An airline’s business model is a description of the value the company delivers to targeted customers and of how it configures resources internally and externally to achieve this (Holloway (2012).
Tretheway (2004) states that from 1945 to end of the 20th century, the world’s airline industry built a product that offers passengers to fly seamlessly to almost any other part of the world by purchasing a single ticket. However, to develop this product, airlines had to invest costly systems and infrastructure that will be used to serve not only to the passengers needing to connectivity but also to the passengers simply flying to point to point destinations. Tretheway says that there are no studies if there are economies of scope by serving both passengers with simple itineraries and passengers requiring connectivity services, but there are studies that found that there are only limited economies of scope by serving scheduled and charter services. As aviation industry has changed recently from regulated to deregulated, from government owned to privatized, from labour driven to technology driven and from in-house services to outsourced service, airline business models have also changed. Holloway (2012) says that; • deregulation/liberalization (by removal of barriers to entry) • Internet (by providing price transparency and increase in available choice of feasible flight configurations, new service attributes such as internet check-in for customers, lower distribution costs for airlines) • Advances in aircraft technologies (increased reliability of aircraft through quick turnaround times, high level utilization, low maintenance costs and new transcontinental flight destinations as a result of longer stage length of aircrafts) caused changes on airline’s business models. Now there are different business models to serve different types of passengers’ needs. Current airline business models are listed below: Legacy or full-service network carriers Full-service airlines also known as network airlines, legacy airlines (especially in US, because they existed before deregulation), established airlines, incumbent airlines, flag carriers. These airlines primarily operate on a hub-and-spoke basis, provides a wide range of services. Turkish Airlines, Lufthansa, British Airways, Delta, Singapore Airlines, Qantas, Air New Zealand etc. belongs to this group. Low cost carriers (LCCs) & Ultra low cost carriers (ULCCs) Low-cost airlines or carriers also named as budget airlines, no frills airlines or value-based airlines. This business model is a low cost model, rather than a low fare model. …show more content…
High cost carriers can offer low fares, but these are not sustainable (Tretheway, 2004).
In aviation sector, deregulated markets, entrepreneurs, population growth and economic wealth, availability and capacity of secondary airports and the growth of internet use as a distribution channel accelerated the spread of LCCs (Francis, Humphreys, Ison, Aicken, 2006).
Southwest, Ryanair, easyJet, Westjet, GOL and Air Asia are examples of this model.
Hybrid carriers
Hybrid airline business model combines best features of low-cost model (cost saving methodology) and full service model (service, flexibility and en-route structure). Hybrid airlines mostly operate on short-haul routes.
Air Berlin is an example of this category. It started as a charter airline until the mid-1990s, and then changed its business model to a hybrid model by offering services like full service and by expanding its destinations.
Aer Lingus is another typical example of this category. It was formerly full service airline, and then because of large competition, reinvented itself by offering low-cost flights.
(Vidovic, Stimac, Vince, 2013).
Charter carriers Charter
Tretheway (2004) states that from 1945 to end of the 20th century, the world’s airline industry built a product that offers passengers to fly seamlessly to almost any other part of the world by purchasing a single ticket. However, to develop this product, airlines had to invest costly systems and infrastructure that will be used to serve not only to the passengers needing to connectivity but also to the passengers simply flying to point to point destinations. Tretheway says that there are no studies if there are economies of scope by serving both passengers with simple itineraries and passengers requiring connectivity services, but there are studies that found that there are only limited economies of scope by serving scheduled and charter services. As aviation industry has changed recently from regulated to deregulated, from government owned to privatized, from labour driven to technology driven and from in-house services to outsourced service, airline business models have also changed. Holloway (2012) says that; • deregulation/liberalization (by removal of barriers to entry) • Internet (by providing price transparency and increase in available choice of feasible flight configurations, new service attributes such as internet check-in for customers, lower distribution costs for airlines) • Advances in aircraft technologies (increased reliability of aircraft through quick turnaround times, high level utilization, low maintenance costs and new transcontinental flight destinations as a result of longer stage length of aircrafts) caused changes on airline’s business models. Now there are different business models to serve different types of passengers’ needs. Current airline business models are listed below: Legacy or full-service network carriers Full-service airlines also known as network airlines, legacy airlines (especially in US, because they existed before deregulation), established airlines, incumbent airlines, flag carriers. These airlines primarily operate on a hub-and-spoke basis, provides a wide range of services. Turkish Airlines, Lufthansa, British Airways, Delta, Singapore Airlines, Qantas, Air New Zealand etc. belongs to this group. Low cost carriers (LCCs) & Ultra low cost carriers (ULCCs) Low-cost airlines or carriers also named as budget airlines, no frills airlines or value-based airlines. This business model is a low cost model, rather than a low fare model. …show more content…
High cost carriers can offer low fares, but these are not sustainable (Tretheway, 2004).
In aviation sector, deregulated markets, entrepreneurs, population growth and economic wealth, availability and capacity of secondary airports and the growth of internet use as a distribution channel accelerated the spread of LCCs (Francis, Humphreys, Ison, Aicken, 2006).
Southwest, Ryanair, easyJet, Westjet, GOL and Air Asia are examples of this model.
Hybrid carriers
Hybrid airline business model combines best features of low-cost model (cost saving methodology) and full service model (service, flexibility and en-route structure). Hybrid airlines mostly operate on short-haul routes.
Air Berlin is an example of this category. It started as a charter airline until the mid-1990s, and then changed its business model to a hybrid model by offering services like full service and by expanding its destinations.
Aer Lingus is another typical example of this category. It was formerly full service airline, and then because of large competition, reinvented itself by offering low-cost flights.
(Vidovic, Stimac, Vince, 2013).
Charter carriers Charter