5d57e65e-a0a9-482fIJTTE_Vol 3(1)_7.pdf

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Inernaional Journal or Trac and Transpor Engineering, 2013, 3(1): 69 81

DEVELOPMENT OF BUSINESS MODELS OF LOW-COST AIRLINES

Andrija Vidovi1, Igor timac2, Damir Vince31

University o Zagreb, Faculty o ransport and rac Sciences, Department o Air ransport,Vukelieva 4, 10000 Zagreb, Croatia2, 3Zagreb Airpor Ld., Rudola Fizira 1, 10150 Zagreb, Croaia

Received 4 March 2013; acceped 22 March 2013

Abstract:Te global economic crisis ha aecs all indusries, including he aviaion indusry,has orced airlines o adjus heir business models o exising marke condiions. Low-cosairlines, which ill he onse o economic crises in mos cases ollowed he base low-cosbusiness model, have adaped heir business model in such a way ha hey have implemenedsegmens o radiional airlines business models and hus creaed a hybrid beween radiional

and low-cos business models. Tis paper analyses o which exen low-cos airlines adjusheir business model o he hybrid business model.

Keywords:low-cos airlines, business model, hybrid sraegy.

1 Corresponding auhor: [email protected]

1. Introduction

Low-cos airlines (LCA) have revoluionizedhe medium-haul marke as a resul o

liberalizaion and deregulaion o he aviaionmarke in Europe in a way ha hey provideair ravel a signiicanly lower prices. heconcep was originally developed in he USAin he 70s o he las cenury, aer which in he1990s i has spread rs hrough Europe andnally in he res o he world. Te businessmodel by which he LCA had up o 50% loweroperaing coss compared o ull neworkservice airlines (FNSA) is no longer achievable,

due o he global economic crisis and higheruel coss, bu also because FNSA adjusedheir business models o he exising markecondiions. In an eor o mainain markeshare a he medium-haul markes, FNSAoer new producs, reorganize and raionalizeheir operaions, reduce coss and ees or heirservices. As he air ranspor indusry dynamicshas changed, so have business sraegies o LCA.

Te resul is a change or an improvemen obusiness models o LCA and FNSA.

2. Airline Business Models

In is beginning, LCA business model wasbased on undamenally dieren posulaesin relaion o he business model o radiionalairlines. Tere are hree basic airlines sraegies:FNSA, which operae on a broad geographiccoverage; LCA, which operae on medium-haul roues; and charer airlines which ocuson long-haul secors. Tis classicaion can beexended wih he segmen o cargo airlines, bu

his paper will ocus on he passenger airlines.

Over he recen years, here has been anincreasing rend o mergers and acquisiionso airlines, he creaion o dieren modelso alliances and he mixing o dierenbusiness models. While unil recenly, iwas clear which business model provideswha level o service, oday i is diicul o

UDC: 338.47:656.7DOI: htp://dx.doi.org/10.7708/ijte.2013.3(1).07


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Vidovi A. e al. Developmen o Business Models o Low-Cos Airlines

diereniae which airline belongs o whichcaegory, and ha has become especiallycomplicaed wih he emergence o hybridcarriers ha have urher expanded heir

oer in he aviaion marke. For ha reason,in his paper he speciiies o dierenbusiness models wil l be analyzed as wellas he possible reasons or he modiicaiono hese models. In he ollowing secions,a brie skech o he speciiies o hreeundamenal business models o passengerairlines will be presened.

2.1. Full Network Service Airlines

Full nevork service airlines are airlines haocus on providing a wide range o services,including muliple passenger classes inside anaircra cabin and he possibiliy o connecedighs. Since mos FNSA operae a hub-and-

spoke model, hese airlines are also calledhub-and-spoke airlines. In mos Europeancounries he naional carriers are ypicalrepresenaives o radiional airlines. For

example, Air France/KLM, Luhansa, BriishAirways, Ausrian Airlines, LO, ec. Whilemos o he ormer naional carriers in largerEU counries are now parially or compleelyprivaized, some saes, especially smaller,sill have a naional carrier wholly ownedby he sae. Fig. 1 shows he degree o heprivaizaion o Europes larges radiionalairlines. Ouside he EU, he number andsrucure o ownership varies rom counry

o counry. Te USA is he only counry inwhich a very large number o independen,ully privaized radiional airlines operae.Unlike he USA, in many counries o Asiaand Arica, only one sae-owned radiionalairline operaes.

