regulated and controlled by the Civil Aeronautics Board (CAB). however 10 t tol eratek air lanes were authorized to issue a grandfather enfranchisement by CAB at that time. Underneath this certificate, all major schedule air ducts route mental synthesiss and cards were controlled and ruled. For an air hoses route structure, stops and intermediate stops were specified and passengers carrying amongst stops were check, a new promoted route needed to go with a lengthy procedure and hearings, even a stoppage of a route service was exempt needed the CABs approval. For an airlines act, all fargon expenses were purely controlled by the CAB. (John Clinton, 1984)After deregulatingAfter passing the air lane Deregulation Act of 1978, CAB no longer had an absolute authority on an airlines entry, exit, routes and f ares. Airlines were given freedom on setting up their own fares at heart a wide range, route applicant would be submitted and passed easily without whatsoever restriction when it performed air transportation properly. (John Clinton, 1984)First Successful reckon airlineIn 1967, the first winnerful cipher airline was born and started its stemma in Texas in America, it named itself as Southwest Airlines (SWA). The connection began when the US grocery was deregulated. Its successful model had been influencing a lot of early(a) fol blueing attend airlines. It deliver the goodss inexpensive, high rate of short gimmick flying and this made itself abide by a most moneymaking airline with years. (Peter, David, Gillen, Otto and Hans, 2005)What is Budget Airline?A baseborn- woo carrier or low- apostrophize airline ( alike cognize as a no-frills, discount or reckon carrier or airline) is an airline that generally has lower fares and fewer comforts. To make up for receipts lost in decreased ticket prices, the airline whitethorn film for extras like food, priority boarding, seat allocating, and baggage etc.Todays budget airlineNowadays, the value for money is a great emphasis placed by travelers. They are go forthing to buy chintzyer tickets to trade off some former(a) aspect such(prenominal) as leg room during flight. However, to resolve whether a budget airline can survive and drive down the cost, it generally depends on government and major airports give to open up the skies. Therefore, several(predicate) areas are in different cases, provided every consumer loves a low price ticket and somehow the developments are very similar in nature and continue in varied ways.As in US, budget airlines have dominated the market as travelers are price operate in Europe, to a greater extent local airports are needed to be receptive up to let more budget airlines to fly in in Asia, at that place are more opportunities to expand the whole market scarcely the path is not easy, since the market is still dominated by the guinea pig flag carriers. Besides, they are similarly supported by the cargo business. (Scott Lee, 2004)Problems lineAs we can see, budget airlines business not however commence a trend over the globe, but also bring out more travelers and so to extend the economy of our own country or locality, however, at that place is no budget airline at all shortly in Hong Kong, what are the reasons? Few years ago there was once a low cost carrier- Hong Kong Oasis airway which offered long force low fare was bankrupted after 18 months of operation, why would that happen? An Malayan budget airline- Air Asia already developed its third class ascendent in Thailand, meanwhile, there still arent any budget airlines setting up in Hong Kong as a home base, why? What are the success factors for a budget airline to develop? Is there feasibility for a budget airline to set up and form a home base in Hong Kong?3. Literature Review3.1.Business strategy of Budget AirlineMarkus (2005) once said The business strategy of these low cost airlines to keep back costs is to offerno frills, have fast turn-rounds, use only a single-type buy the farm of planes, and to fly mainly to cheap secondary airports..They also maintain a huge amount of administration costs by only accepting credit card earnings upments and thus reducing the paperwork to a minimum (Markus, p.269, 2005)In other word, they minimize their cost in perplexity, aircraft maintenance, crew training, landing fee, parking fee, administration work, etc. Any additional cost, they allow stay in the air ticket and let the passenger pay for it. This would rise out a question, would the passengers in Hong Kong be willing to pay for a low cost just to get to a close or a high price to buy a candid quality of service?Budget airline is a trend? inception from the next deuce years as announcing in late May, the not bad(p) of Singapore airline would establish a subsidiary-a no frill, low cost airline, utilize