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Incompatibilities of the low-cost and network carrier business models within the same airline grouping

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  • Graf, Luca

Abstract

This paper examines the strategy of setting up a low-cost unit adopted by some incumbent airlines to the threat and opportunity of the low cost incursion. Based on the analysis of five case studies in the European airline industry, the chances and risks of establishing a low-cost carrier within the same grouping of a network carrier business model are explored. The paper examines the hypothesis that incompatibilities of the two business models are the causal reason for failure of earlier attempts. By following this idea, a set of propositions is developed that contribute to the debate of how to control these incompatibilities and when it is favorable to follow other strategic response options.

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  • Graf, Luca, 2005. "Incompatibilities of the low-cost and network carrier business models within the same airline grouping," Journal of Air Transport Management, Elsevier, vol. 11(5), pages 313-327.
    • Handle: RePEc:eee:jaitra:v:11:y:2005:i:5:p:313-327
    DOI: 10.1016/j.jairtraman.2005.07.003
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    References listed on IDEAS

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    1. Wang, Yixiao & Sun, Luoyi & Teunter, Ruud H. & Wu, Jianhong & Hua, Guowei, 2020. "Effects of introducing low-cost high-speed rail on air-rail competition: Modelling and numerical analysis for Paris-Marseille," Transport Policy, Elsevier, vol. 99(C), pages 145-162.
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    3. Homsombat, Winai & Lei, Zheng & Fu, Xiaowen, 2014. "Competitive effects of the airlines-within-airlines strategy – Pricing and route entry patterns," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 63(C), pages 1-16.
    4. Adiloğlu-Yalçınkaya, Leyla & Besler, Senem, 2021. "Institutional factors influencing business models: The case of Turkish Airlines," Journal of Air Transport Management, Elsevier, vol. 91(C).
    5. Joshan, Saeid & Maertens, Sven, 2020. "Low cost carriers in the Middle East and North Africa (MENA) region: Emergence and barriers to development," Journal of Transport Geography, Elsevier, vol. 87(C).
    6. Martin Rüger & Sven Ulrich Maertens, 2022. "The Content Scope of Airline Sustainability Reporting According to the GRI Standards—An Assessment for Europe’s Five Largest Airline Groups," Administrative Sciences, MDPI, vol. 13(1), pages 1-23, December.
    7. Pearson, James & Pitfield, David & Ryley, Tim, 2015. "Intangible resources of competitive advantage: Analysis of 49 Asian airlines across three business models," Journal of Air Transport Management, Elsevier, vol. 47(C), pages 179-189.
    8. Chung, Jin Young & Whang, Taehee, 2011. "The impact of low cost carriers on Korean Island tourism," Journal of Transport Geography, Elsevier, vol. 19(6), pages 1335-1340.
    9. Renan P. de Oliveira & Alessandro V. M. Oliveira & Gui Lohmann, 2021. "A Network-Design Analysis of Airline Business Model Adaptation in the Face of Competition and Consolidation," Transportation Science, INFORMS, vol. 55(2), pages 532-548, March.
    10. Ko, Young Dae, 2019. "The airfare pricing and seat allocation problem in full-service carriers and subsidiary low-cost carriers," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 92-102.
    11. Pearson, James & Merkert, Rico, 2014. "Airlines-within-airlines: A business model moving East," Journal of Air Transport Management, Elsevier, vol. 38(C), pages 21-26.
    12. Gillen, David & Gados, Alicja, 2008. "Airlines within airlines: Assessing the vulnerabilities of mixing business models," Research in Transportation Economics, Elsevier, vol. 24(1), pages 25-35.
    13. Ko, Young Dae, 2016. "An airline's management strategies in a competitive air transport market," Journal of Air Transport Management, Elsevier, vol. 50(C), pages 53-61.
    14. Corbo, Leonardo, 2017. "In search of business model configurations that work: Lessons from the hybridization of Air Berlin and JetBlue," Journal of Air Transport Management, Elsevier, vol. 64(PB), pages 139-150.
    15. Heinz, Stephan & O’Connell, John F., 2013. "Air transport in Africa: toward sustainable business models for African airlines," Journal of Transport Geography, Elsevier, vol. 31(C), pages 72-83.
    16. Chiambaretto, Paul & Combe, Emmanuel, 2023. "Business model hybridization but heterogeneous economic performance: Insights from low-cost and legacy carriers in Europe," Transport Policy, Elsevier, vol. 136(C), pages 83-97.
    17. Wang, Kun & Tsui, Wai Hong Kan & Li, Lan-Bing & Lei, Zheng & Fu, Xiaowen, 2020. "Entry pattern of low-cost carriers in New Zealand - The impact of domestic and trans-Tasman market factors," Transport Policy, Elsevier, vol. 93(C), pages 36-45.
    18. Akamavi, Raphaël K. & Mohamed, Elsayed & Pellmann, Katharina & Xu, Yue, 2015. "Key determinants of passenger loyalty in the low-cost airline business," Tourism Management, Elsevier, vol. 46(C), pages 528-545.

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