Fig. 1.op 25 European raditional Airlines by Criterion Seats per Week Degrees o Privatization

Source: DLR (2008)


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radiional airlines are characerised by heollowing aspecs:

Flee: dieren aircra models, rom

small regional o large wide-bodyaircra;

Geographical coverage o nework:domesic, inra-European and long-haul l ighs, wih a ocus on herespecive home counry;

Srucure o nework: hub-and-spokenework oen complemened byhe seleced decenralized non-hublighs;

Schedules: a wide range o desinaionsoered via he respecive hub, highrequency o lighs;

he range o services: 2-4 passengerclasses, high level o service in irsand business class;

Prices: complex yield managemen, alarge price range.

Tere are several comercial and legal reasonsor FNSA o use hub-and-spoke neworks.As he number o desinaions is growing, sodoes he aircra load acor, resuling in lower

uni coss per passenger. I higher demandjusies he use o larger aircra, he unicoss per sea also drop. Tis phenomenonexplains why he larges aircra, he Boeing747 and Airbus 380, operae mainly beweenhubs where rafc volumes are very high.From markeing and sraegic poin oview, he bundling and redisribuion oincoming and ougoing passengers a hubsallows airlines o connec a larger number

o desinaions. In addiion, he airlines hause hubs have a endency o gaining markepower a heir respecive hubs, which allowshem less compeiion and o charge heso-called hub premium, e.g. higher ares orranser passengers ying rom hubs han orranser passengers and passengers who yon similar roues ha do no include airlines

Table 1

Cost Distribution o Low-Cost Airlines on Short-Haul Flights in Relation to raditional OperatorsCost reduction (%) Cost per seat

Tradiional scheduled airline 100

Low-cos airline

Operating advantages:

Higher seating density -16 84

Higher aircra utilisation -2 82

Lower ight and cabin crew costs -3 79

Use cheaper secondary airports -4 75

Outsourcing maintenance/single aircra type -2 73

Product/service features:

Minimal station costs and outsourced handling -7 66

No ree in-ight catering, ever passenger services -5 61

Differences in distribution:

No agents or GDS commissions -6 55

Reduced sales/reservation costs -3 52

Other advantages:

Smaller administration and ewer sta/ofces -3 49

Low-cos compared o radiional airline 49

Source: Doganis (2007)


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hub. In Europe his aspec is o a specialimporance due o he capaciy limiaionso larges hubs and slo allocaion whichpreven urher enry o new carriers.

Te bigges disadvanages o hub-and-spokemodel are he complexiy o connecing ighsin he given ime rame and high capaciyuilizaion during peak periods. As he demandor poin-o-poin lighs beween mosdesinaions worldwide is usually low, largehubs are he only way ha air services can beoered beween mos desinaions. Te legalreasons or he implemenaion o hub-and-

spoke model in he pas were sric bilaeralair service agreemens (ASAs), according owhich only one or a small number o airporsin each included were deermined as landingpoins. Sricly bilaeral agreemens are sillcommon beween he EU member saes andmos counries in Arica, Asia, he MiddleEas and Souh America.

2.2. Low-Cost AirlinesLCA ocus on reducing coss in order oimplemen a leading price sraegy on markes

hey serve. able 1 shows which sraegicmeasures lead o he reducion in uni coss.

Te usage o younger homogeneous medium-

sized ee (usually Boeing 737-700/800 orAirbus 319/320) usually resuls in lower uel,mainenance and personnel coss and in hecase o large aircra orders in lower capialcoss. Higher sea densiy in aircra resulsin lower uni coss or all cos caegories,such as ixed coss (including he coss ohe AC). he only variable he in-lighseaing coss (addiional coss associaed wihuel) increase wih he growh o passengers

on board. Delays can be reduced by usingsmaller, capaciy uncognesed, airpors andby ocusing on poin-o-poin ighs wihouconnecions, which allow LCA o maximizedaily block-hours, and by ha he uilizaiono aircra (Fig. 2).

Te ree-seaing philosophy also conribueso he reducion o operaing coss because i

encourages passengers o board he plane earlierand hus addiionaly reduce delays. Besidesuncognesion, smaller airpors usually chargelower ees han larger esablished airpors and

Fig. 2.Daily Aircraf Utilization

Source: DLR (2008)



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are willing o co-nance he promoion o newroues. Finally, he uni coss are reduced bydirec selling o ickes online, higher densiyseaing, as well as by eliminaing all orms o ree

in-igh services such as caering, enerainmenduring he igh, magazines, ec.

