Chapter 10 - The Role of the Different Airline Business Models

Abstract

The airline industry has averaged growth rates of 5.5% over the last decade and it continues to thrive as travel has become an integral component of people’s lifestyles. Air travel propels a catalytic effect on global prosperity throughout its air transport value chain and is a key pillar of the tourism sector. The four main airline business models were examined, namely, low-cost carriers (LCCs), full-service network airlines, charter airlines, and regional airlines as each has a different set of structural dimensions, operating characteristics, and specifications. The LCCs have caused the greatest seismic shift in airline history as they have reshaped the industry’s competitive dynamics. These LCCs have become further fragmented by engineering derivatives through ultra low-cost carriers and low-cost long-haul carriers that are targeting specific passenger segments with low fares. The legacy full-service airlines have incorporated specific traits of the LCCs whilst retaining their own value adding but product differentiating characteristics pivoted by their seamless hub and spoke connectivity. The charter airline’s decline is evident on the short-haul market, whilst the long-haul all-inclusive package holiday is resisting abatement due to its unique value proposition. The regional airlines are delineated by their manufacturing etiquette of small jets and turboprops and will continue to be prized as they primarily serve thin short-haul routes that are uneconomic for larger narrowbody aircraft.