The blurring lines between full-service network carriers and low-cost carriers: A financial perspective on business model convergence

2019 ◽  
Vol 75 ◽  
pp. 19-26
Author(s):  
Farshid Azadian ◽  
Bijan Vasigh
Keyword(s):  
Business Model ◽  
Low Cost ◽  
Service Network ◽  
Financial Perspective ◽  
Low Cost Carriers

scholarly journals THE EVOLUTION OF LOW COST CARRIERS IN AUSTRALIA

Aviation ◽  
2014 ◽  
Vol 18 (4) ◽  
pp. 203-216 ◽  
Author(s):  
Panarat Srisaeng ◽  
Glenn S. Baxter ◽  
Graham Wild
Keyword(s):  
Low Cost ◽  
Air Travel ◽  
Air Transport ◽  
Market Segment ◽  
Service Network ◽  
Air Transport Industry ◽  
Low Cost Carriers ◽  
Low Cost Carrier ◽  
Network Carrier ◽  
Second Wave

Due to the vast distances across the country as well as between urban centres, Australia is heavily reliant upon its air transport industry. Following deregulation of Australia's domestic air travel market on the 30th October, 1990, low cost carriers have entered the market. Australia's LCC market has had three discrete phases. The first wave occurred between 1990 and 1993 and was subsequently followed by a duopoly period in 1994–1999. The second wave occurred between 2000 and 2006 and the final wave has been in the post-2006 period. This paper examines the evolution of Australia's domestic low cost carrier airline market and finds that by 2010, low cost carriers had captured around 64 per cent of the market. Following the evolution of the “Virgin Australia” business model from a low cost carrier to a full service network carrier, commencing in 2011, the low cost carrier's market share has declined significantly and is now around 31 per cent. “Jetstar” and “Tiger Airways” are the two major carriers presently operating in this market segment.

An Evaluation for Long-Haul Low-Cost Carriers Using User-Generated Content

2020 ◽  
pp. 231-251
Author(s):  
Mahmut Bakır ◽  
Sahap Akan ◽  
Ozlem Atalik
Keyword(s):  
Regression Analysis ◽  
Service Quality ◽  
Business Model ◽  
Airline Industry ◽  
Low Cost ◽  
Perceived Value ◽  
User Generated Content ◽  
Low Cost Carriers ◽  
New Business ◽  
The Relationship

Since the liberalization of the airline industry, the low-cost business model has been developed worldwide and a new business model of long-haul low-cost carriers (LHLCCs) has evolved. This chapter aims to investigate the LHLCC business model from a customer-oriented perspective in terms of service quality and perceived value. For this purpose, the authors investigated the effect of service quality on perceived value for money for LHLCCs. In this chapter, user-generated content was adopted to collect data, and 824 user-generated airline reviews were collected from TripAdvisor.com, the largest tourism-related repository. In order to investigate the relationship, a predictive correlational design was structured and a logistic regression analysis was applied. To contribute to the regression analysis, a receiver operating characteristic (ROC) analysis was performed to measure the classification success. As a result, the logit model describes well the relationship between variables for LHLCCs.

Can low-cost long-haul carriers replace Charter airlines in the long-haul market? A European perspective

2017 ◽  
Vol 24 (1) ◽  
pp. 64-78 ◽  
Author(s):  
Andrea Martín Rodríguez ◽  
John F O’Connell
Keyword(s):  
Latin America ◽  
Business Model ◽  
Low Cost ◽  
Air Travel ◽  
European Market ◽  
European Perspective ◽  
Low Cost Carriers

Charter airlines operating all-inclusive vacation packages on the short-haul European market are quickly being replaced by low-cost carriers. The business model of low-cost carriers is now evolving to capture the long-haul travel segment and consequentially could replace the all-inclusive package holidays provided by the Charter airlines in this market. The research deduces that this will not transpire. The study extrapolates the opinions from experts who resonate that three pivotal cornerstones the differentiate Charter airlines from low-cost long-haul carriers which comprise of its destination expertise, Air Travel Organiser Licence affiliation and its horizontally integrated multifaceted enterprise. A passenger survey directed exclusively at passengers travelling on Charter airlines to long-haul destinations in Latin America found that vacationers aged 56 years and older together with families would not opt to vacation on low-cost long-haul airlines.

An Empirical Investigation of the Relationship between Profitability Persistence and Firms' Choice of Business Model: Evidence from the U.S. Airline Industry

2011 ◽  
Vol 23 (1) ◽  
pp. 37-70 ◽  
Author(s):  
Denton L. Collins ◽  
Francisco J. Román ◽  
Hung C. (“Leon”) Chan
Keyword(s):  
Business Model ◽  
Airline Industry ◽  
Low Cost ◽  
Profit Margin ◽  
Pricing Policy ◽  
Low Cost Carriers ◽  
Asset Turnover ◽  
The Individual ◽  
The U.S ◽  
Relative Persistence