Te LCA price policy is usually very dynamic.For example, hey oer signican discouns ia person buys a icke well in advance, whichleads o he opening o markes or passengerswho would oherwise ravel by oher ranspormeans. LCA generae addiional revenues byselling producs and services during he igh

and on heir websies, or example, ees orcheck-in baggage and credi card paymen.

However, no all LCA have applied all he abovelised aspecs o savings. EasyJe, or example,is among hose LCA ha operae rom majorhubs (Amserdam, Madrid, Munich, Paris CDG,ec.) and uses he CRS (Compuer ReservaionSysem). Germanwings is one o he ew LCA o

have inroduced a requen yer program (FF),alhough ravelers have o pay a regisraionee o cover adminisraive coss. FlyBe andInersky have applied he elemens o he low-cos sraegy o he regional marke. Ryanairand Wizz Air are ypical represenaives o heoriginal low-cos model. Tey sill mainly usesmaller airpors and charge ees or baggagehandling. Air Berlin, he second larges carrierin Germany, operaes a business model ha is

a combinaion o he ypical elemens o heLCA, FNSA and charer business model. AirBerlin is a ypical example o a hybrid airline.

While he LCA in pas were iniially ocusedon shor-haul ighs, oday hey increasinglyexpand heir services o medium-haul markes.Te main reasons or he enering in medium-haul marke are he increased compeiion onhe exising roues and new ASAs beween

Europe and hird counries. For example,

Ryanair and EasyJe sared heir ighs romairpors in Wesern Europe o Morocco aerhe new agreemen on air ranspor beweenhe EU and Morocco had become eecive.

Tis is one example o he posiive eecs haLCA have on deregulaion o he marke andcompeiion, as well as he beneis or heusers o air services. In general, he increasingcompeiion and declining prices o servicescould be seen on all roues and pairs o ciiesoperaed by LCA. In addiion, he presenceo he LCA a uncognesed regional airporsconribues he developmen o he regional

economy and in some cases helps he regiono mainain or reinorce air services when, orexample, he primary airpor in he regionhas a capaciy limi wihou urher growhpoenial. Te examples o his are he Rhine/Ruhr region in Germany and he London area,in which a signiican growh o secondaryairpors (Cologne, Dormund, Sansedand Luon) parially helped relieve capaciy

resricions a he airpors o Dusseldor andGawick/Heahrow. From he perspecive oenvironmenal proecion, LCA, despie havinga signican conribuion o he absolue growhin he aviaion secor, have relaively low CO

2

emissions per passenger kilomere (RPK) sincehey operae a modern and uel-efcien eewih more seas han heir compeiors.

2.3. Charter Airlines

Charer airline is a broad erm or carriers haocus on he ransporaion o ouriss andare oen reerred o as holiday or leisureairlines. In he pas, he erm charer airlinewas requenly used because mos o he holidayighs were no sold direcly by he carrier buincluded in he charer packages oered byour operaors. oday, many charer ighsoperae as scheduled, alhough hey oen

have only a seasonal caracer.


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Charer airlines achieve low coss per sea-mileby ocusing on he direc poin-o-poin ighs,using a homogeneous ee o medium-sizedand large aircra wih a high seaing densiy.

Charer airlines ypically oer a ull serviceon he igh (ood, beverages, enerainmen,newspapers, magazines, ec.). he maindierences beween LCA and charer airlinesare reeced in he igh nework and yieldmanagemen. While LCA yield managemenollows an increasing price curve, leisure airlinesusually charge average prices amended byaddiional seasonal surcharges or discounsby occasional promoional ares. As ouriss

usually say on a vacaion or a week or longer,he ocus is on he concenraion o demandor a paricular desinaion on a ew ighsper week, while LCA on mos roues usuallyoer a leas one daily requency. Mos ourissare prepared o ravel long disances o hedeparure airpors and his allows airlines oconcenrae passenger ows on ighs romseveral deparure airpors. Several airlines

which concenrae on he ehnic marke,e.g. rom Germany o urkey, are acing ina similar manner.

