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


  • Tretheway, Michael W


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.

Suggested Citation

  • Tretheway, Michael W, 2004. "Distortions of airline revenues: why the network airline business model is broken," Journal of Air Transport Management, Elsevier, vol. 10(1), pages 3-14.
  • Handle: RePEc:eee:jaitra:v:10:y:2004:i:1:p:3-14 DOI: 10.1016/j.jairtraman.2003.10.010

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    References listed on IDEAS

    1. Baumol, William J, 1996. "Predation and the Logic of the Average Variable Cost Test," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 49-72, April.
    2. Button, Kenneth, 2003. "Does the theory of the ‘core’ explain why airlines fail to cover their long-run costs of capital?," Journal of Air Transport Management, Elsevier, vol. 9(1), pages 5-14.
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    Cited by:

    1. Ales Novak, 2014. "Business Model Literature Overview," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2014(1), pages 79-130.
    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. 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.
    4. repec:eee:transa:v:106:y:2017:i:c:p:215-234 is not listed on IDEAS
    5. Chiuling Lu & Ann Yang & Jui-Feng Huang, 2015. "Bankruptcy predictions for U.S. air carrier operations: a study of financial data," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(3), pages 574-589, July.
    6. David Pitfield, 2005. "RyanairÂ’s Impact on Airline Market Share from the London Area Airports - a Time Series Analysis," ERSA conference papers ersa05p16, European Regional Science Association.
    7. 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.
    8. Kuljanin, Jovana & Kalić, Milica, 2015. "Exploring characteristics of passengers using traditional and low-cost airlines: A case study of Belgrade Airport," Journal of Air Transport Management, Elsevier, vol. 46(C), pages 12-18.
    9. Moreno-Izquierdo, L. & Ramón-Rodríguez, A. & Perles Ribes, J., 2015. "The impact of the internet on the pricing strategies of the European low cost airlines," European Journal of Operational Research, Elsevier, vol. 246(2), pages 651-660.
    10. Zuidberg, Joost, 2014. "Identifying airline cost economies: An econometric analysis of the factors affecting aircraft operating costs," Journal of Air Transport Management, Elsevier, vol. 40(C), pages 86-95.
    11. 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.
    12. 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.
    13. 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.
    14. Diaconu Maxim Laura, 2012. "The Development of the Low-Cost Carriers’ Business Models. Southwest Airlines Case Study," Scientific Annals of Economics and Business, De Gruyter Open, vol. 59(1), pages 231-238, July.
    15. 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.
    16. 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.
    17. Moreno, Luis & Ramon, Ana & Pedreño, Andrés, 2015. "The Development of Low-cost Airlines and Tourism as a Competitiveness Complementor: Effects, Evolution and Strategies," Journal of Spatial and Organizational Dynamics, CIEO-Research Centre for Spatial and Organizational Dynamics, University of Algarve, vol. 3(4), pages 262-274.


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