|Learning Objectives: Sources of economies of scale|
This video shows how economies of scale played an important role in BIC
A 2014 newspaper report likened the rise of budget supermarkets (such as Aldi and Lidl) to the strategy that saw Ryanair outcompete BA:
- Further reading: Ruddick, Graham, “Is Aldi doing to Tesco what Ryanair did to British Airways?” Daily Telegraph, February 2014
The pioneer of no frills airlines were Southwest. See “Why are no-frills airlines so cheap?” The Economist, October 18th 2013.
This article explains some of their key decisions. Which include:
- Only flying 737s
- Simple fare structure
- Point-to-point (for less congested airports)
- No assigned seating
- No inflight meals
- Only one fair class
Note that this demonstrates a lack of price discrimination. Whereas Ryanair do lots of it.
|These resources form part of my Managerial Economics course map. You can watch the full YouTube playlist here. This page ties into Chapter 2 of ‘Markets for Managers’.|