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Abstract
1. Research problem
In 1978, the U.S. was the first country in the world to ever deregulate the air transport industry from several regulations imposed on the industry since the Chicago convention in 1944 (Doganis, 1992). Afterwards, many European countries began following the footsteps of the US by conducting a series of open market bilateral agreements. The first agreement was between England and Netherlands in 1984, and then it was followed by a series of similar agreements that aimed gradually liberalize the European airspace (Doganis, 2001).
The regions of Africa and the Middle East were not excluded from this growing trend by joining a number of liberalization programs similar to those applied in Europe. Organizations involved in these programs include: the Arab Civil Aviation Commission (ACAC), the COMESA and the GATS.
The open skies policy aims to end government regulations imposed on the air transport industry, which involves designating air routes, pricing, flight frequencies, seat capacity and also the permission for operating new airlines (privately-owned) in the market with great freedom. The rising trend was responsible for the emergence of new airlines in the market to compete with legacy airlines.
from this point foreword, the airline business environment became totally ready to cope with the rise of low-cost airlines. In spring 1999, a British survey of 19000 passengers produced some astonishing results.
large portion of the sample assured that they rather recommend low-cost airlines, such as Go and Easyjet, to their friends and relatives other than leading traditional airlines such as British Airways or British Midland (Doganis, 2001). This preference was very significant in short to medium-haul routes. This survey was considered as one of the early studies that predicted the low-cost revolution. In 2005, SkyTrax (the organization that conducts the world’s biggest airline quality survey) released began releasing a series of special reports that comprise the best low cost airlines in the world by quality of service categorized by region (SkyTrax, 2005). All these international surveys confirm the growing importance of studying the low-cost airline model in the world.
The emerging trend of establishing budget companies is not exclusively applicable in the field of air transport. There are budget hotels like Travel Inn’ and ’Travel Lodge’. The concept also extended to include tour operators, such as ’Thomson’, which began offering a number of tour packages and services targeted at low-budget tourists. It’s clear that this new concept is not only applicable to a specific sector of the tourism industry, but comprises the whole field of traveling. The main drivers behind the survival of this phenomenon are the consumers themselves, who became more aware and more capable of comparing between an amalgam of fares and products provided via the World Wide Web (Horner and swarbrooke, 2004). In coming years, the travel industry will witness a high traffic growth in addition to a large volume of tourists plus the rise of travel costs (Flint, 2008).
As a result, travelers who prefer to deal with low-budget suppliers are currently holding a relatively large share of the international market.
Some might think that this type of firms will attract a poor socio- economic segment of tourists, which contradicts with the principles of sustainable development that favors quality over quantity. This opinion might be more relevant to the hotel sector, but not to the transport sector. In this case, tourists aim to save only the cost of transport where most of its service features are becoming relatively unimportant, and in exchange tourists will direct their spending powers towards other services provided in the tourist destination. Low-cost air travel will eventually succeed in attracting new tourist segments that were previously unable to access remote tourist destinations. (Horner and swarbrooke, 2004) In coming years, the travel industry will witness a high traffic growth in addition to a large volume of tourists plus the There is no doubt that there is an urgent need to establish this type of airlines in Egypt. The country deserves this kind of service, as it is continuously attracting a great number of tourists. Egypt received 9.1 million tourists during 2006. (Egypt Information Port, 2008). The concept of founding such airlines corresponds perfectly with the country’s liberal policy which is recently adopted by the government in order to achieve maximum benefits from the increasing demand on Egypt. The timing of this idea synchronizes with Egypt Air’s new policy that aims to lower the number of air routes served by the airline via its network cut-down any possible losses caused by operating non profitable routes and hence allow for more air transport liberalization that will permit for other airlines to operate more freely in Egyptian airspace. The following table (1) and figure (2) demonstrate the relatively small size fleet of Egypt Air compared to other leading Arab national carriers taking in consideration Egypt’s rank among world
3. Research Objectives:
Analyze the relationship between the open skies policy and international tourism growth
2- Study the growth of low-cost airlines as an international phenomenon and highlight the characteristics of low-cost travel as a worldwide emerging trend.
