Theoretical Background of LCC Operation

Abstract

This paper explores the theoretical background of low cost air carriers’ operation using the theory of service management as well as service marketing. The operation strategies of low cost air carriers are examined from the point of their service operation structure as well as their strategies to achieve customer satisfaction. The purpose of this paper is to explore how low-cost air carriers can achieve customer satisfaction despite their low-cost operation and the problems they may face. This paper consists of 5 sections. Following the introduction, the customer segment of low cost air carrier is described from the market research by JTB Tourism Research and Co. in the late 2010s. Then, previous researches are reviewed from the point of the structure of the operation, response to the uncertainty caused by the diversity of customer needs, the relationship between price and quality as well as Expectation Confirmation Theory. Following the literature review, the theories and models discussed in the previous section are applied to the case of a typical LCC to verify the theories and models in the previous research as well as to explore the findings from the actual case. In this section, cost reductions by LCCs are discussed by each structure of service operation (backyard, front and service-encounter). Also, the customer satisfaction of LCC is discussed by applying the Expectation Confirmation Theory. In the last section, the findings in the previous section and further problems of the low-cost air carriers’ operation are described.