3. The Evolution of Low-Cost Model

Since is appearance on he European markein he mid 90s o he las cenury he marke

share o LCA has grown rapidly, and radiionalairlines have been orced o change and adjusheir business sraegies a he medium-haulmarke. Currenly, here are more han 40 LCAoperaing in Europe and hey generae morehan 36% o oal passenger rafc (Fig. 3) and23% o oal Insrumenal Fligh Rules (IFR)operaions (Vidovi e al., 2012). However,heir marke share has no longer as signicangrowh as i was he case a ew years ago.

Te base model o low-cos airlines by whichhey achieve signicanly lower operaionalcoss is based on he characerisics lised inable 1, o which he mos imporan are heollowing: he ocus on minimal coss and pricesand maximum efciency, he use o youngeree composed mosly o one aircra model,he use o secondary and uncognesed regional

airpors, poin-o-poin nework o ighs, direcicke sales (mosly online), one passenger classinside he aircra cabin, no in-igh service, ec.

Fig. 3.LCA Market Share According to Available Seats - the Worldwide in Relation to Europe(2001 - 2012)

Source: CAPA (2013)



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However, over he las years he border haseparaed he business sraegies o FNSAand LCA becomes hinner. oday he baselow-cos model is applied by several LCA in

he world. Mixing o business sraegies ispresen in he majoriy o airlines who werecaegorized as LCA in he pas and shouldnow be properly classied as hybrid airlines.

he our larges LCA markes in Europe(UK, Spain, Germany and Ialy) represenmore han wo hirds o he oal number oranspor passengers and more han hal o hedesinaions oered by he LCA. Te growh

o he sea capaciy in he year 2010 on hesemarkes was 1,8% compared o an averagegrowh o 4,5% in he res o Europe, whichimplies greaer mauriy o hese markes. Ahe same ime, he number o roues oered inhese markes grew by 9,4% (Klophaus e al.,2012). Major expansion o roues combinedwih a modes increase in capaciy reecshe business sraegy o many European LCA,

especially air carriers such as Ryanair andEasyJe, which are developing new rouesraher han increasing he requency o ighso he exising desinaions.

Due o he large dierences in he operaingcoss in he pas, which were up o 50% loweror LCA when compared o FNSA, he spaceor urher cos reducions is very limied.Te reason or reducing he dierence in he

cos beween he LCA and FNSA lies in a ewundamenal acors. Dynamic aviaion markeand he increasing share o LCA led he FNSAo adjus heir business models in order ominimize he dierences in coss. Tereore,LCA were also orced o change heir basic low-cos models. Alhough he price o he servicewill remain he main compeiive acor in heselecion o he operaor, i is no he only acorha LCA should ake ino consideraion when

developing a new business sraegy.

LCA are now ocusing on oher areas aswell, such as mergers wih oher airlines,low mainenance coss while compensainghe increasing cos o uel and aircra,

he inegraion o new services ino heexising model, improving cusomer service,experimening wih long-haul ighs, ec. Tehree main reasons or he reducion o hedierences in he coss and challenges haLCA are acing are: increasing uel prices,increased coss o airpor services, especially orhose carriers ha use he services o primaryairpors and nally, he increasing compeiionin he aviaion marke (Hamsahul, 2012).

Te space or urher cos reducions is possibleonly or hose low-cos airlines which do noollow he posulae o he base low-cos model.For example, i airlines which have dierenmodels o aircra in heir ee moved o hesame ype o aircra (or same aircra amily,such as he A320 aircra amily, consising oA318, A319, A320 and A321), hey would be

able o reduce addiionally he operaing cossrelaed o raining and licensing o aircra crewand aircra mainenance personnel. Ryanair isan example o LCA which in is ee has onlyB737-802 aircra, while mos oher carriersoperae wih wo or more amilies o aircra.Te ee is more homogeneous when here isa smaller impac on he increasemen in oaloperaing expenses. However, i is esimaedha i he aircra ee is comprised o more

han 75% o he same amily aircra, i can beconsidered as sufcienly homogeneous orhe LCA (Klophaus e al., 2012). All lowervalues regarding aircra lee poin o hehybrid business model.

Anoher segmen in which individual LCAcan make addiional savings is he usage osricly secondary and non- congesed regionalairpors, i.e. he avoidance o he use o more

expensive services in primary airpors. Tere is


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no exac deniion o wha he real secondaryairpors are. One o he deniions says hasecondary airpors are hose airpors hahave less han 2 million annual passenger

rafc, while oher deniions classiy hemas hose airpors where here is no landingo he naional carriers aircra wih a leas100 seas. For he LCA i can be consideredo be saisacory when he percenage o suchairpor is a leas 50% o he oal number oairpors hey serve.

