scholarly journals A Network-Design Analysis of Airline Business Model Adaptation in the Face of Competition and Consolidation

2021 ◽  
Author(s):  
Renan P. de Oliveira ◽  
Alessandro V. M. Oliveira ◽  
Gui Lohmann
Keyword(s):  
Mergers And Acquisitions ◽  
Network Design ◽  
Airline Industry ◽  
Business Models ◽  
Low Cost ◽  
Model Adaptation ◽  
Stepping Stones ◽  
Network Building ◽  
The Face ◽  
Hybrid Configuration

By focusing on the intrinsic relationship between business models and network configurations in the airline industry, this paper develops a two-stage methodology to estimate the strategic drivers of network design of the major carriers in Brazil. The empirical approach decomposes their domestic network-building rationales into the ones adopted by virtual archetypical carriers. We consider the previously conceived low-cost, full-service, and regional carrier archetypes. Our main contribution is the development of a model that allows airlines’ networks to be strategically designed in a time-evolving pattern, reflecting a dynamically chosen blend of these archetypes. Moreover, we also consider the effects that mergers and acquisitions may have had in inducing changes in these blends. Our results suggest that all analyzed airlines have repositioned themselves through their trajectories to adopt a hybrid configuration, aiming at the intersection of at least two archetypical network-design rationales. Besides, the effects of consolidations point to certain diversions of the acquiring airlines’ domestic network-building rationales toward the ones of the acquired carriers, providing evidence that the consolidations may have served as stepping stones for market-repositioning moves.

Ryanair: success before love

2015 ◽  
Vol 31 (8) ◽  
pp. 1-3 ◽  
Author(s):  
Mark Thomas
Keyword(s):  
Airline Industry ◽  
Business Models ◽  
Low Cost ◽  
Public Image ◽  
Necessary Condition ◽  
Sustainable Competitive Advantage ◽  
Value Proposition ◽  
Content Type ◽  
The Public ◽  
True Value

Purpose – This paper aims to show why public acclaim is not always a guarantee for healthy profits. A low-cost forerunner, Laker Airlines, also discovered this same fact to its fatal cost. A company needs to understand its true value proposition and ensure that customers are willing to pay for it. Ryanair was adored by the public when it began its low-cost flights from Dublin to London in 1986. That love nearly drove it to bankruptcy. Today, despite its poor image, it is one of the most successful and profitable companies in the industry. Design/methodology/approach – The article analysis of the changing fortunes of Ryanair from its launch to its near bankruptcy in 1991 and then its revival of fortunes. It draws a parallel with Laker Airlines and the low-cost transatlantic Skytrain. Adulated by the public, the company folded in 1982. It is supplemented with research the airline industry and low-cost business models. Findings – The article shows why companies should not fall into the trap of believing that a good public image will be the necessary condition for maintaining a sustainable competitive advantage. They need to fully understand the value proposition and what a customer is willing to buy.

scholarly journals Hybrid” airlines – Generating value between low-cost and traditional

2017 ◽  
Vol 11 (1) ◽  
pp. 577-587 ◽  
Author(s):  
Cristina Stoenescu ◽  
Camelia Monica Gheorghe
Keyword(s):  
Business Model ◽  
Airline Industry ◽  
Business Models ◽  
Low Cost ◽  
Theoretical Perspective ◽  
Loyalty Programs ◽  
Market Segments ◽  
New Business ◽  
Basic Services ◽  
Cost Efficient

Abstract Over the last years, the rise of low-cost airlines has determined significant changes in the airline industry and has shaped the evolution of the existing business models. Low-cost airlines started by offering basic services at very low prices; traditional airlines responded by equally cutting costs and reinventing the services offered, with an orientation towards braking down the fare and implementing add-ons, in order to become cost-efficient. As traditional airlines developed strategies to become competitive in this new environment, low-cost airlines started focusing on new ways of enhancing passenger experience and attracting new market segments. As a result, the fragmentation of the market segments addressed by low cost carriers and traditional airlines became less obvious and the characteristics of both business models started to blend at all levels (airline operation, distribution channels, loyalty programs, fleet selection). Thus, this new competition became the foundation of the development of a new „hybrid” carrier, between the low-cost and the traditional models. This article investigates the characteristics of the newly created business model, both from a theoretical perspective and by analysing several case studies. A particular attention will be granted to the evolution of the Romanian carrier Blue Air towards the “hybrid” model. The article focuses on determining the position of the “hybrid” airline in a market with carriers situated along both sides of this business model: lower cost vs. “better” experience and raises the question on how value can be generated in this context. Another aspect tackled is the understanding of the new segmentation of the market, as a consequence of the development of the new business model. In order to achieve this purpose, a survey has been conducted, aiming to mark out the travel preferences of the passengers travelling through the Henri Coandă International Airport.