wide body aircrafts to serve medium to long haul routes. correspond to the company after years of markets of extensive review and analysis, they have to consider that there is a large growin g demand for low fare travel. The low fare airlines assist to stimulate the growing demand of travel. The company wants to launch this service to drudge its single-digit growth to a double-digit growth as this low fare market is growing hugely. (Govindasamy, 2011)This has showed us which the low fare air travel marketis growing and even an Asian state- have stodgy airline want to join in to gain share, hence there is lots of room for more new budget airlines to be set up and serve the demand.Budget airline comparing with conventional airline over the globeGraham Dunn (2011) state in the airline magazine, selective information from intravenous feeding years of the Airline Business low-cost carrier and world airline ranking quite a littles shows that while the 10 largest ne cardinalrk carriers were highly juicy in 2006 and 2007, seven lost money in 2008 and eight were in the red in 2009 at an operating level. Contrast this with the top 10 lost-cost carriers- only two lost money in 2009, three in 2008 and one apieve in 2007 and 2006. In this case as we know, during the economic crisis surrounded by 2008 and 2009, we can see that the low cost carrier is on a steady growth and earn money, but the conventional airlines are greatly affected.In fact, the magazine also shows that the budget airlines are growing at a double-digit development around the USA and Europe, and there are still more room for them to rise. In South East Asia, the larger low-cost carriers already expand beneath their home market and set up more home base in other country around the region as there has been a great demand for cheap air travel, such as Airasia has also set up a home base in Indonesia and Thailand beyond Malaysia. (Graham Dunn,2011)Therefore, even Hong Kong set up a budget airline, there are still lots of other competitors around the region, and can it survive?The Background and Success of Air Asia and the Asia regionApparently in the 21st century, if the more preferable d emography and economic trend persist, Asia would be well foc utilize by the whole world, in other words, more people would be willing to travel in and out of Asia by plane for business and leisure. (Joseph, 2011)Air Asia now is one of the largest low cost carriers in South East Asia. It used to be built up by the Malaysia government from 1993 and started its own operation as a flag conventional airline in 1996, however, within those quintuplet years, it was a cracked airline which only have two Boeing 747, 250 staffs, four destination and a debt of $11 million. But in 2001, it was bought by line of work air and turned it and re-launched as a low cost carrier, because it start to become a profitable business. In 2007, Air Asia X was set and launched as a low cost long haul carrier which flies to Europe and Australia. Currently, the whole Air Asia Group has owned 102 aircrafts, flies 150 routes and 68 destinations, it has been still continuing to expand its fleet and market share. In the past two year, it has already accomplished a Double-digit capacity growth. Certainly, there are some advantages that it already fully take, such aslow-price labor, a helpful economical hub at Kuala Lumpur. (Joseph, 2011)In this case, are there any success factors we can learn from and use in Hong Kong?The Background and failure of Oasis Hong Kong airwayOasis Hong Kong airline claimed to be the first long haul low cost airline ground in Hong Kong, Reverend Raymond Lee led a starting capital of $100 million with several Hong Kong investors. It began its operation and launch to serve passengers from October 2006, but after 18 months of operation, it halted all operation and collapsed as financial liquidation. It used to own 4 Boeing 747 and flew two routes, and three destinations Hong Kong, Vancouver and London. During the operation period of time, the price of jet fuel has jumped from $600 a tonne when Oasis started flying to a current level of around $1,137 a tonne. Besides, the company did not run as an short haul, no service model but provide a full service such as inflight meal and entertainment. (Robin, 2008)In this case, a rise of jet fuel price can push a company to fall, are there any other unfavourable threats which exist? Or the whole Hong Kong aviation environment is not commensurate for an budget airline to exist?Disadvantages and advantages of budget airlinesFor traveling with budget airline, there are also some disadvantages that you whitethorn want to take count on for, such as youmay only have a limited meal with probably peanuts at all for the whole flight, you may not choose your own seat, they have less flexibility which you cant vitiate your flight or get a refund, any extra canvas bags will be charged, they often land on remote airports with no bus connection and they are usually booked through internet. (Shewanda, 2011)However, there are also some advantages you may want to consider, such as the fare with budget airline is rela tively small which you can save the money for other things, they often fly to more locations and smaller cities that you may interest, and as money are saved, thus more travels will be encouraged and more people can afford it.