IS FSC LESS ENTHUSED BY THE PRESENCE OF LCC ? Part II. THEORETICAL


Group: 1 (Task 2)
Chairman:
Netti Yuliarti (2241.10.176)
members:
Elparida Arni B (2241.10.133)
Claudia Kartika C (2241.10.163)
Class: S1 ZU10

 

The increasing demand of air transportation cause not only the upper class that requires this type transportation. The rise of the implementation strategy of the Low Cost Carrier aims to reach almost the entire community. Thus, the full service airline to be a bit marginalized. But if it remains consistent full-service market will still be there. According to the surveys we’ve done, here are some of the basic theory underlying the full service airlines:

 1. Theory of flight services

Article 97 paragraph 1 of Law No. 1 of 2009 states:

Services provided by the scheduled commercial air transport enterprises in carrying out its activities can be grouped in at least:

a. service with a maximum standard (full services);

b. service standards (medium services), or

c. minimum standards of service (no frills).

From the article it can be concluded that the Full Service Carrier Services is a service provided by the airlines maximum standards. “Maximum” means the service is given in full. Services include pre-flight services, in-flight and post-flight. So the service will be received by passengers before the flight that includes services (online services, customer complaint service, check-in process which is easy), during the flight (seating arrangements, food and drink, music, newspapers, magazines), and after  the flight (baggage, booking a hotel or taxi). Whereas in Low Cost Carrier, the passenger will receive only minimum service standards (basic services), by reducing the facilities provided to passengers, such as lack of catering, entertainment, and other additional facilities.

2. Theories related to cost

Supriyono (1999: 16), argued that the cost is a cost that is sacrificed or used in order to earn income (revenue) and will be used as a reduction of revenue.

From the definition, it can be said that, if the costs as low as possible, the profit obtained can be larger. In order to gain profit, the total income shall be reduced by the total cost .If in the reduction, the total cost is low, the positive difference obtained will be greater. This is what underlies the airline seeks to reduce their expenses, so that they can gain advantage by holding a maximum of Low Cost Carrier services. In the application of Full Service Carrier, although airlines do not do reduced cost, but in order to maximize revenue to cover operational expenses incurred, then this airline imposing a higher rate than the rates of Low Cost Carrier. Application of high tariffs also coupled with maximizing the quality of service provided to passengers, so despite high tariff does not mean full-service airline will lose passengers.

3. Price theory assumed quality

” …….. Setting a higher price for a product will make the consumer believe that the product of higher quality that can lead to sales and profits received bigger ……… “(Lincolin Arsyad, 2008).

Providing optimal services is usually accompanied by high prices. Just as Garuda Indonesia, every heard of this airline, always comes to mind is an expensive ticket prices but with premium facilities. Another case when we hear the name of Air Asia, then we think is a cheap ticket but did not get any food on the plane. Therefore, the pricing should be based on the value of a flight that could be felt by passengers.

4. Theory of flight safety

Article 1 number 48 of Law # 1 of 2009 mentions “Aviation Safety is a state of fulfillment of the requirements for safety in the use of airspace, aircraft, airports, air transport, air navigation, as well as supporting facilities and other public facilities.”

Aviation safety is a requirement that cannot be violated for any reason and in any condition. With high tariffs imposed in Full Service Carrier, not only gained additional passenger facilities, but also to the safety of flight, as evidenced by the implementation of a large insurance fund for each passenger. While the Low Cost Carrier, elimination of additional facilities in addition to improving renevue, also for the budget airline owned by the company can be diverted to support flight safety assurance.

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