The impact of low-cost carriers on high-quality producers in the aviation industry: cost-benefit analysis

Nizar Mohammad Alsharari (Department of Accounting, Finance and Entrepreneurship, College of Business, Jackson State University, Jackson, Mississippi, USA)

Journal of Money and Business

ISSN: 2634-2596

Article publication date: 24 May 2024

190

Abstract

Purpose

This paper aims to examine the low-cost carriers (LCC) impact on the high-quality carriers (HQC) in the aviation industry. The impact of LCCs on high-quality producers in the aviation industry has been a significant and multifaceted phenomenon.

Design/methodology/approach

The study employs a captivating case study approach, investigating into the intricate fabric of the subject matter. Interviews serve as the cornerstone of primary evidence, offering first-hand insights, while secondary data sourced from documents adds depth to the exploration of the challenges encountered by the HQC.

Findings

The study concludes that LCCs have disrupted the traditional aviation landscape by offering low fares, simplified service models and aggressive cost-cutting strategies. This disruption has affected both the high-quality producers, such as full-service airlines. Full-service airlines have adopted a strategy of segmenting their market by offering multiple fare classes, with varying levels of service and flexibility. This allows them to target both price-sensitive travelers and those seeking premium services, catering to a broader customer base. The competition from LCCs has spurred innovation within the aviation industry, leading to advancements in technology, digital services and operational efficiency. Airlines, both LCCs and traditional carriers, have had to adapt to evolving consumer preferences and embrace digital solutions for booking, check-in and in-flight services.

Research limitations/implications

While this study provides a valuable cost-benefit analysis of the impact of LCC on high-quality producers in the aviation industry, it is essential to acknowledge its limitations and recognize the avenues for future research to further enhance our understanding of this complex and evolving industry landscape. While this study contributes valuable insights into the impact of LCCs on high-quality producers in the aviation industry, it is essential to recognize its limitations and identify opportunities for future research to expand our understanding of this complex and dynamic landscape. By addressing these limitations and exploring new avenues of inquiry, we can continue to advance our knowledge and inform evidence-based decision-making within the industry.

Originality/value

This study pioneers an exploration into the intricate tapestry of factors molding the future of the aviation sector. Through its groundbreaking analysis, it furnishes indispensable insights for industry stakeholders, policymakers and the discerning traveling public, setting a new benchmark for understanding and navigating the aviation landscape.

Keywords

Citation

Alsharari, N.M. (2024), "The impact of low-cost carriers on high-quality producers in the aviation industry: cost-benefit analysis", Journal of Money and Business, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JMB-11-2023-0064

Publisher

:

Emerald Publishing Limited

Copyright © 2024, Nizar Mohammad Alsharari

License

Published in Journal of Money and Business. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode


1. Introduction

The aviation industry has undergone a remarkable transformation over the past few decades, primarily fueled by the emergence and proliferation of low-cost carriers (LCCs). These budget airlines have disrupted the traditional aviation landscape by offering passengers affordable travel options, streamlined services and an unrelenting focus on cost efficiency. As a result, the aviation industry as a whole has experienced a significant paradigm shift (Alsharari, 2022; Alshurideh et al., 2019). This study delves into the multifaceted dynamics and consequences of the impact of LCC on high-quality producers in the aviation industry, emphasizing a cost-benefit analysis. The coexistence of LCCs and high-quality producers, such as full-service airlines, has presented both challenges and opportunities. While LCCs attract budget-conscious travelers with lower fares, they have forced traditional airlines to reevaluate their pricing strategies, service offerings and operational efficiency. The evolving competition has led to innovative approaches and structural changes within the industry, reshaping the way airlines operate and serve their customers.

