Carrier Business Model Research Articles

Overview of the Influence of Level of Service on the Airport Passenger Terminal Capacity

Establishing the desired quality of service (QoS) of the airport passenger terminal in order to improve operational performance is a challenge for every airport. Recent international research indicates a gradual recovery in air transport and, accordingly, the need to develop additional transport infrastructure. If the passenger terminal design in terms of infrastructure and operational capacity is not approached correctly, the level of service provided to passengers may decline. This research will focus on how the IATA Level of Service (LoS), which is provided to airport users can contribute to the optimisation of the level of service of the passenger terminal. Additionally, the impact of level of service on passenger terminal capacity assessment in relation to the diversity of air carrier business model will be analysed. Since there is no common link to uniformly describe and solve this problem, this paper will review the relevant literature in the field of passenger terminal capacity research and will analyse different approaches to solving this problem with the aim to develop a new unified concept in observing and optimising the capacity of the airport passenger terminal taking into account the types of air carrier business models.

The key elements of the low-cost carrier business model. The Russian experience

The key elements of the low-cost carrier business model. The Russian experience

An empirical investigation of European airline business models: Classification and hybridisation

Airline business models are evolving and what was once a clear distinction between low-cost carriers (LCCs) and full-service carriers (FSCs) is now less apparent. LCCs and FSCs are merging into new hybrid carrier business models, a convergence accomplished in different ways by various airlines. This paper aims to establish how many types of business models exist and to examine the defining characteristics of the various levels of hybridisation. This is an empirical study based on a sample of 49 European airlines. Data are collected in a categorical format, where appropriate, or transformed into categorical variables if numerical. The methodology employed for analysis is the well-established k-modes technique. The clustering process indicates that there are four observable airline categories: FSCs, LCCs, and two hybrid types in between.

Mapping causalities of airline dynamics in long-haul air transport markets

The introduction of low-cost air transport services to short-haul routes has significantly shaped the structure of this market segment. Recent research investigates and discusses the transferability of the low-cost carrier business model to long-haul routes and identifies respective challenges such as lower cost advantages over the competing full-service network business model. Our paper complements the existing research with a review of airline dynamics in long-haul air transport markets and the subsequent development of a causal loop diagram of the transatlantic air transport market using systems thinking. The objective of this paper is to provide an overview of specific characteristics regarding airline operations in the transatlantic air transport market to investigate the market potential of long-haul low-cost carriers competing with full-service network carriers in this market. We implement these characteristics in a causal loop diagram which comprises the most important elements of and causalities within the long-haul air transport market that affect the development of these elements. These include the generation of transatlantic air transport demand, passenger choice, and airline ticket price and fleet development. The causal loop diagram serves as a framework for qualitative investigation of the market potential of long-haul low-cost services. The paper proves systems thinking to be a feasible approach to map causalities based on knowledge from scientific literature.

Transatlantic Market Competition Between Hybrid Carrier and Long-Haul Low-Cost Carrier Business Models

Long-haul low-cost carrier (LHLC) business models are generating considerable interest from the aviation practitioners and academics. Despite the high interest for the LHLC business model, only few have compared the LHLC business model to hybrid carrier business model and studied how airlines can compete with LHLCs. This paper analyses the differences of hybrid and long-haul low-cost carrier models and shows how Aer Lingus airlines has secured its dominant position in the Irish-US market. Product comparison with the help of in-depth interviews with key aviation practitioners as well as secondary data about the capacity and demand of the two carriers in question proves the differences between the two models. Porter five forces model provides an overview of the external competitive environment where the airlines in question operate. The research concluded that the hybrid and long-haul low-cost business model characteristics have many similarities, but also significant differences. It was also discovered that LHLC lack capacity and frequency as well as feeder traffic are very important elements for the transatlantic market. Robust route network including interline traffic and low operating cost, elements present in the hybrid airline business model, ensure profitability.