Global airlines will need long-term productivity gains

2016 ◽  
Keyword(s):  
Mergers And Acquisitions ◽  
Airline Industry ◽  
Cost Of Capital ◽  
Low Cost ◽  
Air Transport ◽  
Economic Sustainability ◽  
Content Type ◽  
The Cost ◽  
Productivity Gains

Subject Airline industry outlook. Significance The International Air Transport Association (IATA) predicts that the global airline industry will record a fifth year of profitable operations in 2016. The average profit margin is foreseen at 5.6%, with the industry meeting the cost of capital for the second consecutive year. This is the first period of economic sustainability in the airline industry's history. Impacts Further consolidation is likely among North American airlines, but smaller carriers are reluctant to embark on major restructuring. In Asia, the appetite for looser alliances and joint ventures will prevail over mergers and acquisitions. Low-cost carriers offering cheap business class services, in addition to less expensive economy-class tickets, will pressure IATA members.

scholarly journals Passenger choice attributes in choosing a secondary airport: A study of passenger attributes in using Lanseria International Airport

2016 ◽  
Vol 10 (1) ◽  
Author(s):  
Elmarie Kriel ◽  
Jackie Walters
Keyword(s):  
South Africa ◽  
Airline Industry ◽  
Business Models ◽  
Low Cost ◽  
Central Business District ◽  
Access Time ◽  
Exploratory Research ◽  
Face To Face ◽  
International Airport ◽  
Business District

Background: The economic deregulation of the airline industry in South Africa in 1991 was a landmark event and brought about various changes in the air transport market, both locally and internationally. One important after-effect of deregulation was the entry of low-cost carriers (LCCs) in 2001, which increased competition in the market and offered passengers the freedom to choose between full-cost carriers and LCCs. It is generally accepted that LCCs have been very successful across the globe, and the main reason for this lies in their simplified lower cost business models. One way of achieving lower costs is for LCCs to operate from secondary or alternative airports. This trend is observed in most regions of the world. In South Africa, and more specifically the Gauteng province, Lanseria International Airport is considered as an alternative airport to OR Tambo International Airport (the main international airport of South Africa and located about 30 km east of the Johannesburg Central Business District [CBD]). Currently, two LCCs operate from this airport with a third LCC airline indicating that it will shortly begin operations from this airport.Objectives: The research presented here reflects on the aspects passengers consider when selecting a secondary airport for their travel needs. It also compares the research findings of passenger attributes when choosing Lanseria Airport as a secondary airport in 2010 to a similar study in 2013 after another LCC commenced operations from the airport.Method: In this exploratory research a face-to-face survey was used as the quantitative data collection method in order to identify the factors that influenced passengers’ airport choice decisions at Lanseria International Airport.Results: From this research it emerged that when airports in a metropolitan area are close to one another, one of the main considerations for passengers is access time when selecting an airport. Even after a second LCC started operating from Lanseria International Airport, the attributes passengers regard as important in their decision to fly from the airport remained unchanged.Conclusion: The aim of the research is to gain a deeper understanding of the factors involved in secondary airport selection and, building on this knowledge, to assist airport owners and managers in positioning their airports in a multi-airport competitive environment. Similarly, the findings of the research could assist airlines in their decision-making process to operate from secondary airports

Movie Rental Business: Blockbuster, Netflix, and Redbox

2017 ◽  
pp. 1-21 ◽  
Author(s):  
Sunil Chopra ◽  
Murali Veeraiyan
Keyword(s):  
Business Model ◽  
Business Models ◽  
Low Cost ◽  
Video On Demand ◽  
Mail Order ◽  
Vending Machines ◽  
Video Rental ◽  
Brick And Mortar ◽  
The Face ◽  
The Impact

Jim Keyes, CEO of Dallas-based Blockbuster Inc., was facing the biggest challenge of his career. In March 2010 Keyes was meeting with Hollywood studios in an effort to negotiate better terms for the $1 billion worth of merchandise Blockbuster had purchased the year before. In recent years, Blockbuster's share of the video rental market had been sharply decreasing in the face of competitors such as the low-cost, convenient Redbox vending machines and mail-order and video-on-demand service Netflix. While Blockbuster's market capitalization had dropped 47 percent to $62 million in 2009, Netflix's had shot up 55 percent to $3.9 billion that year. The only hope for Blockbuster, as Keyes saw it, was to shift its business model from primarily brick-and-mortar physical DVD rentals to increased digital and mail-order video delivery. In Keyes's favor, the studios were more than willing to provide him with that help. Hollywood wanted to see Blockbuster win the video-rental wars. Consumers still made frequent purchases of DVDs at its store—purchases which were much more profitable for studios than the rentals that remained Blockbuster's primary business. Blockbuster had made efforts at making its business model more nimble, but the results had been disappointing, and its debt continued to skyrocket. By the end of 2009, the company's debt had climbed to $856 million, its share of the $6.5 billion video rental business had fallen to 27 percent, and its revenues had tumbled 23 percent to $4.1 billion.The objective of this case is to discuss how different business models and supply chain structures impact the financials of the firms in the DVD rental business. In particular, the goal is to convey that the characteristics of the movie (recent/big hit or old/eclectic) affect whether it is best rented from a centralized or decentralized model. In addition, as streaming gains market share, the impact will be different for movie types and business models.