The impact of low-cost carriers on high-quality producers in the aviation industry has led to increased competition, cost efficiency and changes in business strategies. Full-service airlines have had to adapt to the changing landscape by adjusting pricing, services and route networks to remain competitive in the industry. This ongoing competition and adaptation benefit consumers by offering a wider range of choices and price points in the aviation industry. The aviation industry is one of the most critical sectors in the transportation business. Air transport helps passengers move from one destination to another in the fastest way possible. Air transport has been changing rapidly, as low-cost carriers (LCC) are emerging in the industry. The emergence of low-cost carriers has a significant impact on s(HQC), as the LCC charges with fewer fares, making people save a considerable amount of money (Sarker et al., 2012). The market share of the LCC is continuously increasing in the Middle East region, as reported by the International Air Transport Association (Vidovic et al., 2013). The significant growth of the LCC is notable in the Middle East region, wherein Air Arabia has gained a remarkable position. The low-cost airline companies operating in the Middle East region are six in the present-day context, including Fly Dubai and Ras Alkhaimah (RAK) Airways, among many others (Alsharari, 2022; Alshurideh et al., 2019).

The objective of this study is to analyze the impact of the LCC on the HQC in the Middle East region. The rationale behind this research is that the growth of low-cost airlines has become an emerging issue in the global context. The research topic was also selected to make people aware of the benefits of low-cost airlines. This study, after the introduction, is structured as follows. Section 2 presents the critical literature about the aviation industry. Section 3 provides the research methodology. Section 5 shows the analysis and discussion, and section 6 presents the discussion and results. This is concluded by the conclusions of the study.

2. Literature review

The airline industry within the Middle East market had started to earn a considerable profit during the 1970s, when the industry introduced LCC to bring the service for the budget-conscious people. LCC as an airline or carrier, which offers discounts and comparatively low-cost services to the customers to increase the sales rate. This will simultaneously lead the company to gain competitive advantages within the highly competitive market. The Emirates Group (2015) report has further highlighted that the Emirates and Qatar Airways are more inclined towards adopting the LCC business model to enhance the revenue and profit margin. The LCC business model is widely spread worldwide, specifically within Europe and North America. However, the model is comparatively new for specific companies, as they have recently adopted it to enhance their financial conditions by increasing the overall sales rate. More elaborately, Vidović et al. (2013) affirmed that several industries, including aviation, had been affected negatively due to the global economic crisis. It was forced to change the business model to balance the current market requirements and strategic goals. Due to liberalization, LCC has revolutionized the medium-haul market, especially within the Middle East region (Mason and Alamdari, 2007).

Vidović et al. (2013) further affirmed that the concept of LCC had been initially developed within the US market, from which it has been adopted by the European market and across the world after the 1990s. The below-mentioned diagram has been developed by AlJazira Capital (2013), which indicates that the fundamental LCC model includes certain services. However, all the companies do not follow similar models or services. Furthermore, the differentiated strategy is another essential factor, which depends on the local legislation that needs to be followed or maintained by the companies while implementing any strategic changes within the organization. For instance, certain LCC provides onboard meals without extra cost, whereas others charge for this service. This mostly depends on the competitive market and business practices among the market players (Sabuncuoglu et al., 2001). The main services provided by low cost carriers are presented in Figure 1.

Alsharari (2016a, b) further mentioned that the Middle East market had witnessed significant growth regarding the LCC business model, specifically after the establishment of Air Arabia, which is an LCC with its headquarter in the United Arab Emirates (UAE). The report of Aljazeera Capital (2013) highlighted that the region operates around six LCCs, among which three LCCs are based in UAE. The LCC business model mainly concentrates on providing services with a comparatively lower price range, prominent in the Middle East market. Figure 2 below indicates that the Middle East market has adopted the LCC business model, and it will require a few years to compete with other regions, as other regions such as Europe, South West and North America has dramatically adopted this model (Davison and Ryley, 2010).

In the beginning, the airline was mainly concentrating on the customers with a high-income range by offering HQC, which on the other hand, limited the target market as well as the revenue of each company. Thus, most companies are moving towards LCC in recent decades instead of concentrating on the HQC Business Model. This has a high impact on the HQC businesses in the long run by reducing market share and overall revenue. Furthermore, by concentrating on the UAE airline companies, it can further be affirmed that the government of UAE supports the companies financially based on which the business model can easily focus on increasing efficiency by reducing the price range of the products (Barbot et al., 2008). On the other hand, service quality is another critical dimension that plays an essential role in the competition. HQC, in this perspective, has a positive outcome, as the service provided by these companies is considered an added frill based on the higher price considered. People mostly prefer high-quality service along with a comparatively lower price range. Therefore, parallel to providing a lower cost to the customers, satisfactory service is also considered an equal requirement (Francis et al., 2007). Figure 3 includes five dimensions of quality service: empathy, tangibles, responsiveness, assurance and reliability. Furthermore, there are two significant aspects in providing satisfactory services: expected and perceived service.

