Long-haul market entry by value-based airlines: dual business models support product innovation

Abstract

Airline innovation is often driven by external factors. Evolving aircraft technology opens markets, while information technology reshapes distribution. New entrants in deregulated markets often adopt short-haul low-cost operations, where network connectivity is less important, and traditional costs can be converted to revenues. Buoyant conditions in 2005 saw new airlines serving long-haul routes. The survivors avoided competition in highly contested markets, and followed low-cost concepts. Carriers with large premium cabins had to compete in key markets and failed. Porter's (1980) generic strategies, Markides and Charitou's (2004) dual-business model study and Yoffie and Kwak's (2002) judo strategy help explain this failure.