Comparative Analysis of Airlines Business Models: Cost and Operations

This essay provides a comprehensive analysis of airline business models, focusing on low-cost carriers (LCA), full-service airlines, and the hybrid model. It explores the reasons for the shift in business strategies due to economic recessions and the increasing popularity of the hybrid model. The essay evaluates the differences between LCA and full-service models in terms of services, cost structures, and operations, highlighting the rise of long-haul low-cost carrier (LHLC) operations. The conclusion emphasizes the adaptation of airlines to changing economic conditions and the growing importance of hybrid and LHLC models in the aviation industry.

Running head: AIRLINES BUSINESS MODEL
Airlines Business Model
Name of the Student
Name of the University
Author Note

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Introduction
Airlines business is a blooming industry in recent time due to the global enhancement
technology. Nowadays, people mainly concentrate on saving their times. As the airlines allow
the people to travel a long distance in a very short time span, the popularity of this business has
increased a lot in last few decades. Therefore due to the global economic recession, the along
with all other industries, the aviation industries has also faced this difficulties. As a result, the
airlines companies have to compromise their existing business models. Most of the airlines
companies generally followed the low cost strategies for combating with these situations. The
existing full service business model followers starts to shift to the low cost business model
strategy due to the economic crisis which affected almost all the sectors worldwide. On the other
hand, the aviation companies who are already using the low cost business model modified their
business strategies to such extent that a hybrid business strategy is discovered and this new
business model created a bridge between this traditional full service business and low cost
business model of the aviation sector (Bieger and Agosti 2017). In this essay, the different type
of airlines business models are highlighted. In addition to this the evaluation of this two types of
model are also discussed. In the later part of this essay, the Long Haul operation with low cost
carrier products is discussed in a brief manner.
Different types of Business model
It can be said without any doubt that, the low cost airlines (LCA) has created a revolution
in the aviation industry and this models are offering an low cost air services to the customers
worldwide. The LCA business model is mainly based on the fundamentally different postulates
which are related to the business model of traditional airlines. The LCA airlines are generally
operating in the medium haul routes. However, in recent years it is very difficult to identify the

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category of airlines due to the occurrence of various other mixed business models. The LCA
models of airlines business model generally concentrates on reducing the costs of services in
order to implement a price strategy in the market in which they are operating their business. For
example, it can be said that, in the world there are many airlines, such as Southwest Airlines, Air
Asia group, who are providing low cost airlines services to the world (Pels, Njegovan and
Behrens 2017).
The full service airlines refers to those airlines services which are providing a lot of
services such as inclusion of multiple classes within a single aircraft cabin, foods, beverages. The
companies which are following this model generally has different type of aircrafts, providing
services in domestic and international regions, a wide range of destinations are covered by them,
large price ranges for the multiple services. In most of the European countries, the national
carriers are the representative of this business model and on the other hand the countries like US
have multiple representatives of full services. For example Air France, British Airways ,
Australian Airlines are providing traditional full services (Taneja 2017).
The hybrid model of airlines refers to the new model of business that is the combination
of the LCA and full service business model. In this new hybrid model, the fare structure is
inspired by the LCA model and simultaneously it also follows the wide range of destinations
offering system of the full service model. In recent market, this new model is mostly followed by
the aviation industries and thus it is accepted by the medium class travelers and also by the
business class travelers. Air Berlin is a common example of hybrid model airlines (Ghorabaee et
al. 2017).
The main reason of the rapid change of the airlines business model is the prices strategy
of LCA model greatly affects the full service model. The LCA model can give an almost same

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service in a very low cost and this feature of LCA make LCA more popular. Due to this, the full
service airline services are also facing reduction in their business and these forces the full service
airlines provider to change their business as it has become very difficult to continue providing
services in reduced profit range. As a result, they also changed their business model and a new
model of services has introduced in the airlines market that is the hybrid model.
Evaluation of Two Business Models
While evaluating the two business models such as Low cost airlines (LCA) and full
service airlines a few segments can be emphasized for this evaluation process.
 Firstly, the services given by the LCA and full services airlines can be analyzed. While
analyzing this section it is found that LCA provides a low cost services to the consumers
and they offers same prizes for all the customers. A sub regional, short-haul, point to
point service is provided by them. Along with this they are also providing online and
offline booking services to the passengers. Therefore, no free services are not provided to
the customers. The full service airlines provides inter regional connecting flights to the
consumers and different fares are provided to different customers and channels. In
contrast to the LCA model full service airlines, offers entertainment services such as
video and audio services to their consumers (Van de Voorde 2015).
 In most of the cases it is observed that, the LCA model airlines are generally
concentrating on the profitable routes and as a part of their cost reducing plan they are
using kiosk based check in system. In order to reduce their costing, LCA model airlines
only offers airline services in a low cost and there is no aggregation of costly services. On

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the other hand, the full service airlines built more hubs for giving services to the
consumers by providing connecting airline services (Pels, Njegovan and Behrens 2017).
 The LCA airlines routes are evaluated in a uniform manner based on revenues for traffic
on that particular route. In order to reduce the service costs, the LCA airlines generally
operate through the secondary airports and it helps to reduce the total unit costs by many
folds. The main reason of the success of the LCA model is the low cost service. On the
other hand the main reason of adapting the new model is the high service cost of the full
service models. Therefore, in some countries like US, China, Mexico full service airlines
are still the dominator in the airlines market.
 While comparing the cost structure of the two types of business model it can be easily
observed that, the LCA model mainly reducing their costs by using the new generation
model of point-to-point routes and this will allow the LCA airlines to reduce the turn-
around time, utilization of fuel and also to enhance the utilization of the aircraft. On the
other hand, the full service airlines focuses on inter connecting aircrafts and aggregating
core services with additional services and this will enhance the total cost of their service
(Pels, Njegovan and Behrens 2017).
Long Haul Operations with Low Cost Carriers
In recent time, the long haul operations with low cost carriers have become very popular.
In recent times, almost 20 companies are offering LHLC in the world and this trend is increasing
in the world day by day. Due to increase of the LHLC, the routes of LHLC have also increased
from Europe by 2.5 times in between 2015 to 2017. The emergence of LHLC has become
popular in the world airlines business. It is recommended that in order to compete in the
international market of aviation the LHLC model is one of the best model. In recent times,

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almost 19 LHLC airlines are serving almost 3% of total LHLC market. It is very helpful as it is
consuming 20% less fuel than the traditional one and providing almost 6% cost advantage to the
companies (Little 2019).On the other hand almost 25% savings can be done from the reduced
costs of the cabin crew. However, it will cause reduction in placements of those candidates as
well. In addition to this, the point-to point network strategy will reduce the overall travel time of
the passengers as well (Lawton 2017). Moreover, this will allow those LHLC airlines services to
improve their services as they can reduce their cost of marketing due to the immense popularity.
Conclusion
Hence it can be concluded that, due to the economic recessions in the world, the full
service airlines and LCA airlines have to remodel their business strategy and as a result the
hybrid model come into the play. Due to its mixed service, the hybrid model has become very
popular and most of the companies are using this model nowadays. Moreover, the LHLC
services also started in recent past to give more economical comfort to the middle class
passengers.

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References
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