IDEAS home Printed from https://ideas.repec.org/a/eee/jaitra/v89y2020ics0969699720304622.html
   My bibliography  Save this article

The long-haul low-cost airline business model: A disruptive innovation perspective

Author

Listed:
  • Albers, Sascha
  • Daft, Jost
  • Stabenow, Sebastian
  • Rundshagen, Volker

Abstract

This paper analyzes the impact of the long-haul low-cost (LHLC) airline business model on the air transport industry from a disruptive innovation perspective. We argue that the LHLC business model is set to stay; it is bound to penetrate the mass market that has, to date, been occupied by incumbent network carriers. It will thus lead to significant strategic adaptations in the long-haul air travel market where incumbents are well advised to prepare their responses. We provide a set of strategic response options along the categories of avoiding, accepting and embracing the LHLC business model that can be used by incumbents to defend their competitive positioning in the long-haul air travel market. This paper provides guidelines for airline managers to (re)evaluate the strategies of their own organizations facing the emergence of a potentially disruptive innovation in their industry.

Suggested Citation

  • Albers, Sascha & Daft, Jost & Stabenow, Sebastian & Rundshagen, Volker, 2020. "The long-haul low-cost airline business model: A disruptive innovation perspective," Journal of Air Transport Management, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:jaitra:v:89:y:2020:i:c:s0969699720304622
    DOI: 10.1016/j.jairtraman.2020.101878
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969699720304622
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jairtraman.2020.101878?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Daft, Jost & Albers, Sascha, 2012. "A profitability analysis of low-cost long-haul flight operations," Journal of Air Transport Management, Elsevier, vol. 19(C), pages 49-54.
    2. Daft, Jost & Albers, Sascha, 2015. "An empirical analysis of airline business model convergence," Journal of Air Transport Management, Elsevier, vol. 46(C), pages 3-11.
    3. Daft, Jost & Albers, Sascha, 2013. "A conceptual framework for measuring airline business model convergence," Journal of Air Transport Management, Elsevier, vol. 28(C), pages 47-54.
    4. Mason, Keith J. & Morrison, William G., 2008. "Towards a means of consistently comparing airline business models with an application to the [`]low cost' airline sector," Research in Transportation Economics, Elsevier, vol. 24(1), pages 75-84.
    5. Ramón-Rodríguez, Ana B. & Moreno-Izquierdo, Luis & Perles-Ribes, José F., 2011. "Growth and internationalisation strategies in the airline industry," Journal of Air Transport Management, Elsevier, vol. 17(2), pages 110-115.
    6. Jiang, Hongwei, 2013. "Service quality of low-cost long-haul airlines – The case of Jetstar Airways and AirAsia X," Journal of Air Transport Management, Elsevier, vol. 26(C), pages 20-24.
    7. John McGee & Howard Thomas, 1986. "Strategic groups: Theory, research and taxonomy," Strategic Management Journal, Wiley Blackwell, vol. 7(2), pages 141-160, March.
    8. Moir, Loren & Lohmann, Gui, 2018. "A quantitative means of comparing competitive advantage among airlines with heterogeneous business models: Analysis of U.S. airlines," Journal of Air Transport Management, Elsevier, vol. 69(C), pages 72-82.
    9. Frédéric Dobruszkes & Moshe Givoni & Timothy Vowles, 2017. "Hello major airports, goodbye regional airports? Recent changes in European and US low-cost airline airport choice," ULB Institutional Repository 2013/239911, ULB -- Universite Libre de Bruxelles.
    10. Ioulia Poulaki & Vicky Katsoni, 2020. "Current Trends in Air Services Distribution Channel Strategy: Evolution Through Digital Transformation," Springer Proceedings in Business and Economics, in: Vicky Katsoni & Thanasis Spyriadis (ed.), Cultural and Tourism Innovation in the Digital Era, pages 257-267, Springer.
    11. Klein, Klemens & Albers, Sascha & Allroggen, Florian & Malina, Robert, 2015. "Serving vs. settling: What drives the establishment of low-cost carriers’ foreign bases?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 79(C), pages 17-30.
    12. Matt Marx & Joshua S. Gans & David H. Hsu, 2014. "Dynamic Commercialization Strategies for Disruptive Technologies: Evidence from the Speech Recognition Industry," Management Science, INFORMS, vol. 60(12), pages 3103-3123, December.
    13. De Poret, M. & O'Connell, J.F. & Warnock-Smith, D., 2015. "The economic viability of long-haul low cost operations: Evidence from the transatlantic market," Journal of Air Transport Management, Elsevier, vol. 42(C), pages 272-281.
    14. Hunt, Jennifer & Truong, Dothang, 2019. "Low-fare flights across the Atlantic: Impact of low-cost, long-haul trans-Atlantic flights on passenger choice of Carrier," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 170-184.
