The document discusses the differences between full-service carriers and low-cost carriers in the airline industry. It notes that while low-cost carriers offer lower ticket prices, they provide lower quality services by decreasing costs through reducing amenities and quality. Full-service carriers have higher ticket prices but provide higher quality services like more food options, baggage allowances, legroom, and flexible tickets. The document concludes that customers should consider more than just price and look also at the quality and advantages of different airlines.

1. Jane Jelena Budiman 01120090012
Michelle Wong 01120090376
Ridwan Daeng Kuma 01120090172
Tuesday, April 24th 2012, class 12.45-14.30
Price or Quality
It is a customer behaviour to purchase products that are cheaper than the others
(Kotler, 2010). For example, people like women buying groceries in the flea market rather
than super market because in flea market they can get a same or similar products with
lower prices. The airline industry is having the same nature in terms of prices. People tend
to buy low-cost carriers because it is the same like the other full-service carriers. For
example, people tend to buy Lion Air tickets to Bali rather than Garuda Indonesia because
Lion Air have lower prices and they both take the customers to the same destination. It is a
reasonable explanation why people tend to go for the lower prices.
However, what they do not know is that low-cost carriers do not have the same
quality as the full-service airplanes. They are able to decrease their selling prices because
they also decrease their quality. There are reasons why they can decrease their prices
without getting negative profit. In order to decrease the selling price, a producer needs to
decrease the cost of production (Kotler, 2010). There are several ways to decrease the cost
of production such as decreasing the quality and decrease the amount of services provided.
Nowadays, people are complaining about the increasing price of the airline tickets.
They complain but they do not see the differences between the full-service and low budget
carriers. In order for a company to stand out from the other competitors is to have
competitive advantage. Competitive advantage can be created by differentiation (Kotler,
2010). According to Kotler (2010), differentiation is when you have something more that
the competitors do not have.
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2. Full-service carriers have competitive advantage over low budget carriers in terms
of the quality of the service such as the food and beverages; baggage allowance; room
space, flexibility with the customers, and more connections and routes. Customers think
price is a clear standards that reflects the quality of the service. There are some pricing
method that airlines use to perform their services such as low cost carriers and full-service
carriers. Customers can choose between full service carrier and low cost carrier that differ
in terms of the price and quality.
The first strategy is full service carrier. The airlines that used this strategy offer
more expensive price compared with low cost carrier. The ticket’s price is included food
that will be served during the flight, drinks, luggage, tax and insurance even blanket. The
range of prices for domestic is about IDR 900.000 to IDR 4.000.000
(www.skyscanner.co.id). Airlines that uses this strategy are Garuda airlines, and SQ
airlines. They seldom get complaints from customers, because the flight almost never
delayed, and no lost luggage and accident. This type of airline have a good quality of
service and high customer satisfaction because they provide more services than others,
such as customer service department, in-flight entertainment and have alliance partner to
serve you from the beginning until you arrive home.
Here is an example of First Class cabin that Singapore Airlines provide.
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3. Second, there is low cost carrier airline. Low cost carrier offer cheaper price but
fewer service. They also provide food and drinks, entetainment, tax, insurance and luggage
for customers like full service carrier, but customers must pay an extra charge for that. The
airlines that used this strategy are Citilink, Air asia, Wings air and so on. The range of prices
for domestic is abut IDR 149.000 to IDR 700.000 (www.skyscanner.co.id). This type of
airline usually have more schedule and direct route. They often get many complaints from
customers because of cancellation or delayed flight, and lost luggage, but many people still
choose them because of their price. The service is very basic and low in quality that equal to
their cheaper price.
Here is an example of an economy class in a low-cost carrier. They do not even have services like
first class cabin that full-service offers.
In conclusion, People has their preferences in choosing airline based on their own
considerations. They can choose full service carrier that provide more benefits but higher
price or low cost carrier that offer cheaper price but less benefits. The prices reflect the
quality of service depends on what strategy that an airline used.
However, people seldom notice the differences between low-cost and full-service
carriers. All of people care about is the price of the tickets that leave their point of view
bias against full-service carriers. They have the mindset that they should buy low-cost
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4. carriers because everything is the same. People won’t even notice from kind of meals
provided, attitude and ability of the stewardess, and types of ticket offered. Although they
seem so similar in appearance, the certainly have numerous dissimilarities too.
Full-service carriers have competitive advantage in terms of the quality of the
service. It is true that they charge more but they compensate that with provided food and
beverages that varies in different flights. This kind of carrier usually provides the
passengers with some kind of different range menu of meals for carnivore or vegetarian
people. They also provide you with range of drinks start from water, juices, milk, coffee,
tea, coke, etc.
On the other hand, low-cost carriers want to suppress the budget that’s why usually
they only provide the passengers with water. They also give passengers free 23kg baggage
allowance as low-carriers charge more for that service. Full-service carriers also have more
room space for the passengers rather than low-budget airliners where passengers have less
space because the planes are so small they squeeze the passengers.
Another competitive advantage is that they are flexible with the dates. The full
service carriers want to please their customer who often is middle until middle upper class.
Often most of them are businessmen with tight schedule and sometimes very busy with
their business. That’s why they launch a new program that so called flexible ticket. This
kind of ticket offer you the privilege to change the date and time of your flight. They even
had business class which is more expensive but it had more privilege for example
executive lounge, more variety in meal and drinks, prioritized baggage, etc.
On the other hand, low cost carriers charge passengers if they want to change the
dates. Low cost carriers have a strict no changes of date policy and once the tickets are
issued they are not refundable and transferable. The full-service airlines have less perks
than low-budget airlines and they are simpler in terms of flexibility with the customers.
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5. Flight routes and destination is another advantage that full-service carriers have.
They provide more routes with longer mileage that low-cost carriers do not offer. For
example, Garuda Indonesia offer routes to Europe and America and low-cost carriers such
as Lion Air only offer routes to domestic destination in Indonesia. Passengers will have to
choose full-service carriers to travel to Europe and America. They cannot deny that full-
service carriers have a better service than low-cost carriers.
In conclusion, people need to see more than just the prices of a product. They must
see the quality and the advantages that gain from using that product. It is true that a higher
price equals a higher quality. In this case, airlines such as full-service and low-cost carriers
are the comparison. Full-service airlines have higher price but they compensate this
weakness by improving the quality of service, the flight routes and the flexibility with the
customer changes. On the other hand, low-cost carriers only have one advantage and that
is lower price. However, the service is not good compared to the full-service. Customers
must see more that just the price but also the other advantages that they get from full-
service airlines.
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