The emergence and effects of the ultra-low cost carrier (ULCC) business model in the U.S. airline industry

The effects of “low cost carriers” (LCCs) such as Southwest Airlines and JetBlue Airways on the competitive landscape of the U.S. airline industry have been thoroughly documented in the academic literature and the popular press. However, the more recent emergence of another distinct airline business model—the “ultra low cost carrier” (ULCC)—has received considerably less attention. By focusing on cost efficiencies and unbundled service offerings, the ULCCs have been able to undercut the fares of both traditional network and low-cost carriers in the markets they serve.In this paper, we conduct an analysis of ULCCs in the U.S. aviation industry and demonstrate how these carriers' business models, costs, and effects on air transportation markets differ from those of the traditional LCCs. We first describe the factors that have enabled ULCCs to achieve a cost advantage over traditional LCCs and network legacy carriers. Then, using econometric models, we examine the effects of ULCC and LCC presence, entry, and exit on base airfares in 3,004 U.S. air transportation markets from 2010 to 2015. We find that in 2015, ULCC presence in a market was associated with market base fares 21% lower than average, as compared to an 8% average reduction for LCC presence. We also find that while ULCC and LCC entry both result in a 14% average reduction in fares one year after entry, ULCCs are three times as likely to abandon a market within two years of entry than are the LCCs. The results suggest that the ULCCs represent a distinct business model from traditional LCCs and that as the ULCCs grow, they will continue to play a unique and increasingly important role in the U.S. airline industry.

The role of secondary airports for today's low-cost carrier business models: The European case

One of the core characteristics of Low-Cost Carrier (LCCs) is their use of secondary and regional airports. However, nothing is fixed as the market constantly evolves and carriers modify their strategies in order to achieve growth. This paper uses the examples of Ryanair, easyJet and Norwegian to show how changes to LCC business models are affecting secondary airports across Europe. Using a content analysis, this paper first describes how airport choice factors for LCCs have evolved over the last 10 years. This is followed by a data analysis of historical and current airline network capacity to identify how LCC traffic at secondary airports is developing. The paper finds that cost, demand and efficiency are still the most important criteria for LCCs when choosing an airport to operate from. However, it also identifies that LCCs have become more interested in serving business passengers, which is why they are increasingly using primary airports (accounting for 58% of their recent capacity growth). Through the use of a selection of case airports it is finally concluded that the evolution of LCCs increases competition between primary and secondary gateways. In most cases, secondary airports are losing a significant amount of LCC traffic and only sustain flights to less important destinations. This research puts into question the future importance of secondary airports for LCCs. As not all airports have been impacted by the hybridisation of LCCs to the same extent, the results are not equally applicable to the whole European airport industry.

The evolving low-cost business model: Network implications of fare bundling and connecting flights in Europe

In a context of limited organic growth, some low-cost airlines have considered business strategies that are changing two key principles of the low-cost airline business model: fare unbundling and point-to-point operations. Using a multivariate analysis we identify the influence of several route characteristics on the share that European pure low-cost and hybrid low-cost carriers have on the routes they operate. Results show that, from a network perspective, the distance between the archetypical low-cost carrier business model and the adapted low-cost carrier business model with a hybrid approach is widening. Differences are also clear between hybrids offering connecting services and hybrids offering fare bundling. The results are also important from an airport policy perspective, since secondary airports and legacy airports in transition could be able to reduce the gap between them and the main hub airports.

Codesharing agreements by low-cost carriers: An explorative analysis

In this paper, we present an explorative analysis related to the involvement of low-cost carriers (LCCs) in codesharing agreements. Our goals are to evaluate the diffusion of the phenomenon across countries, and to identify the determining features of companies with regards to the codesharing propensity of LCCs. We analyzed the worldwide scheduling of LCCs in 2011, revealing that one-third of LCCs were involved in codesharing arrangements in 2011. Yet, only 25% of LCCs are involved in codesharing with carriers to whom they are not hierarchically linked. The spread of this phenomenon varied by geographical area, with LCCs in Europe, Australia–New Zealand, Asia, and North America being most likely to codeshare. The airline size, the hybridization of the carrier's business model and an airline network concentration affect the likelihood to codeshare.