ABSTRACT This paper examines the influence of a firm's business model on the relative persistence of profitability in the U.S. airline industry. The strategic management literature describes a firm's business model as reflecting how that firm chooses to compete in the marketplace. Given this linkage between business model, competition, and the marketplace, we conjecture that the persistence of profit margin and asset turnover ratios will be influenced by firms' choices of business model. Further, we hypothesize that this choice of business model influences the relative persistence of the individual revenue and expense components of current profit margin and asset turnover ratios for future profitability ratios. We test these conjectures by (1) partitioning our sample firms according to business model (network carriers versus low-cost carriers), and (2) decomposing sample firms' profit margin and asset turnover ratios into components relating to pricing policy, input cost control, and productivity. We find that the profit margin and asset turnover ratios of network carriers tend to be more persistent than those of low-cost carriers, and that this differential persistence is reflected in the associations between current revenue and expense components, and future profit margin and asset turnover ratios.

scholarly journals ANCILLARY REVENUE PRICING

2015 ◽  
Vol 6 (2) ◽  
pp. 43-62 ◽  
Author(s):  
Andreas Wittmer ◽  
Nicole Oberlin
Keyword(s):  
Airline Industry ◽  
Low Cost ◽  
Performance Ratio ◽  
Major Influence ◽  
Service Network ◽  
Price Performance ◽  
Low Cost Carriers ◽  
The Individual ◽  
Buying Behaviour ◽  
Network Carrier

The airline industry has evolved from a system of long-established state owned carriers operating in a regular market to a dynamic, deregulated industry. This development – especially the emerging competition of low-cost carriers – has had a major influence on the price setting behaviour of airlines. Profitability of airlines is limited and pricing systems are reconsidered. To stay competitive, traditional full service carriers consider the implementation of ancillary revenue systems, which are similar to low-cost carriers. This paper investigates challenges of an ancillary revenue pricing approach for full service network carriers. A qualitative means-end approach is used to find attributes, which are important for air passengers, and influence their ticket buying behaviour. In addition, the study provides insight into the perception of an ancillary revenue system in the full service network carrier market. The findings present 18 ticket purchase attributes and 15 behavioural terminal values in hierarchical value maps. Based on these values, it is evident that most passengers appreciate if some services are included in the price and not offered as ancillaries. Benefits of ancillary revenue systems include the individual ticket creation, customisation, improved price-performance ratio, flexibility gains and progressive ideas. The main drawbacks of the system include a complicated and complex booking process, feelings of uncertainty, branding problems, a distortion of competitive behaviours, a system similar to that of low-cost carriers, feelings of paying extra for every service and a perceived decline in service and quality.

scholarly journals Business Model Management of Low-Cost Carriers: in a Search for Impact-Factors of Performance (Case of AirAsia Group Airlines)

2020 ◽  
pp. 354-367
Author(s):  
Chen-Yuh Wu ◽  
Iryna Heiets ◽  
Hanna Shvindina
Keyword(s):  
Comparative Analysis ◽  
Performance Management ◽  
Business Model ◽  
Low Cost ◽  
Model Management ◽  
Gdp Per Capita ◽  
Impact Factors ◽  
Passenger Traffic ◽  
Low Cost Carriers ◽  
Per Capita

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.

scholarly journals Low-Cost Carriers – Business Model Development

2015 ◽  
Vol 3 (1) ◽  
pp. 1-5
Author(s):  
Antonín Kazda ◽  
◽  
Mária Mrázová
Keyword(s):  
Business Model ◽  
Business Models ◽  
Low Cost ◽  
Model Development ◽  
Aviation Industry ◽  
Historical Evolution ◽  
Financial Benefits ◽  
Low Cost Carriers ◽  
Business Model Development

This paper deals with low-cost airline business model that has overwhelmingly been the favoured mode of the airline. Fast-changing aviation industry forces low-cost carriers to transform their initial business model and therefore, author stresses further opportunities for the expansion of these models to another direction with more concentration on customer ´s needs as well as company´s operational and financial benefits. One of the most important partial results is analysis of existing low-cost carrier’s business models, describe their historical evolution and propose future modifications to stay competitive and profitable.

scholarly journals The Revenue and Cost of the Airline Company

2018 ◽  
Vol 3 (2) ◽  
pp. 134
Author(s):  
Peng Qin
Keyword(s):  
Airline Industry ◽  
Business Models ◽  
Low Cost ◽  
Asia Pacific ◽  
Service Network ◽  
Fuel Price ◽  
Low Cost Carriers ◽  
Air Pollutions ◽  
Human Cost ◽  
The Government

<p><em>The airline industry is characterized by a number of business models with the most prominent being the Full Service Network Carriers (FSNC) and Low Cost Carriers (LCC) models. The main difference between full service network carriers and low cost carriers is how the airline companies operation their revenue and cost.</em></p><p><em>The advanced developments in telecommunications, air pollutions and the competition of high rail are three new challenges for the airline industry globally while an increasing passengers and the government policies are two big issues for Asia/Pacific regional airline companies. The fuel price and human-related costs are two big issues affecting the company’s cost. Code-sharing and advertising are two possibly ways in increasing company’s revenue, cutting down the fuel cost, advertising costs, controlling the human cost and cooperating with airports are four possibly ways in reducing company’s cost.</em></p>

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