3- Analyze the economics of low-cost airlines.
4- Evaluate the role of information technology in lowering airline costs.
Highlight a selected sample of low-cost airline models throughout the world.
6- Conclude a number of principles and controls to be considered when establishing low-cost airlines in Egypt.
7- Develop a framework for a low-cost airline model capable of promoting inbound tourism to Egypt.
4. Hypothesis
Hypothesis 1: ”The price of air transport services has a primary influence on passengers’ preference to travel on an airline comparing to the quality of service.” This hypothesis presumes that the air fare has an influence upon passengers’ choice to travel on a specific airline given the fact it has an overriding affect on the perception of the air travel experience comparing to the quality of service.
Hypothesis 2: ”The strategic management technique has a primary influence on the profitability of low-cost airlines.” This hypothesis suggests that the strategic approach to management is among the primary disciplines to be implemented in order to achieve profitability.
5. Research methodology
Desk-based research
This dissertation relied partially on secondary data to achieve it objectives through meticulous research and sorting out of the literaturs that coincides with the topic of the thesis. The secondary data was used in order to review the low-cost airline phenomenon from different angles including its concept and structure, mainly from an economical perspective, plus its relationship with the international air transpor liberalization trend, in addition to a demonstration of a number of case studies with an aim to deduce the results of real life experiences of low. cost airline companies in different parts of the world. Secondary data included in this dissertation can be divided into these categories: 1-books 2-theisis dissertations 3-scientific journals 4-press releases 5-online sources 6-annual reports issued by several organizations including low- cost airline companies.
Field study:
The passenger questionnaire was used as a research tool to test the first hypothesis. A survey was conducted on a random sample of passengers flying on low-cost airlines. Another executive questionnaire form was distributed on a sample of air transport experts and officials in the Egyptian Ministry of Civil Aviation and in a number of air travel companies.
Research limitations
The field study sought to investigate the impact of specific variables attributed to low-cost airlines namely the air fare and a number of selected service quality elements. The structured interviews (executive questionnaire) focused upon the strategic management approach as a discipline to achieve airline profitability hence the study results were limited by a number of specific variables that were tested. The results of the passenger questionnaire analysis are valid for the low-cost airlines that were included in the survey. The time period limitations of this research extended from 2006 to 2008, this period covers all the data gathering and analysis of the secondary and primary data.
6. Research plan
→ Chapter 1: The concept of low-cost airlines
The first chapter of the dissertation aims to define the concept of low- cost airlines models. In the beginning, a thrall demonstration of the evolution of air transport liberalization will be given followed by a clear interpretation of the strong correlation between air transport liberalization and the creation of low-cost airlines in the world. The following part of this chapter will highlight the low-cost airline model from different angles through several related topics such as the definition, development and strategic management of low-cost airlines.
[13:45, 29/05/2024] Nehal Arafa: → Chapter 2-The economics of low-cost airlines
This chapter will shed the light on air transport economics in general by defining the basics elements of airline economics and then the economical characteristics of low-cost airlines including the model’s cost advantages will be set apart. This section of the thesis will end by demonstrating the economic performance of a chosen sample of low-cost airlines extracted from different parts of the world.
→ Chapter 3- Low-cost airlines and tourism demand
This chapter interprets the correlation between low-cost airlines and tourism. The relationship is undertaken from a large scope by clarifying the low-budget travel phenomenon as a whole and then by discussing the role of low-cost airlines in the tourism industry.
+ Chapter 4- The business models of low-cost airlines
A number of case studies are demonstrated in this chapter in order to recognize the real life experiences of a selected sample of leading low-cost airlines in the market. Each case will be undertaken through a number of standardized / fixed categories with an aim to fully benefit from their policies and strategies throughout the years.
Chapter 5-Field study
The methodology, results and analysis of the field study will be all discussed in this chapter. The responses of the passenger and executive questionnaires were all analyzed statistically in order to test the research hypothesis and also to deduce any empirical results that could be beneficial for the subject of the thesis.