Te hird acor in which LCA can achieveaddiional savings is he sales nework. LCA,

such as Ryanair, which operae on a baselow-cos model, do no use inermediariessuch as ravel agencies or a global reservaionsysem, bu heir services are oered viaheir own websie. While some ravel agensoer a sale o he Ryanair ighs hrough heoperaors websie or he commission, i maybe considered ha his sale is no really adeviaion rom he principle o direc sales;

he carrier is no direcly involved in he salesprocess. Furhermore, on he websies o someagencies he igh oers are displayed, andaer clicking on hose links, he users willbe orwarded direcly o he websies o hecarrier or he process o buying ickes. I anLCA ari being oered over he inerne doesno include a reurn icke a a lower pricehan he sum o he wo one-way ickes, ican be considered ha he carrier operaes a

a base low-cos model. Te service o Ryanaircan be aken as an example, which does nooer more han one ari or he ime o heigh booking.

However, mos LCA have been oering laelyheir sales service via agencies and globaldisribuion sysem in addiion o he saleson heir own websies. Unlike Ryanair, heyoer more aris per igh. Te highes prices

usually include addiional services such as

exra baggage, choice o seas, change o aigh dae wihou he exra charge, ec. I allhe seas on he shor-haul igh are wihinone passenger class, his is seen as a one-class

igh. I he passengers in he rs rows andin he rows near he exis have he possibiliyo making a reservaion and speed boarding,his is also considered compaible or hiscrierion. For example, Germanwings doesno mee he one-passenger class crierion(hey oer economy and premium economyclass) since he sea wih more leg space areound in he ors en rowns in he aircra,which means ha hey deliberaely reduce

he sea densiy in he aircra in order o sellsome seas a higher prices.

According o he ELFAA gures (EuropeanLow Fares Airline Associaion), he majoriy ohe airlines ha are members o he associaionoperae homogenous aircra ee on shor-haul lighs. he homogeneiy varies rom41% (Air Balic) o 100% (Ryanair). he

average homogeneiy value o EuropeanLCA is esimaed a 92%. For example, hehomogeneiy o FNSA ee, which has helarges share in passenger air rafc on heour larges LCA markes in Europe (Alialia,Briish Airways, Iberia and Luhansa), isesimaed rom 67% (Luhansa) o 100%(Iberia). Relaions in number o aircra, eeype and aircra order beween FNSA andLCA can be seen in able 2.

Te crieria ha should be me by LCA inorder or hem o be considered as rue LCAare he ollowing: homogeneous aircra eeconsising o one aircra model (more han75% o requiremen or LCA), he usage osecondary airpors (over 50% o airpors shouldbe secondary or LCA needs), poin-o-poinigh nework, no code sharing, one-way ariper igh (only one-way aris or no more

han one or wo aris a any given momen),



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one class in he cabin, no exra services onboard (no in-igh service on a igh wih helowes or he highes ari, no ree charge orbaggage regisraion wih he highes or helowes ari, no FF program).

Briey, here are lised hireen crieria hashould be me by LCA in order or hem obe considered as airlines ha saisy he basicposulaes o he low-cos model. Te onlyLCA airline among he European op 20 hamees all he menioned crieria is Ryanair.Among he real LCA here can also be lisedWizz Air, Blu Express, Bmibaby and Blue Air.Tose airlines ha mee eigh ou o he enlised crieria can be called hybrid airlines

wih dominan characerisics o LCA, andhese are: easyJe, Je2, Corendon, ransavia,Vueling, Aer Lingus and Wind Je. Te hirdcaegory is hybrid airlines wih FNSA dominaneaures, which mee beween our and sevencrieria, and his caegory includes Norwegian,FlyBe and Germanwings. Te las group, whichmees up o hree above menioned crieria,can be seen as ull-service airlines, and heseare Air Berlin, Air Balic, Niki, Meridiana y

and Air Ialy.

As ar as he oher segmen o possible reducionin operaing coss is concerned - he usage osecondary airpors - 20 ELFAA members havehe average o 21%; only hree airlines meehe above menioned requiremen or he50% usage (or more) o secondary airpors

(Wizz Air 58%, FlyBe 53% and Ryanair 50%).

