Development of Business Models of Low-Cost Airlines

Abstract

Abstract:The global economic crisis that affects all industries, including the aviation industry, has forced airlines to adjust their business models to existing market conditions. Low-cost airlines, which till the onset of economic crises in most cases followed the base low-cost business model, have adapted their business model in such a way that they have implemented segments of traditional airlines business models and thus created a hybrid between traditional and low-cost business models. This paper analyses to which extent low-cost airlines adjust their business model to the hybrid business model.

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

“…According to Vidovic, Stimac, Vince (2013), there are three different business models in the airline industry: FSCs, LCCs and charter airlines. During the last years, their characteristics started to blend and led to a new concept of "hybrid airlines".…”

“…Moreover, FSCs offer a wide range of products and a high level of customer service, since their image is associated with the country they usually represent as national airline (Vidovic, Stimac, Vince, 2013). FSCs are equipped with several aircraft models, as they have long-haul, regional and domestic flights, with a focus on their home country (Vidovic, Stimac, Vince, 2013).…”

“…On the other hand, LCCs use a younger homogenous medium sized fleet which means lower fuel, lower costs for maintenance and training (Vidovic, Stimac, Vince, 2013), one single class of service with higher density of seats (Vidovic, Stimac, Vince, 2013), "no frills" (Morrell, 2008), point to point network (Vidovic, Stimac, Vince, 2013), simpler means of fare differentiation by time of booking (Morrell, 2008), alternative marketing and distribution channels, avoiding intermediaries, lower input prices (Morrell, 2008).…”

“…Some low-cost airlines choose to mainly operate from majors airport hubs (Easy Jet) and offer connecting flights (Germanwings, Air Asia), implement Computer Reservation Systems (Vidovic, Stimac, Vince, 2013) (Easy Jet, Germanwings), introduce FFPs (Germanwings, Wizzair), offer full service level on board (Air Berlin) and differentiated fare packages (Norwegian, Germanwings).…”

The Evolution of Low Cost Carriers in Australia

“…LCCs focus on cost reduction in order to implement a price leadership strategy in the markets which they serve (Vidović et al 2013). An airline's fleet size and fleet structure have a substantial impact on its operating costs (Klophaus et al 2012).…”