Determining Matchable System
Development Model for Low Cost
Carriers (LCCs)
Hamidreza Monajjemi
AmirKabir University of Technology, MS of Aerospace
hrmonajjemi@gmail.com
Each airline is a complex system that lives from the interaction among the various parts of
the system: aircrafts, airports, passengers, aviation policy. In the recent decades the LCCs
become important players in air transport around the world especially in Europe and Asia. In
this paper the method for establishment and development of Low Cost Carrier is discussed. To
achieve this goal, the system engineering system development models are used. There are three
classical process and development models in system engineering: Vee, Waterfall and Spiral.
These models define the relation between the requirements, specifications, components and
operation for each system. So the target of this paper is to determine the best model which is
better matched for Low Cost Airlines. The strengths and weakness of using each model are
discussed. Also the best model to form LCC is present at last. Vee model is a constrain system
and hard to change. The waterfall can change but not easily and fast. But the Spiral model is
easy changeable, real-time model that can grow. By this model, the company can start in an
ambiguous environment and step by step defines the requirement or change them. Besides, it
can start with little budget and in the outer cycle expand its activities. So according to the
nature of LCCs, the suitable process model for the LCC is Spiral model. Also as the spiral
model is suitable for establishing a LCC it can be used for breaking up a LCC and it can
happen in outer loop of the model.
1 Introduction
In the current century, airline industry is fundamentally different from that it was
prior to 1978 in the USA and prior to 1993 in Europe. At those times, the industry
controlled by government agencies and they determining the routes each airline flew
and controlling the prices which were charged by the airlines. Now, the demand of
customers determining the levels of service and price. The historical trends of market
changes and business flourishing within the developed countries as well as recently in
the developing countries show that in some extend, Liberization is a result of
Deregulation which itself comes from Privatization in the whole market.
Before deregulation, airlines have had no tendency to minimize the time costs due to
constraints on pricing and the market was the domain of Full Service Carriers. After
deregulation, airlines have enjoyed greater freedom to set fares and open new routes.
By this time, a new kind of airline created, called Low Cost Airline (LCA) or Low
Cost Carrier (LCC). LCC is an airline that offers generally low fares in exchange for
eliminating many traditional passenger services. The source of this concept is
Southwest Airlines, USA.
After the deregulation in Europe the Low Cost model spread to Europe, where two
successful LCCs formed in 1990s, Ryanair and Easyjet. After the downturn in the
beginning of the new century, this concept penetrates subsequently to much of the
rest of the world. The term originated within the airline industry referring to airlines
with a low - or lower - operating cost structure than their competitors.
There are numerous variations across LCCs (for example, between Ryanair and
easyJet, or between Southwest and Jet Blue). The standard LCC model may be
characterized by a combination of some of the following attributes [Evangelho, F.,
2005]:
1. Distribution—not always based on travel agents with commission payment;
electronic ticketless systems becoming common
2. In-flight service—no class differentiation, high volume, no seat assignments, no
hot meals; to reduce costs of cleaning cabins, the logistics of supplying the aircraft
and the time on the ground
3. High flight frequencies
4. Minimum delays
5. Low tariffs and simple operations, lacking partnerships with other operators
6. Aircraft of a single type (Boeing 737 with four variations for Southwest); high
utilization (over 11 h/day)
7. Routes—direct short haul routes (averaging below 800 km)
8. Airports—secondary with little congestion, leading to turn around times for aircraft
as low as 15–20 min
The LCC model becomes a threat for the traditional FSC model of service delivery in
the airline industry. Also this threat increased by a rapid growth in the number of
LCCs in air travel markets around the world. These new players take the Southwest
Airlines business plan as their basic operating model, and then tune and/or expand it
to fit their regional environment, such as:
 In the US, AirTran and Jet Blue,
 In the UK, RyanAir, EasyJet,
 In Malaysia, Airasia,
 In the UAE, AirArabia.
As LCCs have grown, they have increasingly overlapped with network carrier
markets or FSCs. The growth of LCC causes the fall for network carrier market.
