Lan Airlines in 2008
Lan Airline was established by the Chilean government as the country’s first airline in 1929. In 1980s, the government sold 51% of the airline to a group of local investors, and became fully privatized five years later in 1994. The majority Lan Airline stocks were owned by the Cueto Group and the Pinera Group. In 2007, Lan owned 62 passenger destinations and an additional 16 cargo destinations. Lan had five statutory companies which were Lan Ecuador, Lan Argentina, Lan Airlines, Lab Express for Chilean domestic routes, and Lan Peru (Masanell, Tarzijan & Mitchell, 2009).
The main problem of Lan was the low-cost model. As the Lan CEO questioned, if they ...view middle of the document...
For instance, Lan is the first company that has a new premium business class with fully flat seats. Therefore, Lan can use the advantages taken from the low-cost model to support full-service for international and gain more profit. Secondly, Lan can purchase more planes and flight routes. After having more planes and routes for both domestic and international markets, Lan can extend its economies of scale, which means it has larger volume of production. Therefore, they can do further on reducing cost and keep gaining profit from it.
Staff and Training
Due to the low cost model strategy bring high volume of Lan air travel fliers, it enhance the employee specialization. So the worker could specialize their skills into some narrow task. This action will improve quality of the service by shortening the flight’s time. This also help Lan reduce its cost and increase its profit, at the mean time will receive customers satisfaction. Once the customer gain more use to the Lan Airline flight, Lan will be able to use their benefit to increase their pay scale. That’s the reason why Lan’s wage rate usually were 10% to 25% higher compare to other airline company.
First Move advantage
Lan become a one-world alliance member which was the first Latin American airline taking this action. This help Lan increase his reputation and let more people get in touch with Lan’s service. Which make Lan’s airline become one of the leading carriers in the world. Once people recognize Lan’s service, Lan would generate more flight service which increase its revenue. Furthermore, Lan maintain a flight service agreement with other airline company, such as American airlines, Iberia, and Quatas. This will help Lan expand his air territory to further region. Lan could maintain its service by further reduce his cost. It also helps Lan to gain more advantage and become more sustainable. Lan’s first move advantage will help prevent other Latin American airline company entering the airline market. Because been a first mover, Lan could obtain a valuable resource to obtain customer loyalty. As long as Lan keep its price low and good quality, It would be hard for customer switch to different airline company. In order to compete again with Lan, competitors have to complement their price strategy similar to Lan which increase their cost.
While Lan implement low cost model for domestic short haul, Lan also keep their high stand full service for Long distance flight. For international flight, Lan have create three level of class: economy, business and first class with approximately 10...