All European LCA, wih he excepion oAir Ialy, oer only one-way ickes on heirwebsies (wihou a discoun on reurn ighs).Tis is he only eaure ha diereniaes someLCA rom FNSA. On he oher hand, all largerairlines excep Ryanair oer enicing aris orrequen ravelers. According o he percenageo he airlines ha use secondary airpors, i

can also be concluded ha mos LCA use hesame airpors as FNSA, which addiionallyconrms he ac ha he border line beweenLCA and FNSA is becoming hinner.

4. Hybrid Models of Airlines

Te hird chaper has shown ha oday i is difculo deermine he dierence beween dierenbusiness models. Due o he dynamic airline

marke and an increasing number o airlines on he

Table 2Relaion in he Number o Aircraf, Flee Type and Aircraf Order o Tradiional and Low-Cos Airlines

FNSA LCA

Airline YearAC

type

No. o

AC

Order

ACAirline Year

AC

type

No. o

AC

Order

ACLuhansa 1950 18 291 78 Ryanair 1985 1 305 0

Austrian Airlines 1957 8 39 0 German Wings 1997 1 34 4

Air France 1933 16 250 36 easyJet 1995 3 210 16

KLM 1920 11 116 1 Wizz Air 2003 1 39 76

Iberia 1927 8 97 24 Pegasus 1990 3 40 79

TAP Portugal 1945 5 55 12 Vueling 2004 2 55 2

Turkish Airlines 1933 15 190 61 FlyBe 1979 3 66 26

British Airways 1974 14 259 36 Norwegian AS 1993 4 74 268

Source: CAPA (2013)


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marke (especially he smaller ones), airlines havesared o implemen a business model which byis characerisics does no mach he decripiono business models o airlines described in he

second chaper. Tis has resuled in he emergenceo a new model: a hybrid business model. Fig. 4shows he evoluion o he hybrid model in heexample o hree airlines (easyJe, JeBlue andSouhwes) or he period beween 2008 and 2010(Sabre, 2011). Tis model is a combinaion o hesavings mehodology o coss ha are pracicedby LCA wih he services, exibiliy and rouesrucure o FNSA. Tis business model is odaymaybe he mos represened one on he airline

marke. I is characerized by a high sandard ocomor and charging o all addiional services.I has been acceped by business ravelers andmedium-class passengers. As he represenaiveso his model here can be menioned JeBlueand Virgin Alanic rom he USA, as well as AirBerlin and Bmibaby rom Europe. Te example olong-haul airline ha has successully implemenedhis model is Air Asia.

Air Berlin is a ypical example o an airlinewhich has changed is business model rom acharer o a hybrid airline, hus i can be placedin he FNSA group in line wih he servicei oers. In order o reduce is dependenceon he larges German our operaors, AirBerlin, as he airline which was a charer airlineunil he mid-1990s, inroduced a igh oeroward ouris desinaions only beore he

compeiion did he same, and hus i hasbecome he larges ouris airline. In order oenlarge he oer o is ighs and become lessdependen on seasonaliy, in 2002 Air Berlinse up Ciy Shutle (now called Euroshutle),he service o low-cos ranspor ha operaesrom a large number o he airpors in Germanyowards he key desinaions such as London,Rome, Milan, Vienna and Zrich. In 2006 and2007 i ook over DBA and LU airlines, hus

expanding heir igh oer o he desinaions

wihin Germany and o par o long-haul ighsor ourism purposes. Unlike basic LCA, AirBerlin oers ranser lighs rom is hubsBerlin, Dsseldor, Nuremberg and Palma de

Mallorca, as well as he ull service level onboard (ood, beverages, enerainmen, FFprogram, ec.).

Anoher example o a ypical hybrid airlineis Aer Lingus. Tis is a ormer Irish naionalFNSA which oered ull service on is ighsrom Dublin and Shannon o Europe, and i wasconneced by long-haul ighs wih he USA.Te large compeiion on boh markes has

resuled in signican losses. Tis has led o a bigchange in a business model. oday Aer Lingusoers low-cos ighs rom Dublin o he mainEuropean airpors ha simulaneously boardighs wih a ull service and wo passengerclasses on he ighs o Norh America.

Par o cargo airlines has sared oering heservices o passenger ranspor in a way ha

hey use converible Qucik Change aircra.he example o his is N Airways. heairline is based in Lige, and in is ee i hasone Boeing 737-300QC or he purpose ocharer passenger ranspor, which enableshe airline he maximum usage o is aircrain a way ha i perorms passenger ranspora day and cargo ranspor a nigh. Anoherexample o an airline ha operaes in he sameway is ASL, which has in is ee Boeing 737s

and ranspors mail a nigh, while being usedor charer ranspor a day.