FSCs have responded in two ways [Morrell, P. 2005]:
 The establishment of ‘low cost’ no frills divisions (applying all or some elements
of the new business model)
 Attempts to remove a significant amount of cost from their operations, without
changing their business model or reducing service levels to their business
passengers, such as Air Canada, United, Delta
But till now, many attempts to set up a no-frills low-cost carrier as a subsidiary of a
full-service carrier have failed. One of the most prominent examples was the effort of
Continental Airlines in establishing its low-cost offshoot, Continental Lite. In 1994,
Continental Airlines waste a monthly loss of nearly $55 million, of which up to 70%
could be attributed to Continental Lite [Bethune and Huller, 1998]. Moreover, the
idea of running two different and actually conflicting airline business models
simultaneously resulted in poor quality, dissatisfied customers, and discouraged
employees [Porter, 1996].
2 LCC Characteristics
There are many studies that analysis LCC model; but usually are focused on LCC
business model. In the following the system characteristics of the LCC are presented:
 streamlined process [Hansson et al., 2003; Franke, 2004]
 quick process [Hansson et al., 2003; Franke, 2004]
 minimal complexity in products [Hansson et al., 2003; Franke, 2004]
 Simple product [Graf, 2005]
 Simple pricing system [Graf, 2005]
 Simple growth concept [Graf, 2005]
 Usually no competition with each other [Binggeli, 2003]
 Simple organization Centered around flight operations [Graf, 2005]
 Restricted horizontal cooperation [Graf, 2005]
 They usually are market maker and also market taker
 Dynamic corporate culture [Graf, 2005]
 Increase efficiency where possible [Graf, 2005]
 Market with high complexity
 Fast reaction to changes
Also the differences between individual LCC and offshoot LCC are:
 Offshoot LCC is financed by a FSC but the individual one need to absorb
finance.
 It supported by its FSC in airport services, maintenance and etc.
 Its target is to compete with individual LCC.
 The risk function in these LCCs is different.
Now by defining the characteristics of the LCCs and differences between offshoot
and individual LCCs, we can discus about the system engineering methodology in
which can be used for establishing a LCC.
3 System Engineering Process Models
In the middle of 20 century, there was no formal design or analysis of systems.
Organizing, defining, and managing the development of projects is a widely
discussed topic in development of products. Organizations have conflicting needs for
a well-defined, well-managed process, and for the quick delivery of the product.
Existing methods attempt to provide an orderly, systematic way of development.
A Systems Development Process Model, appropriate for the size and type of system,
is to be adopted for each system development effort and is managed across its entire
system life cycle. Over the three decades, a number of effective approaches have
evolved and are described below:
3.1 Waterfall Method
The Waterfall life cycle model was introduced by Winston Royce in 1970. The
waterfall model presents a sequential execution of a set of development and
management processes, with no return to an earlier step. The general breakdown for
Waterfall is as follows: requirements analysis, specifications, design, implementation,
test, maintenance, and iterate. The graphic representation of these phases, shown in
Figure1, resembles a waterfall. The waterfall method emphasizes completing each
phase of development before proceeding to the next phase. In the waterfall, late
changes to requirements or design are limited and Major decisions must be made
early, when knowledge is at its least depth.
Requirement analysis
Specification
Design
Implementation
Feedback
Test
Maintenance
Figure 1: BasicWaterfall modal [Wason, C., 2006]
3.2 Spiral Method
The spiral method was originally proposed by Barry Boehm. It is an evolutionary
model that is hybrid in that it uses key concepts of the iterative nature with the
controlled and systematic aspects of the Linear Sequential model. The spiral model
was developed to address the weaknesses of the waterfall model, especially its lack of
resilience in the face of change. The spiral method contains four major stages:
planning, risk analysis, engineering, and customer evaluation. Figure 2 shows a
diagram of the spiral method. Each cycle begins with a planning period, which
consists of determining the objectives, and the alternatives and constraints of the
project. The planning stage also includes defining the requirements important to the
customer. The risk analysis stage analyzes the alternatives and attempts to identify
and resolve any risks. The engineering stage consists of prototyping, developing and
testing the product. The customer evaluation stage is an assessment by the customer
of the products of the engineering stage.
Determine objectives,
alternatives,
constraints
Evaluate alternatives;
identify, resolve risks
Risk analysis
Risk analysis
Risk analysis
Life cycle plan Operation
Concepts
Requirement
Development plan
validation
Development plan Requirement
validation
Develop, verify
next level
Plan next phase
Figure2: Basic Spiral model [Boehm, 1985]
In the spiral model each cycle has the following phases:
 Identify the objectives for that cycle and the alternatives that are possible for
achieving those objectives
 Evaluate the different alternatives based upon objectives and constraints (identify
uncertainties and risks)
 Develop strategies that resolve the uncertainties and risks (using benchmarking,
prototyping, simulation)
 Plan the next stage, allowing any of the possible life cycle models to be used
The main goal in spiral model is to identify risk and focus on it early. In theory, risk
is reduced in outer spirals as the product becomes more refined. Also as Cost/time
increases, it causes reducing in risk [Gonsoulin, R., 2001].
