It also only required regular training for the same aircraft type. Single aircraft type (Airbus A320) – By having a fleet of the same kind of airplane, VivaColombia had savings in the maintenance and technicians needed to support the operations.To be a low-cost airline, VivaColombia had to differentiate from the traditional airline business model. Education and transparency will always be an integral part of this service model. This gives a potential edge in customer satisfaction to the low-cost airlines if and only if the customer understands their offering. On the other hand, a customer from a traditional airline might be annoyed by the fact that he/she is being charged a fee for something extra since this does not resonate with their perceived value of the service offering. In the cheap airline services, customers that genuinely understand the value of the service won’t be alarmed when they are being charged for something extra. This trend from traditional airlines could be positive for low-cost airlines. In many cases, this revenue has grown tremendously year over year with many airlines doubling their revenue per passenger in the past years. Ancillary revenue is all the revenue collected by the airlines that are non-ticket related such as early boarding, excess luggage weight, in-flight meals, and entertainment, preferred seat assignment, among many others. For the past decade, the airline industry has been getting smarter about opportunities in ancillary revenue since the hikes of fuel prices in 2007. Not to be confused with YOU and some luggage, nor YOU in addition to some in-flight catering services.Īfter the customer purchases the service, an a-la-carte pay per service experience takes over in which the customer chooses to enhance their experience by paying extra fees.
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They are straight forward with their offering: “We’ll take YOU there as cheaply as possible.” That offering comes with the full and sole intention of what YOU mean. Their website makes the charge structure clear with disclaimers that other fees can be included in the final. At the same time, it is imperative for VivaColombia to be transparent about the fact that they are a low-cost airline and what that means to a consumer. Their value offering stands from stripping the most out of expenses to then push on those savings to the customer.
The low-cost airline service models are very straight forward. Whichever project had to yield a minimum rate of return of 8%.Īnalyzing VivaColombia’s Operations Strategy ( Using Frances Frei’s “4 Things a Service Business Must Get Right”) The Service.They didn’t want to incur in higher debt.They would only do one of the two projects.The board members of the airline had different opinions of what the best course of action was, but they all agreed that whichever decision was made had to comply with the following four points: This decision had to be determined in the board meeting on December 29, 2015. Both projects involved an upfront cost of $1 Million. The VivaColombia case narrates the airline’s history from 2012 to 2015 at which point the company’s board of directors had to make a decision: whether to expand to a new market in Brazil or go forward with consolidating their local operations to improve standards, consistency of service and customer satisfaction. VivaColombia: The Challenge of Growing a Low-Cost Airline in Latin America Founded initially in 2008 under the name Fast Colombia, the VivaColombia went through various hurdles until May 2012 when they finally began operations in Colombia. Needless to say, the four of them had the combined experience needed to create this company and after much discussion, they all agreed to fulfill that demand in Colombia. VivaColombia was the Stanford University’s project of one of its founders, William Shaw (former British Airways CEO), who brought in Juan Emilio Posada (former Avianca CEO), Fred Jacobsen (former Tampa Cargo CEO) and Gabriel Migowski (former Brazilian Air executive) to realize this idea and turn it into a business. In 2007 the idea of bringing a low-cost-carrier (LCC) business model to Colombia was born.
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