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Sky Airline’s switch to LCC model seems successful

Sky Airline’s switch to LCC successful

2018 01 13

2018 01 13

In the aviation industry, things don’t happen overnight. And in most of cases that’s a good thing, especially for safety reasons. But sometimes airlines take too much time to implement a new technology, to open new routes or to explore new markets. Cost efficiency is everything these days with other means of transportation offering great prices, the constant shifts in fuel and handling fees and the passenger’s quest to discover new travel experiences. And cost efficiency is reached with the acknowledgement of past experiences, the thorough study of facts and figures and the desire, in most case, to embrace change.

Holger Paulmann, the CEO of Chilean Sky Airline, took change seriously and swiftly executed the plan he envisioned since he took helm of the company back in 2014. For more than 15 years a legacy carrier, Sky switched in early 2017 to a low-cost model after roughly a year of thorough analysis. In this industry, executing such change in such a short period of time shouldn’t go unnoticed. It’s also a huge demonstration of trust from management to all the company, which involves a major operational shift, a new network structuring and a refurbished commercial strategy.  

“We analysed the local and overseas markets, we planned and we delivered. There were no low-cost actors in Chile, not even in Argentina, and there was a point in the process when we said why not? Today we`re leading the market; Latam for instance, for the first time in 15 years, is copying our way of doing things. We are the ones implementing changes, they’re the ones following them. How did we do it? By leading our business with a customer centred model, even though operating as a low-cost carrier”, states Paulmann.

This vision has led Sky to obtain in consecutive years the National Customer Service Award in the airline segment. That is a huge task when operating under a low-cost scheme, being customer service a KPI not as relevant as the industry standard of squeezing every cent of revenue per passenger (especially in this segment). And figures also support Sky’s overall shift, with a healthy direct revenue of 75%, whereas other similar carriers as Volaris and Frontier don’t surpass 70%, and the other 25% coming mainly from travel agencies.

It’s load factor has increased 15% compared to last year, boasting today a healthy 83% of capacity per flight and registering an average utilization of 11 hours per day, one of the statistics that need to be improved according to Holger Paulmann. “If we want to continue increasing our market share, as we’ve done this year with a growth of more than 6 times the GDP of the domestic market, we need to shoot for at least a 10% increase in utilization. That means going from 11 to 12 hours a day”. 

How will they do it? Sky has committed to 6 new A320neos for delivery in the second half of 2018, via a leasing scheme. And for 2020 the plan is to at least incorporate 15 more. This will allow to add more seats per plane, from 154 to 186, thus paving the way to an overall increase in seat utilization and hours flown. These are all facts and figures that support the once legacy airline’s transition to a low-cost carrier.

And as expected, this shift has changed the airline’s passenger profile. As a legacy carrier, 40% were corporate travellers, but today’s low prices have granted the opportunity for many people to travel for the first time. That new scenario has decreased the corporate travellers to 25%, still an above average number when compared to other low-cost airlines. “Whoever flies with Sky Airline will receive the same great treatment. Customer service is a deviation of what you promise and what you deliver, and we are committed to delivering every single promise to our clients. A low-cost scheme must never be an excuse for providing a bad service”, concludes Paulmann. 

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