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Distortions of airline revenues: why the network airline business model is broken

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  • Tretheway, Michael W
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    Abstract

    This paper looks at the inherent flaws that have emerged in the business models that have been pursued by the major network airlines. The business model adopted by the low-cost carriers is more robust and has gradually undermined the ability of the network carriers to practice the price discrimination needed for them to recover their full costs. The full service network carriers still have a future but they will take a smaller market share. The paper points to a number of modifications that need to be made to the full service network carriers’ business model if it is going to maximise this share.

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    File URL: http://www.sciencedirect.com/science/article/pii/S096969970300084X
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Air Transport Management.

    Volume (Year): 10 (2004)
    Issue (Month): 1 ()
    Pages: 3-14

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    Handle: RePEc:eee:jaitra:v:10:y:2004:i:1:p:3-14

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    Web page: http://www.journals.elsevier.com/journal-of-air-transport-management/

    Related research

    Keywords: Low-cost airlines; Network economics; Business models; Airline competition;

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    Cited by:
    1. Oliveira, Alessandro V.M., 2008. "An empirical model of low-cost carrier entry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 42(4), pages 673-695, May.
    2. Enrico Bachis & Claudio A. Piga, 2006. "Hub Premium, Airport Dominance and Market Power in the European Airline Industry," Rivista di Politica Economica, SIPI Spa, vol. 96(5), pages 11-54, September.
    3. Zhang, Anming & Hanaoka, Shinya & Inamura, Hajime & Ishikura, Tomoki, 2008. "Low-cost carriers in Asia: Deregulation, regional liberalization and secondary airports," Research in Transportation Economics, Elsevier, vol. 24(1), pages 36-50.
    4. Adler, Nicole & Gellman, Aaron, 2012. "Strategies for managing risk in a changing aviation environment," Journal of Air Transport Management, Elsevier, vol. 21(C), pages 24-35.
    5. Dennis, Nigel, 2007. "End of the free lunch? The responses of traditional European airlines to the low-cost carrier threat," Journal of Air Transport Management, Elsevier, vol. 13(5), pages 311-321.
    6. Starkie, David, 2012. "European airports and airlines: Evolving relationships and the regulatory implications," Journal of Air Transport Management, Elsevier, vol. 21(C), pages 40-49.
    7. David Pitfield, 2005. "Ryanair’s Impact on Airline Market Share from the London Area Airports - a Time Series Analysis," ERSA conference papers ersa05p16, European Regional Science Association.
    8. Lara Gitto & Fulvio Minervini, 2007. "The Performance of European Full Service Airlines after Liberalisation: An Econometric Analysis," Rivista di Politica Economica, SIPI Spa, vol. 97(1), pages 105-122, January-F.
    9. Hazledine, Tim, 2011. "Legacy carriers fight back: Pricing and product differentiation in modern airline marketing," Journal of Air Transport Management, Elsevier, vol. 17(2), pages 130-135.

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