    15. Bießlich, Peter & Wegmann, Kai & Lütjens, Klaus & Gollnick, Volker, 2018. "A hierarchical metamodeling approach for airline costs," Journal of Air Transport Management, Elsevier, vol. 71(C), pages 193-200.
    16. Whyte, Randall & Lohmann, Gui, 2015. "The carrier-within-a-carrier strategy: An analysis of Jetstar," Journal of Air Transport Management, Elsevier, vol. 42(C), pages 141-148.
    17. 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.
    18. Albers, Sascha & Heuermann, Caroline & Koch, Benjamin, 2010. "Internationalization strategies of EU and Asia–Pacific low fare airlines," Journal of Air Transport Management, Elsevier, vol. 16(5), pages 244-250.
    19. Soyk, Christian & Ringbeck, Jürgen & Spinler, Stefan, 2018. "Revenue characteristics of long-haul low cost carriers (LCCs) and differences to full-service network carriers (FSNCs)," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 112(C), pages 47-65.
    20. Linz, Marco, 2012. "Scenarios for the aviation industry: A Delphi-based analysis for 2025," Journal of Air Transport Management, Elsevier, vol. 22(C), pages 28-35.
    21. Dobruszkes, Frédéric & Givoni, Moshe & Vowles, Timothy, 2017. "Hello major airports, goodbye regional airports? Recent changes in European and US low-cost airline airport choice," Journal of Air Transport Management, Elsevier, vol. 59(C), pages 50-62.
    22. 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.
    23. Fageda, Xavier & Suau-Sanchez, Pere & Mason, Keith J., 2015. "The evolving low-cost business model: Network implications of fare bundling and connecting flights in Europe," Journal of Air Transport Management, Elsevier, vol. 42(C), pages 289-296.
    24. Briance Mascarenhas & David A. Aaker, 1989. "Mobility barriers and strategic groups," Strategic Management Journal, Wiley Blackwell, vol. 10(5), pages 475-485, September.
    25. Morrell, Peter, 2008. "Can long-haul low-cost airlines be successful?," Research in Transportation Economics, Elsevier, vol. 24(1), pages 61-67.
    26. Wensveen, John G. & Leick, Ryan, 2009. "The long-haul low-cost carrier: A unique business model," Journal of Air Transport Management, Elsevier, vol. 15(3), pages 127-133.
    27. Soyk, Christian & Ringbeck, Jürgen & Spinler, Stefan, 2017. "Long-haul low cost airlines: Characteristics of the business model and sustainability of its cost advantages," Transportation Research Part A: Policy and Practice, Elsevier, vol. 106(C), pages 215-234.
    28. Merkert, Rico & Hensher, David A., 2011. "The impact of strategic management and fleet planning on airline efficiency - A random effects Tobit model based on DEA efficiency scores," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(7), pages 686-695, August.
    29. Atallah, Stephanie & Hotle, Susan L. & Mumbower, Stacey, 2018. "The evolution of low-cost Carrier operational strategies pre- and post-recession," Journal of Air Transport Management, Elsevier, vol. 73(C), pages 87-94.
    30. Vicky Katsoni & Thanasis Spyriadis (ed.), 2020. "Cultural and Tourism Innovation in the Digital Era," Springer Proceedings in Business and Economics, Springer, number 978-3-030-36342-0, December.
    31. Clayton M. Christensen & Rory McDonald & Elizabeth J. Altman & Jonathan E. Palmer, 2018. "Disruptive Innovation: An Intellectual History and Directions for Future Research," Journal of Management Studies, Wiley Blackwell, vol. 55(7), pages 1043-1078, November.
    32. Wilken, Dieter & Berster, Peter & Gelhausen, Marc C., 2016. "Analysis of demand structures on intercontinental routes to and from Europe with a view to identifying potential for new low-cost services," Journal of Air Transport Management, Elsevier, vol. 56(PB), pages 79-90.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jost Daft & Sascha Albers & Sebastian Stabenow, 2021. "From product-oriented flight providers to customer-centric retailers: a dynamic offering framework and implementation guidelines for airlines," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(6), pages 615-625, December.
    2. Magdalina, Ana & Bouzaima, Martin, 2021. "An empirical investigation of European airline business models: Classification and hybridisation," Journal of Air Transport Management, Elsevier, vol. 93(C).
    3. Vatankhah, Sanaz & Bamshad, Vahideh & Altinay, Levent & De Vita, Glauco, 2023. "Understanding business model development through the lens of complexity theory: Enablers and barriers," Journal of Business Research, Elsevier, vol. 155(PA).
    4. Chiambaretto, Paul, 2021. "Air passengers’ willingness to pay for ancillary services on long-haul flights," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 147(C).
    5. Alessandro V. M. Oliveira & Thiago Caliari & Rodolfo R. Narcizo, 2024. "An empirical model of fleet modernization: on the relationship between market concentration and innovation adoption in the Brazilian airline industry," Papers 2401.06876, arXiv.org.