scholarly journals The direction of airlines business models – up or down? (Post Covid-19 crisis – case study)

2021 ◽  
Vol 13 (1) ◽  
pp. 263-274
Author(s):  
Mária MRÁZOVÁ ◽  
Antonín KAZDA
Keyword(s):  
Business Model ◽  
Airline Industry ◽  
Business Models ◽  
Low Cost ◽  
Model Development ◽  
Point Of View ◽  
Aviation Industry ◽  
Role Of The State ◽  
Negative Impacts

This paper deals with airlines business models, mostly full service network carriers (FSNC) and low-cost carriers (LCC) and their position on the airline market. Covid-19 crisis causes many negative impacts on all airline industry. Hybridisation process in aviation industry is described many times in the past; now it has a stronger impact on airline business model development and it is oriented on different aspects than before. The paper emphasises the fact that low-cost carrier’s business model is much closer to the features of the FSNC carriers from the price point of view and vice versa. Furthermore, the authors introduce some other diversifications of airlines business models and the paper offers the new stimulus to move forward in this tough time for airlines business, paradoxically, thanks to Covid-19. Finally, yet importantly, the authors emphasise the important role of the state in the further direction of the airlines during and after the Covid-19 crisis

scholarly journals Determinants of Financial Risk: An Empirical Application on Low-Cost Carriers

2019 ◽  
Vol 66 (3) ◽  
pp. 335-349
Author(s):  
Kasım Kiracı
Keyword(s):  
Business Model ◽  
Airline Industry ◽  
Financial Risk ◽  
Business Models ◽  
Low Cost ◽  
Panel Data Analysis ◽  
Rapid Development ◽  
Transformation Process ◽  
Size Firm ◽  
Second World

The airline industry has entered a rapid development and transformation process, especially after the Second World War. In this process, it is seen that the market structure changed and many private airlines were established. Due to increased competition, airlines have begun to follow various strategies and business models in order to gain a competitive advantage over each other. One of the business models successfully applied recently is the low-cost business model. Therefore, this study focuses on airline companies that applied the low-cost business model. The study aims to reveal the factors that determine the financial risk in airlines, which implements the low-cost business model. For this purpose, firstly, airline companies that implement the low-cost business model have been identified according to the classification in the literature. The study included an analysis of 13 airlines with the low-cost business model that was fully accessible to financial data for the 2004-2017 period. Panel data analysis was used in the study and Altman (1968) Z-Score and Springate (1978) S-Score were used in measuring financial risk. Empirical findings of the study reveal that firm leverage, asset structure, firm size, firm profitability, and liquidity ratio have an effect on financial risk.

scholarly journals TRANSNATIONAL REPRESENTATION BY EUROPEAN WORKS COUNCILS IN THE PASSENGER AIRLINE INDUSTRY

2020 ◽  
Vol 11 (1) ◽  
pp. 1-10
Author(s):  
Stephen Havlovic
Keyword(s):  
Mergers And Acquisitions ◽  
Airline Industry ◽  
Low Cost ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Works Councils ◽  
The Past ◽  
Start Up ◽  
Subject Areas ◽  
International Airlines

Mergers and acquisitions have reduced the number of European Works Councils (EWCs) in the airline industry over the past two decades. In addition, start-up low-cost airlines have been reluctant to form EWCs. Only 5 of the 11 eligible transnational passenger airlines have established EWCs. This limited number of airline EWCs reduces airline employees' opportunity to be involved in strategic decision making in areas such as tourism. All of the available EWC agreements provide the opportunity for management and employee member consultation, the offering of opinions, and providing information related to European transnational operations. The Lufthansa Group and the International Airlines Group EWC agreements contain more subject areas for discussion than the Air France-KLM agreement. Only the Lufthansa Group EWC agreement includes the topic of environmental protection.

Making the Organization Fly

2010 ◽  
Vol 9 (3) ◽  
pp. 145-148 ◽  
Author(s):  
Kim Peters ◽  
Passagorn Tevichapong ◽  
S. Alexander Haslam ◽  
Tom Postmes
Keyword(s):  
Organizational Citizenship ◽  
Organizational Identification ◽  
Airline Industry ◽  
Service Sector ◽  
Business Models ◽  
Service Industry ◽  
Low Cost ◽  
Flight Attendants ◽  
Organizational Functioning ◽  
Lower Status

Recently, the service industry has seen a low-cost sector emerge alongside the traditional full-service sector. We explored whether these business models have different implications for employee cooperation, one factor that plays an important role in organizational functioning. Drawing on the social identity perspective, we argue that employees will identify less strongly with the lower-status, low-cost organizations, reducing their intrinsic motivation for such cooperation. We tested these relationships among employees in Thailand’s airline industry. In line with expectations, flight attendants working for low-cost airlines (N = 77) perceived their organizations to have lower status than those working for the full-service airlines (N = 77), and this was associated with reduced organizational identification. This in turn predicted lower levels of organizational citizenship behaviour and a stronger desire for organizational exit.

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