Airline performance and the leasing ratio in the context of business models

In low-cost carrier (LCC) businesses, LCCs have developed cabin design and production services that are different from the available airlines to compete for routes in certain regions. The LCC reduces operating costs. Its operation mode has quickly robbed ordinary airlines of a market, and its business model is also a concern for academia and the industry. This study aims to explain how low-cost mobile carrier apps can enhance decision-making during shopping with an LCC. Stratified sampling was used for data collection in this study, which included individuals who had experience using LCCs and utilized LCC mobile apps; 868 participants completed the surveys, and their data were considered for analysis. We then evaluated our hypotheses using structural equation modeling (SEM). The findings of this study offer some critical implications for the design of mobile applications and results to succeed in LCC business endeavors: the mobile application's interface design can be personalized and display things that are the user interface for passengers while reflecting lifestyles and preferences that appeal to them, to increase their willingness to continue using the application. Moreover, LCCs can adjust their competitive market strategies by implementing mobile applications. This study is based on the operation of LCCs, presents a continued usage mobile device application model, and provides strategic practice guidelines and academic insights.

T he Collins et al. (2011) study (hereafter, CRC) examines how the competitive strategies of airlines impact the persistence of their operating earnings. The study then investigates if the persistence of earnings components, such as unit prices, costs, and productivity changes, also varies by competitive strategy. The study uses 590 observations of quarterly financial performance from 14 airline companies, over the period 1996 to 2008, to examine the impact of different competitive strategies on the persistence of profit margins and asset turnover. Two airlines’ competitive strategies are identified: network carriers and low-cost providers. The paper documents that network airlines (differentiators) have more persistent operating profit margins than low-cost carriers. Little difference is noted for total asset turnover across business models. The study also demonstrates that partitioning the change in profit margin into growth, price-recovery, and productivity components more fully explains future profit margins than current profit margin alone. The paper is a nice blend of the literatures in industrial economics and both financial and management accounting. There are two strings in the paper that are interesting to management and management accountants. One is how a firm’s competitive strategy impacts the persistence of profit margins and asset turnover ratios, which are the two key components of return on assets using the DuPont formula. The other interesting issue is the examination of how volume, price, and productivity components of profit margin changes impact earnings persistence differently across competitive strategies. As this latter part of the paper uses traditional variance analysis and productivity measures, it is particularly interesting to management accountants. Below, I discuss these two inter-related issues.

A comparative analysis of cost change for low-cost, full-service, and other carriers in the US airline industry

The study is aimed at analyzing how social and economic development indicators, global and regional economic indices are influencing low-cost carriers (LCC), AirAsia Group Berhad (AAGB) in particular. It is crucial not only to define the impact-factors but to embed them in a management framework for further decision-making. Passenger traffic is the main indicator of LCC performance, unlike the Full-Service Network Carriers (FNSC) that taking advantage of both passengers and freights. However, both categories depending on the macroenvironment and business environment dynamics, and KPIs should be reconsidered to face the current global challenges. The global GDP, GDP per capita are commonly used to access the economic and social development trends, the passenger numbers per annum, unemployment rate, and else are used to understand the status of operations in LLC performance management. This study deals with several overlapped categories of research, such as low-cost carriers business model, impact-factors of air transport development, global trends in several industries. The research methodology is a combination of comparative analysis, correlation analysis, regression analysis, and forecasting, using secondary data from annual reports and quaternary financial reports. The comparative analysis gave us an understanding of the general performance trend of the group and subsidiaries. One of the study components is the correlation analysis that revealed the most correlated factors for the economic development of AAGB, such as global GDP, regional GDP, regional GDP per capita, population growth. The global and regional dimensions were presented in the research to reveal what affects airline performance the most. Global GDP is the most correlated indicator for the global and regional development within AAGB, and the regional GDP per capita comes the second by its significance. The population size has a great influence on performance indicators (globally and regionally), and if this indicator is taken into account for forecasting the potential growth is expected in the next five years. These findings enable to design of the business-model of LLC more accurate in accordance with the forecast analysis towards innovative cost decisions. Keywords: business model, management, KPI, performance management, Low-Cost Carrier, airline, AirAsia group, passenger traffic.

Low cost carriers in the Middle East and North Africa (MENA) region: Emergence and barriers to development

This paper reports the findings of an empirical study on the low-cost airline market. A lot of literatures on low-cost carriers’ business model agree that low-cost airlines operate with high load factors. However, due to variations in the market development life cycle of low-cost carriers from one region to another, empirical evidences have shown mixed results of the effect of increasing airline capacity on load factor. The paper therefore extends this analysis by examining two airlines in Kenya over 72 months period; and explores such impact using panel data to capture both time-series and cross-sectional elements over the period. Findings indicate that fleet capacity is a significant positive predictor of load factor. The paper finally underlines that increasing capacity by 1 seat will result in an increase of 0.03% in load factor.

Purpose: The crisis caused by the pandemic has forced airlines (both full-service carriers (FCC) and low cost carriers (LCC)) to review their business models and look for opportunities to make up for losses. The goal of this paper is to review the cost optimization methods used by LCC airlines and to identify the activities of LCC that were taken to reduce costs. Design/Methodology/Approach: The analysis of the areas of economization of activities undertaken by the LCC carried out in the article is the result of a literature review of business models used by LCC carriers. Findings: The conducted literature analysis allowed for the identification of seven main areas in which measures are taken to reduce the costs of the LCC line. Practical Implications: Economization methods implemented by LCC lines at the strategic level reduce the carrier's costs and can be adapted to the market in which it operates. Originality/Value: Although the business models used by LCC lines are not a new topic, the review of economization methods from a strategic perspective presented in the article has not been discussed in the literature.