    6. Klophaus, Richard & Yu, Chunyan, 2023. "Short-haul airline services in Europe and North America - A cross-business model and cross-continental analysis," Journal of Air Transport Management, Elsevier, vol. 109(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Klophaus, Richard & Yu, Chunyan, 2023. "Short-haul airline services in Europe and North America - A cross-business model and cross-continental analysis," Journal of Air Transport Management, Elsevier, vol. 109(C).
    2. Soliman, Amr & O’Connell, John Frankie & Tamaddoni-Nezhad, Alireza, 2022. "A data-driven approach for characterising revenues of South-Asian long-haul low-cost carriers per equivalent flight capacity per block hour," Journal of Air Transport Management, Elsevier, vol. 103(C).
    3. Hunt, Jennifer & Truong, Dothang, 2019. "Low-fare flights across the Atlantic: Impact of low-cost, long-haul trans-Atlantic flights on passenger choice of Carrier," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 170-184.
    4. 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.
    5. Soyk, Christian & Ringbeck, Jürgen & Spinler, Stefan, 2017. "Long-haul low cost airlines: Characteristics of the business model and sustainability of its cost advantages," Transportation Research Part A: Policy and Practice, Elsevier, vol. 106(C), pages 215-234.
    6. Zuidberg, Joost & de Wit, Jaap G., 2020. "The development of long-haul low-cost networks in the North Atlantic airline market: An exploratory data approach," Transport Policy, Elsevier, vol. 95(C), pages 103-113.
    7. Klophaus, Richard & Merkert, Rico & Lordan, Oriol, 2021. "Mesh network as a competitive advantage for European LCCs: An alternative topology to hub-and-spoke for selling online connections," Transport Policy, Elsevier, vol. 106(C), pages 196-204.
    8. Kuljanin, Jovana & Kalić, Milica & Begović, Boris & Mijović, Nemanja & Renold, Manuel, 2021. "The effect of LCC market entry on dominant FSC's price into long haul sector: A case of Norwegian competition on British Airways' prices on selected transatlantic routes," Journal of Air Transport Management, Elsevier, vol. 91(C).
    9. Urban, Marcia & Hornung, Mirko, 2021. "Mapping causalities of airline dynamics in long-haul air transport markets," Journal of Air Transport Management, Elsevier, vol. 91(C).
    10. Magdalina, Ana & Bouzaima, Martin, 2021. "An empirical investigation of European airline business models: Classification and hybridisation," Journal of Air Transport Management, Elsevier, vol. 93(C).
    11. Bauer, Linus Benjamin & Bloch, Daniel & Merkert, Rico, 2020. "Ultra Long-Haul: An emerging business model accelerated by COVID-19," Journal of Air Transport Management, Elsevier, vol. 89(C).
    12. Chiambaretto, Paul, 2021. "Air passengers’ willingness to pay for ancillary services on long-haul flights," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 147(C).
    13. Oliveira, Bruno F. & Oliveira, Alessandro V.M., 2022. "An empirical analysis of the determinants of network construction for Azul Airlines," Journal of Air Transport Management, Elsevier, vol. 101(C).
    14. Soyk, Christian & Ringbeck, Jürgen & Spinler, Stefan, 2021. "Effect of long-haul low-cost carriers on North Atlantic air fares," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    15. Cho, Woohyun & Min, Dong-Jun, 2018. "Longitudinal examination of passenger characteristics among airline types in the US," Journal of Air Transport Management, Elsevier, vol. 72(C), pages 11-19.
    16. Soyk, Christian & Ringbeck, Jürgen & Spinler, Stefan, 2018. "Revenue characteristics of long-haul low cost carriers (LCCs) and differences to full-service network carriers (FSNCs)," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 112(C), pages 47-65.
    17. O'Connell, John F. & Avellana, Raquel Martinez & Warnock-Smith, David & Efthymiou, Marina, 2020. "Evaluating drivers of profitability for airlines in Latin America: A case study of Copa Airlines," Journal of Air Transport Management, Elsevier, vol. 84(C).
    18. Ferrer-Rosell, Berta & Coenders, GermÃ, 2017. "Airline type and tourist expenditure: Are full service and low cost carriers converging or diverging?," Journal of Air Transport Management, Elsevier, vol. 63(C), pages 119-125.
    19. Bernardo, Valeria & Fageda, Xavier, 2020. "Impacts of competition on connecting travelers: Evidence from the transatlantic aviation market," Transport Policy, Elsevier, vol. 96(C), pages 141-151.
    20. Jimenez, Edgar & Suau-Sanchez, Pere, 2020. "Reinterpreting the role of primary and secondary airports in low-cost carrier expansion in Europe," Journal of Transport Geography, Elsevier, vol. 88(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jaitra:v:89:y:2020:i:c:s0969699720304622. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/journal-of-air-transport-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.