The Spiral Model addresses the problem that both Waterfall and V-Model suffer from
an unrealistic modeling of timing of phases [Kuiper R., Luit, E.J., 2001]. It
recognizes that development is often iterative and graphically depicts this by
providing multiple instances of the phases from these models and ordering these as a
spiral. Thus, a more realistic representation of timing is provided.
3.3 Vee Method
This methodology was borne out of the complex development projects in the
aerospace and defense industries. It recognizes that the project environment is a
complex one, with many interrelating causes and effects. It is out of this environment
that the critical path scheduling programs were born. The strategy for managing risk
is to break the project down in smaller and smaller pieces, until the unknowns
became known. Typically there was a heavy emphasis on pre-planning and then on
testing and certification.
The V-Model recognizes that testing consists of various kinds of testing, like module
and integration testing, and that information used stems from earlier development
phases. Arrows indicate the relations between the deliverables on both sides of the V.
In fact, this is the information flow from the development activities to the
corresponding test activities [Kuiper R., Luit, E.J., 2001].
Define System
Requirements
Detail Design
of Components
Verification of
Subsystems
Verify
Components
Figure 3: Basic Vee Model [Wason, C., 2006]
Integration and
Verification Sequence
Decomposition and
Definition Sequence
Allocate System
Functions to
Subsystems
Full System
Operation and
Verification
4 Selecting the Process model
One system development methodology is not necessarily suitable for use by all
projects. Each of the available methodologies is best suited to specific kinds of
projects, based on various technical, organizational, project and team considerations.
If there is a need to identify the best methodology for system development and based
on many studies on the system development methodologies, the following criteria can
be used to decide which model is adaptable for establishing a low cost airlines. They
are based on several characteristics which analyzed and studied in this paper:
 Characteristics of the Requirements
 Characteristics of the Models
 Characteristics of the Projects
4.1 Characteristics of the Requirements
In the starting point of a LCC, all of the requirements are not clear and also they vary
during the period of time. As an airline, these requirements are not easily defined and
also should indicate the complexity of an airline, specially a LCC. A typical LCC
start with 2 or 3 aircraft and routes, then it will grow. So, early functionality is a
requirement.
Table 1: Characteristics of the requirements
Characteristics of requirements
Waterfall
Easily defined requirements
Yes
Well known requirements
Yes
frequently Changeable requirements
No
early defined requirements
Yes
system complexity indicated by the requirement
No
early functionality as a requirements
No
Spiral
No
No
Yes
No
Yes
Yes
Vee
No
No
No
Yes
Yes
No
4.2 Characteristics of the Models
The LCC needs a powerful relation with its users. Based on LCC characteristics
which described in the previous LCC model is:
 quick process
 Dynamic
 Market with high complexity
 Fast reaction to changes
 Simple growth concept
 Risky market
So, by using the below table, it can help to find which model is adaptable for LCC.
Also based on the characteristics of the requirements and as shown in the previous,
the Vee model is not suitable at all. This model is suitable for the system which will
not vary in the long period of time. So, this study focused on the waterfall and spiral
model after this conclusion.