Based on the increasing demand for tourism and federal government support to the airline companies, it has been apparent that the Middle East market has significantly adopted the LCC business model. However, it has considerably affected the HQC companies by reducing market power and customer preferences (Olipra, 2012; Connell, 2006).

3. Research methodology

This study concentrated on both the LCC and HQC Business Models to determine the outcome in the overall aviation industry. Several companies before the LCC introduction continued to operate the airlines business through HQC by targeting limited customers. However, with the advancement of different managerial tools, companies often modify the services to maintain their uniqueness in front of the customers. Before the introduction of LCC, the intensity of market competition was comparatively less. Thus, it can be affirmed that the development of LCC has significantly changed the overall market scenario by including more complications within the business context. To elaborate on the previous scenario of the aviation industry, reviewing literature sources provided the most effective outcome. The study determining the impact on the market due to the high involvement of LCC has become an essential topic of research for which several types of research have been conducted. Therefore, reviewing a wide range of literature sources to elaborate the impact of LCC services on HQC services provided the expected outcome. Hence, the research is conducted based on the qualitative approach. Another supportive factor for applying a qualitative approach is that it does not involve any calculations. Such an approach is that quantitative analysis, which involves calculations, might have led to absurd results. The use of a qualitative approach has allowed understanding the complexities and subtleties of the problem that the HQC has been facing due to the growth of LCC in the Middle East region (Ateneo, 2009).

Using available literature sources provides an apparent representation of the overall impact of LCC. However, evaluating real company examples is a practical approach to understanding current trends. Hence, the research included two companies based in UAE, namely Emirates Airline and Air Arabia, which are engaged in different business models. Based on the current market scenario, these companies are considered ideal examples are providing unique services and high-profit margins. The research concentrated on determining the current situation of these companies regarding applying the respective business models within the business. This helped provide more transparent, reliable, valid and relevant outcomes to the research (Alsharari, 2017, 2018a, b; Ateneo, 2009).

The study considered both primary and secondary data for attaining the stated research objective. The primary data are collected from the company annual reports, investors' reports and other company websites. The companies providing these sources are considered more reliable and provide information that helped increase research efficiency. The secondary data collected from credible journal articles included information relating to the aviation industry before the emergence of LCC in the Middle East region. This data collection approach is decisive, as attaining this information from alternate sources such as interviews and questionnaire surveys, among others, is not feasible.

Moreover, the overall impact can be highlighted through these literature sources, which the companies have faced due to the increasing competition rate over time. The research has concentrated on evaluating the current scenario. It included journals and other credible sources that have been published within the past 16 years to attain the objective of the research. While reviewing the literature sources, initially, the research included information in a global context. However, to attain the research objective, it focussed on the Middle East context. The appropriate analysis of these credible sources led to reliable, valid and relevant outcomes (Alsharari, 2019).

Utilizing secondary data within the research helped to enhance understanding by evaluating the fundamental concepts and previous scenarios before the introduction of LCC. Without reviewing the previous scenario of the industry, analyzing the current setting and determining the change might not have provided the expected outcome. Another positive factor of using secondary data is its easy accessibility. On a contrary note, the secondary data is considered the outcome of others' reviews or perceptions, which might not be similar to the research objective. Hence, purely concentrating on the secondary data could have reduced the efficiency of the research outcome. Apart from this, the research needed to elaborate the company activities in the current market due to the high involvement of LCC and negative impact on HQC, for which including primary data is an essential aspect. The primary data collected concentrates on the respective companies' current strategies and other factors. Therefore, the secondary data evaluated the overall impact of LCC on the HQC in the recent market, and the primary data elaborated those impacts regarding the two selected companies.