THEORETICAL FUNDAMENTALS OF THE AIRPORT NETWORK ANALYSIS

The methodological approaches to the analysis of airports network on the theory of complex networks based are described. Results of experimental calculations on a fragment of airports network of Ukraine are presented. Indicators of complex networks (node degree, the strength of the node, the clustering coefficient) are estimated for Ukrainian airports net fragment. Results of research explain the vision that air-transport network of all Ukrainian airports formed on basis of the feeder carrier business model for European airlines. On the selected fragment of airports network of Ukraine the most node strength have the airports in Kyiv (3861) and Odessa (1141), the degree of the node at these airports is 14 and 9, respectively. The highest clustering coefficient has Donetsk airport – 0.6. It is also made a conclusion about the low integration of Kyiv in the European network of hubs.

The Predicament of Domestic Airline Service after the Introduction of Taiwan High-Speed Rail

Abstract The launch of the Taiwan High-speed Rail (HSR) service in 2007 has significantly changed intercity travel in the Taiwan western corridor. The HSR links Taipei with Kaohsiung (Zuoying), a total distance of 345 kilometers (km), via a ninety-minute journey. Notably, this new service has considerably reduced air transportation volumes, bringing about a decline of approximately 70 percent. This study uses statistical data covering the period following the establishment of the high-speed rail to examine its impact on the domestic airline industry. Over relatively short distances, such as 350 km, high-speed rail has various advantages over air travel, including higher frequency and more reliable departures, a central location of departure, and reduced time-consuming security checks, among others. Accordingly, airlines must revise their competitive strategies. This study makes several suggestions, which may be useful for airlines in Taiwan and elsewhere planning to introduce high-speed rail. For example, airlines should consider adopting a low-cost carrier business model as well as focusing on flights to regions not served by high-speed rail. For example, airlines could operate leisure routes linking the populated western seaboard of Taiwan with the east coast and the offshore islands. This approach would facilitate integration between high-speed rail and the airlines. Airlines can incorporate high-speed rail services into their networks as hubs to complement and substitute for short-distance aircraft services.

Legacy carriers fight back: Pricing and product differentiation in modern airline marketing

The adoption of the low-cost carrier business model has applied competitive pressure on established network or “legacy” carriers, by offering fares at prices that legacy carriers find it difficult to match and still cover their fixed costs. This paper reports how two medium-sized national airlines-Air New Zealand and Air Canada-have coped with the low-cost threat by, in effect, turning their fixed costs into profit centres. Features such as full regional networks, long-haul connections, frequent flyer programs, membership in global alliances, lounges and business class cabins can be bundled into products which can be marketed and sold profitably to business and even some leisure travellers, and which cannot be easily replicated by low-cost carriers. Although not panaceas, the innovations of Air New Zealand and Air Canada to the competition they face in their domestic and trans-border markets demonstrate the possibility of an effective legacy carrier response to the low-cost carrier business model.

Some limitations to the success of the Low-Cost Carrier business model in India

Despite the growth in market share of Indian Low-Cost Carriers (LCCs), there are certain factors inhibiting the success of the LCC business model in India. This paper argues that the success of the LCC business model in India is limited by three exogenous factors – the lack of the concept of secondary airports, the route dispersal guidelines, and the excessively high costs of Aircraft Turbine Fuel (ATF). These factors are unique to India and a direct result of the flawed policies is adopted by the government. These policies also indicate the extent to which air transport in India is still regulated.

Incompatibilities of the low-cost and network carrier business models within the same airline grouping

This paper examines the strategy of setting up a low-cost unit adopted by some incumbent airlines to the threat and opportunity of the low cost incursion. Based on the analysis of five case studies in the European airline industry, the chances and risks of establishing a low-cost carrier within the same grouping of a network carrier business model are explored. The paper examines the hypothesis that incompatibilities of the two business models are the causal reason for failure of earlier attempts. By following this idea, a set of propositions is developed that contribute to the debate of how to control these incompatibilities and when it is favorable to follow other strategic response options.