Characteristics
High Priority
Team
Time
Complexity
User feedback
Flexibility
Process Speed
Resource
Changeability
Initial
Requirements
Scalable
Sequence
Table 2: Characteristics of the S.E. Process Model
Waterfall
Spiral
Not conclusive
Risk avoidance
Less experienced and composition
Experienced
fluctuate
Not conclusive
Real time
Medium
High
At the end
In every cycle
Inflexible
Flexible
Slow
Fast
Conserved
Scarce
Difficult to change
Ease of Change
Need big requirements
Poorly understood
requirements
High
High
Logical
Logical
4.3 Characteristics of the Projects
According to the study done by the Center for Medicare and Medicaid, 2005 and by
this study, the characteristics of the projects in which the spiral and waterfall model
can be used, are presented in table 3. The nature of the LCCs and based on the data
presented above it is obvious that the spiral model is adaptable for the establishing the
LCC (offshoot or individual). Based on the dynamic nature of LCC, it needs real time
process model. Based on the risky market where LCC operate in, the risk avoidance
model is needed too. As LCC starts with minimum fleet and grow after that, the
implementation is a requirement. Also as defined in the previous, LCC has not early
defined requirements and it needs to formed by poorly defined requirements
Table 3: General Situations for project where Waterfall or Spiral most
most appropriate
Waterfall
Spiral
Large
Real-Time System
Expensive
Safety-critical System
Complicated
Risk avoidance is high priority
Clear objectives and solution
Minimizing resource consumption is not an
absolute priority
requirements are stable or
A high degree of accuracy is essential
unchanging during the system
life cycle development
Conservative resources
Implementation has priority over functionality
Unstable team composition
Project might benefit from a mix of other
development methodology
Project requirements can be
stated unambiguously and
comprehensively
Not conclusive
Poorly understood requirement
Poorly understood architecture
According to the previous description, which discussed above, it is obvious that the
Vee model and the Waterfall model are not suitable for a LCC. Vee model is a
constrain system and hard to change. The waterfall can change but not easily and fast.
But the Spiral model is easy changeable, real-time model that can grow. By this
model, the company can start in an ambiguous environment and step by step defines
the requirement or change them. Besides, it can start with little budget and in the
outer cycle expand its activities. So the spiral model is suitable for this purpose.
4 Conclusion
 Based this study and according to the nature of LCCs, the suitable process model
for the LCC is Spiral model.
 To use spiral model for offshoot LCC, the following data should be known:
 LCC cooperation with its holding company
 Risk function of establishing offshoot one should be analyzed
 Main differences of offshoot and individual are in the investment and
resources that the first one is supported by a FSC and the first second one
need to absorb finance.
 As the spiral model is suitable for establishing a LCC it can be used for breaking
up a LCC. It can happen in outer loop of the model.
Bibliography
[1] Bethune, G., Huller, S., (1998), “From Worst to First: Behind the Scenes of
Continental’s Remarkable Comeback”, Wiley, New York.
[2] Boehm, B.W. (1985), “A Spiral Model of Software Development and
Enhancement”, TRW Defense system Group, 1985.
[3] Binggeli, U., (2003), "Revolutionary or just a specialist? The low-cost concept
in Europe”, 6th Hamburg Aviation Conference, Hamburg, February 13, 2003.
[4] Center for Medicare and Medicaid, CMS, (2005), “Selecting A Development
Approach”, Boulevard Baltimore, USA, 2005.
[5] Evangelho, F., Cristian, H., Linhares, A. (2005), “Market entry of a low cost
airline and impacts on the Brazilian business travelers”, Journal of Air
Transport Management, 11, 99–105.
[6] Doganis, R., 2001, “The Airline Business in the 21st Century”, Routledge,
London.
[7] Ferreira, P. (2001), “Systems in Transportation: The case of the Airline
Industry”, Massachusetts Institute of Technology, 2001.
[8] Graf, L. (2005), ” Incompatibilities of the low-cost and network carrier business
models within the same airline grouping”, Journal of Air Transport
Management 11, 313–327.
[9] Gonsoulin, R., Lee, W., Parks, D. (2001), “Development of an Integration
methodology for legacy data systems”, University of Virginia, 2001
[10] Kuiper R., Luit, E.J., (2001), “Development models”, Eindhoven University of
Technology, 2001.
[11] Morrell, P. (2005), “Airlines within airlines: An analysis of US network airline
responses to Low Cost Carriers”, Journal of Air Transport Management 11,
303–312.
[12] Monajjemi, H., Saeedipour, H. (2003), “Airline Management with Particular
References to Low Cost Carriers (LCCs)”, 5th Iranian aerospace society
conference, Jan. 2003.
[13] NASA (1995), Systems Engineering handbook, 1995.
[14] Ogunnaike, B. (1994). “Process Dynamics, Modeling, and Control”, Oxford
University Press.
[15] Palmer A. (2005), “The Business Environment”, McGraw-Hill.
[16] Porter, M.E. (1980), “Competitive Strategy: Techniques for Analyzing
Industries and Competitors”, The Free Press, New York.
[17] Wason, C. (2006), “System Analysis, Design, and Development, Concepts,
Principles, and Practices”, John Wiley & Sons, Inc., Publication, 2006