(Jennifer, 2011)Therefore, when the Hong Kong customers equate the advantages and disadvantages of budget airlines, will they still choose budget airline? What is the low fare travel market like in Hong Kong?Challenges and Background of the local plethoric airline in Hong KongThe company began in 1946. It was found by two world-war 2 pilots. They first flew to carry passenger to Manila, Bangkok, Singapore and Shanghai. However in 1948, some of the shares was bought by a UK company, Butterfield Swire (today known as the Swire Group) which took a 45% share. Therefore John Kidston Swire took the leadership work Butterfield Swire became wholly responsible for the managementof the airline. And then it has been expanding through time. In 1998, the Cathay City was built, and in 2006, the calculus air was bought to be involved in Cathay Pacific Group. cover now it owns 128 aircrafts and has ordered more than 100 aircrafts. Its route has covered more than 150 destinations in 41 countries. It ranks as the worlds 2nd most profitable airline by net profit and the 7th largest airline in the world by operating profit. Its staffs number is 19,850 worldwide. (From Cathay Pacifics Website)In this case, its customers do not only include leisure and business travelers but also the regional people. If a budget airline was being set up, this airline would be the biggest local competitor.Potential low cost carrier that will be set in Hong KongThere will be two potential budget airlines setting up in Hong Kong- the Hong Kong express and the Jetstar subsidiary. The Hong Kong post will transform to a low cost carrier in Jul-2012 or Aug-2012, operating under its new low-cost model to cities in mainland China, South Korea, Japan and Southeast Asia. As a Fore ign budget airline- Jetstar is also looking forward to establishing a subsidiary in Hong Kong, it may try to co-operate with Hong Kong Airline. (CAPA, 2011)This case has showed us that many companies are interested in developing a low cost carrier in Hong Kong, therefore in other words, there isfeasibility for Hong Kong to set up an low cost carrier.4. AimThrough analyzing all the data collected to determine whether it is possible to set up an budget airline in Hong Kong or not.5. ObjectivesTo explore the background information and business model of budget airlineTo explore the operation, cost structure, strategy of low cost carrier in AsiaTo carry out a case study the success account statement of Airasia and the failure story of OasisTo set up a survey to ask about Hong Kong frequent flyers expectations on budget airlines servicesTo calculate all operating cost and expense to run this businessTo compare the price of flying with an existing conventional airline with a theoretical budget airline to find out the feasibility6. Research methodFor this research, I will use the inductive method approach, because my aim is explore the feasibility to set up an successful budget airline which could last for a long time in Hong Kong through observing change of data such as budget airline business model, cost structure, government policy and so to analyze and find out the answers for it. And I will select the survey strategy for gaining Hong Kong peoples opinion of service they heed to add in without any additional cost for a budget airline service in order to calculate the operating cost of an hypothetical budget airline and so to set up the high hat price of a fare to equalize the cost. Then I will pick the memo-method as my unique data collection method, and carry out the cross-sectional study as the data would give me the result. For data collection, I will use questionnaire and the interview.6.1 QuestionnaireFor the Questionnaire, I plan to interview 50 people, they are mostly business travelers and leisure travelers, I will approach them through my friends who are frequent flyers.6.2 InterviewFor individual interview, I hope that I can make an appointment with some of the staffs who work as an airline accountant and inside the airport authority, and gain financial information of data track an airline company.7. Project PlanI would like to spend half(a) a year to complete my project. Here is my work breakdown structure