CFA Level I · CFA Level I Exam · Business Models
A budget airline offers the lowest fares on its routes by flying one aircraft type, using secondary airports and charging separately for baggage and meals. Its value proposition is most likely based on:
The airline's value proposition is most likely a low price made possible by a low-cost structure. A single aircraft type, secondary airports and unbundled fees reduce costs, letting it offer the lowest fares rather than premium exclusivity or individually customized service.
- Aa premium service differentiated by exclusivity
- Ba low price enabled by a low-cost structureCorrect
- Ccustomization of the product for each individual traveler
Explanation
Lowest fares, a single aircraft type, secondary airports and unbundled charges all point to a cost-leadership approach in which a low cost structure supports a price-based value proposition. Premium exclusivity and individual customization would require higher costs and prices.
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