The data analysis is the central part of the research, leading to the appropriate determination outcome. It has been mentioned that the research outcome has been determined based on both primary and secondary data. The primary and secondary data that have been collected for the research were analyzed through the textual analysis method. The textual analysis method is the data gathering process that evaluates several sources and interprets them based on the actual scenario. The collected data has also been analyzed through logical interpretation. The analysis method mainly focuses on evaluating any situation from a particular cultural or industrial perception and manages to determine the insight of the literature. This analysis method is appropriate as it restricts the attainment of absurd outcomes (CAPS, 2012).

On the other hand, including case study analysis enhances understanding the business activities based on real examples. Case study analysis helped collect a wide range of data that general research design might not have provided. Emirates Airline is the most successful company providing high-quality services to its premium customers (The Emirates Group, 2015). The activities and recent strategic changes of the company have been evaluated so that the impact of LCC on the company decision-making process can be highlighted. On the other hand, Air Arabia is the largest company globally in service providing that concentrates on LCC business (Air Arabia, 2013). Analyzing the activities of LCC helped to provide a clear understanding of the situation of HQC.

4. Analysis and discussion

The global crisis has visibly increased over time, leading the Middle East airline market to reduce operating costs compared to the traditional airline business model. Additionally, adopting the LCC business model would attain a prominent position for the companies, considering its cost leadership strategies. Based on the secondary data, it can be affirmed that the companies need to be financially strong to adopt the LCC business model (Cho, 2012). More elaborately, cost leadership strategy mainly concentrates on providing extraordinary services to its customers within the comparatively lower price range, which the competitors cannot provide. Thus, the companies need to be financially strong to provide such services within a lower range at the initial stage, which will limit their profit margin (Sarker et al., 2012). Concentrating on the Middle East market, it has been apparent that the federal government provided significant support to these companies, a positive outcome for their future growth (Curtis and Rhoades, 2015). Focusing on the different dimensions, the LCC has primarily influenced the aviation industry based on customers' satisfaction, quality service and lower price range. The industry follows two business models, namely LCC and HQC. Notably, the LCC has forced the HQC to reduce its cost to retain customers in the market (Cho, 2012). To elaborate the stated fact, the research has evaluated Emirates Airline as an example of HQC company and Air Arabia as an LCC example to determine the impact of LCC on HQC.

4.1 Air Arabia airlines as LCC

Air Arabia is a UAE-based airline company established in 2003 that concentrates on the LCC business model. Within a decade of its business operations, the company has visibly expanded its business worldwide, including around 90 destinations among 40 countries (Air Arabia, 2015). This implies that the company has successfully enhanced its business and quality service and customer satisfaction. In recent decades due to high competition, threats of new entrance or competitors are increasing visibly. Therefore, the companies need to develop strategies and services to retain its customers, other positive approaches for Air Arabia. The company has expanded the business within a shorter period globally (Air Arabia, 2013). Figure 4 indicated that Air Arabia has visibly increased the customers' base from 2004 to 2013 (2004 representing as year 1 in the diagram), i.e. within ten years, it increased from less than 1 million to 7 million (Air Arabia, 2013). Based on the stated fact, it can be affirmed that the company mainly concentrates on retaining customers to gain competitive advantages within the market.

Customers’ satisfaction refers to the interaction among the employees and customers through which the company aims to develop its goodwill in front of the market. To maintain these procedures, the company needs to focus on the environment, employees' behavior, organizational culture and others (Dobruszkes, 2006). Air Arabia understood these factors initially, for which it included several programs and training to develop the organization’s “way of life”. Parallel to satisfying customers' requirements, the employees can also develop their competencies so that the company can concentrate on further growth. The company introduced the “Airwards program” strategy in late 2015, which indicated that the primary goal of Air Arabia is to enhance the market by attracting new customers. Through the program, the company influences its customers to pay for the service instead based on the distance traveled (Air Arabia, 2015).