Te ac ha no only have LCA aken overhe FNSA business model is proved by heexample o radiional airlines FlyBe andInersky which have aken over he very lowari model rom LCA.

Hybid airlines mosly operae on shor-haul

roues lasing hree hours a minimum. Unlike



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Fig. 4Features o the Hybrid Model or Tree Airlines in the Period 2008-2010

Source: Sabre (2011)


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he LCA basic model, he aircra o such airlinesoer more leg space; he seas are covered inleaher; he cabin ligh has more qualiy, wopasseneger clasess are oered a exra charge,

enerainmen oer is larger, ood and beveragesare available a exra charge (wih some airlineshey are included in he icke price) as wellas WiFi and FF program (Kurh, 2008). Inaddiion o all his, some hybrid airlines havesigned conracs on he cooperaion wih largeairlines, hus expanding heir igh neworkand serving o he large airlines as a goodway or ransering passengers. Fig. 5 showshe characerisics o he hybrid model, i.e.

he basic eaures ha his model has akenover rom LCA and FNSA business models.

5. Conclusion

Te problems aced by all air carriers, such ashe increasing uel prices and airpor axes,as well as he increased compeiion on heaviaion marke, have led o he creaion o

hybrid airline business model ha combineshe bes eaures o he LCA and FNSA businessmodels. Te increased operaing coss will makea dierence beween business models smaller and

smaller; icke prices will be increasing wih heservice increase on board, which will coninueo be atracive o business ravelers, and lessor he leisure ones. Tis model has beenwidely acceped and i combines cos savingsmehodology which is a characerisic o heLCA base model, wih service, exibiliy, anden-roue srucure o FNSA business model.Te emergence o his model does no imply hedisappearance o he already esablished business

models o radiional and low-cos airlines romhe marke, bu due o he adjusmen o newmarke condiions, i is cerain ha in he nearuure here will be more airlines which willbase is developmen sraegy on he eaureso he hybrid business model. LCA will sillremain he dominan carrier in a poin-o-poinnework model or he desinaions up o hreehours o igh, even hough here are some

Fig. 5Te Characteristics o the Hybrid Model Based on the Characteristics o the LCA and FNSA Model

Source: timac et al. (2012)



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indicaions o opening long-haul ighs, alsobased on he hybrid air rasnpor model, whichshould inroduce urher compeiiveness ohe already weakened group o nework air

carriers on he global level.

References

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Rouledge, USA. 307 p.

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Air Transpor Managemen, 23(2012): 54-58.

Kurh, W. 2008. A Review o Regional Growh and

Susainabiliy in he LCC Marke. In Proceedings o he22nd Annual Geneva Inernaional Aviaion Forum, Aircra

Finance & Commercial Aviaion, MBA Workshop.

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Business Model. Available rom Inerne: .

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Crisis on he Changes o Low-Cos Carriers Business

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Airlines rafc Evoluion in Souh-Eas Europe,Journal

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New Ne Environmen in B&H, 7(1): 369-375.

R A Z V O J P O S L O V N I H M O D E L A

NISKOTARIFNIH VAZDUHOPLOVNIH

PREVOZILACA

Andrija Vidovi, Igor timac, Damir

Vince

Saetak: Globalna ekonomska kriza kojaporesa sve indusrije, pa ako i vazduhoplovnuindusriju, primorala je vazduhoplovneprevozioce na prilagoavanje svojih poslovnihmodela posojeim rinim zahevima.Niskoarini vazduhoplovni prevozioci, kojisu se do poeka ekonomske krize u veinisluajeva pridravali baznog niskoarinogmodela poslovanja, su prilagodili svojemodele poslovanja ako da su implemeniralisegmene poslovnih modela radicionalnihprevozilaca i na aj nain svorili hibrideizmeu niskoarinog i radicionalnog modelaposlovanja. U radu je prikazano israivanje kojeima za cilj da uvrdi u kojoj su meri niskoarini

vazduhoplovni prevozioci prilagodili svojposlovni model hibridnom modelu poslovanja.

Kljune rei: niskoarini vazduhoplovniprevozioci, poslovni model, hibridna sraegija.

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