Low Cost Carrier(LCC)s in Asia.Pacific market are expected to record high growth due to the expansion of Open Sky Policy among Korea, Japan, China and South East Asia. As everybody is aware of, LCC is not only saving flight cost but also creates differentiating business model by reducing unnecessary services such as F&B and in-flight duty free sales services. Booming LCCs in Asian market will cause not only Incheon airport but also other local airports in Korea to compete heavily to attract LCCs. For example, Air Asia Group with more than 200 fleet has expanded its alliance network throughout Asia. Therefore this paper has researched a new business model operating a LCC terminal for the hub airport competitiveness. According to analysis result of case study, it was found out, considering increasing airline demand next decade, Incheon airport and other domestic airports in Korea had better change an existing terminal into a LCC Terminal(LCCT) to differentiate airport services and expand its hub network. That is because of economic feasibility, first of all, of securing hub and spoke networking capabilities with airlines and finally of developing commercial facilities customizing LCC passengers' demand.

The aim of this paper is to analyze the development of the low-cost airline model, underlying the factors that have encouraged and/or inhibited the spatial and temporal spread of these operators. The study shows that there are significant differences in the business practices of the ‘low cost carriers’, depending on the particularities of the strategies that they have adopted, on how, when and where they were implemented, reason for which we refer to ‘business models’. In the end of the paper, we have conducted a detailed research, based on a questionnaire, on the company that has implemented for the first time the low-cost carrier model: Southwest Airlines.

It is often assumed that the airlines’ fares increase monotonically over time, peaking a few days before the departure. Using fares for about 650 thousand flights operated by both Low-Cost and Full Service Carriers, we show several instances in which the monotonic property does not hold. We also show that the volatility of fares increase in the last four weeks before departure, which is the period when the airlines can formulate a better prediction for a flight’s load factor. Finally, especially within the last two weeks, Full Service Carriers may offer lower fares than those posted by Low Cost Carriers.

3 - Commoditization and segmentation of aviation markets

The emergence of low-cost carriers (LCCs) has been a key catalyst for the development of the aviation industry in the last decade. Indeed, extensive research has been undertaken to analyze the business model and impact on the aviation sector and beyond. Despite recent developments in the LCC markets in Asia and Latin America, much of the research has been focused on developed countries. Therefore, the purpose of this book is to identify the premises and prerequisites of the LCC model, and assess whether this business model could be successful in other less-developed countries, in particular the countries of Sub-Saharan Africa. This book identifies various definitions that have been applied to describe the LCC business model. In essence the majority of researchers define LCCs as carriers which, through a variety of operational processes, have achieved a cost advantage over full-service carriers (FSCs). This cost advantage is, in most cases, translated to the consumers by a lower fare offering. Although many carriers are defined as LCCs, the LCC model has developed into many different variations since the original Southwest Airlines model, the first U.S. LCC, which began operations in the 1960s.

This research explores operational efficiency strategies in the airline industry based on the analysis of different operational models in airline industry, with especial emphasis on their ability to operational adjustments during disruptive periods. The study also aims to investigate the differences between low-cost carriers (LCCs) and full-service carriers (FSCs) operational models by analyzing how their prospecting and defending strategies affect their responses to crises like the COVID-19 pandemic, as well as their recovery patterns. The research methodology is based on the case study approach, which make it possible to analyze the airline industry adaptation to changes by comparing its different segments on the example of two airline companies: a low-cost airline, Ryanair, and a full-service carrier, Air France-KLM. The research results proved distinct approaches of LCCs and FSCs to economic pressures and operational challenges, particularly in response to major threats like the COVID-19 pandemic. The assessment of operational efficiency in LCCs versus FSCs shows clear strategic variations, each presenting unique advantages and disadvantages. By analyzing case studies and performance metrics, this study highlights how each business model adapts to financial constraints, customer service and regulatory demands. In particular, LCCs focus on operational efficiency to gain cost leadership, while FSCs prioritize operational resilience by maintaining a delicate balance between service quality and complex operational structures. The decision between these models depends on the airline’s strategic goals, yet both methods provide useful perspectives for improving operational performance within the wider airline sector.

The AIM of this study is to examine and evaluate differences in expenditure and length of stay between tourists who use low-cost carriers and those who travel with full service providers. We consider the statistical dependence between these variables and propose a bivariate distribution that describes tourist expenditure (continuous variable) and length of stay (discrete variable) in terms of their conditional distributions. Covariates are included to reflect the factors that simultaneously affect both variables. In addition, an empirical analysis is made of data obtained by the Canary Islands Tourist Expenditure Survey. The results obtained show that our model achieves a reasonably good fit and that there are differences between LCC and FSC users regarding both expenditure and length of stay, in the use of nonhotel accommodation, as well as differences in expenditure in the case of repeated visits, and in the length of stay according to the visitors’ age, nationality and travel party size.

The market for LCCs is a new and dynamically evolving phenomenon in Europe and specially in Germany. A glimpse at the European LCC market reveals, that not all LCCs are doing the same. In the light of Porter’s strategic framework of cost leadership, differentiation and focus we define the LCC market and point out its competitive relations to the traditional market segments. We describe the fundamentals of the LCC business model and analyze the possibilities to deviate from it guided by some general rules of thumb. After these theoretical considerations we will present the strategy of Germanwings as a real life example for the strategic positioning of a LCC. Our analysis shows that the LCC market will further split up into a leisure and a business segment – demanding the pure low cost business model or allowing for specific deviations by setting a strategic focus respectively.