The company consistently develops its services provided to the customers and expands the business every year. In 2015, the company enhanced 23 new routes and targeted increasing the routes with around 50 fleets by the year 2017. Cost and service are always correlated. Thus the companies need to be financially capable of providing high-quality services. However, in the case of Air Arabia, the company consistently provides satisfactory services with a lower price range even after raising the operational cost. Since the company’s establishment, it has always provided adequate services according to the customers' feedback (Air Arabia, 2015). The revenue collected by Air Arabia for different services are presented in Figure 5.

To evaluate the stated fact, Figure 5 highlighted the revenue mentioned above for the fiscal year 2015 as collected by Air Arabia for different services. The diagram indicates that although the company generates revenue from several sources such as cargo revenue, baggage revenue, lease rental and service revenue, among others, passenger revenue is the primary source of the annual revenue, which contributed around 890.81 million dollars, i.e. approximately 90% of the overall revenue. Thus, it is apparent that the company is continuously generating high profit with the lower pricing strategy, as the numbers of customers are visibly increasing (Statista, 2016). The federal government policies have provided support to the company in reducing operating costs through which it maintained the superior quality service and the reduction in the cost factor. In the case of the airline industry, the companies' high cost includes operating costs such as maintaining the internal environment of the aircraft, providing satisfactory service, concentrating on sales and food, among others. Hence, Air Arabia primarily engaged in the online portal to sell the seats, which helped the company reduce operating costs and increase revenue overall (Morrell, 2008).

4.2 Emirates Airlines as HQC

Emirates Airlines started to serve people from year 1985. Initially, the company concentrated on the Dubai market, and with time, it expanded its business across the world. Experience is an essential factor of the company that helped compete within the aviation industry for more than 30 years. Since the company’s establishment, it has concentrated on the HQC business model by targeting people with a high-income range. According to the annual report of 2015, Emirates Airlines is the third-largest company in the world. The company currently operates among 78 countries with around 56,725 employees globally (The Emirates Group, 2015). The company’s customers mostly prefer it for its unique and well-maintained services. Emirates Airline is the first airline to concentrate on enhancing the aircraft environment so that the customers can gain a better experience (The Emirates Group, 2015).

HQC mainly concentrates on customers with a high-income range so that the companies can place high prices for the services offered. In the case of budget-concerned people, the price is the primary factor. However, the premium customers instead concentrate on the quality of their services. Emirates Airline had successfully maintained its business by sufficing these customers' requirements before the financial crisis occurred in Dubai. The company has to face enormous difficulties during the crisis regarding the high price range. Furthermore, concentrating on the customers with high-income further limits the target market, which is another concern for enhancing overall revenue. Figure 6 indicates that the revenue has been declined in the fiscal year 2009–2010 from 3.2 million to 3.1 million (The Emirates Group, 2010).

On the other hand, consistent development of LCC started to attract customers, for which retaining them became a severe concern for Emirates. Several companies have entered the market, due to which several choices have also been increased, which eventually increased competition. This has further enhanced the new entrance threats that have forced Emirates Airline to reduce its operating cost. However, reducing operating costs indicates that the company needs to compromise its quality of services or profit margin (The Emirates Group, 2010). The revenues collected by Emirates Airline for different segments are presented in Figure 7.

The above Figure 7 highlighted the position of Emirates during the crisis in which the revenue in information technology and airport operations have been reduced from the previous years. Initially, the company concentrated on providing satisfactory services and a comparatively lower profit margin to maintain its operational management cost and other financial expenses such as marketing, acquisition and equipment maintenance (The Emirates Group, 2010). The company has always focused on providing innovative services to retain its customers, which is another positive factor in gaining competitive advantages. In 2010, the company decided to increase the number of Airbus and other extra services that can influence customers to prefer their airline in the future. In this perspective, it can be affirmed that although the company has faced colossal problems to survive in the market during the financial crisis, it has consistently implemented unique strategies to gain a sustainable position within the market (The Emirates Group, 2015).

5. Discussion and results

The above sections revealed that the LCC business model has visibly been developed within a decade. The effective government policies in the Middle East region and high customer preferences have provided massive support to the airlines to follow the LCC business model. The airline companies provide the customers with high discounts and low fares, which helped the businesses sustain their position in the industry. Consistent development of the LCC in the global context has forced the HQC, such as Emirates Airline, towards introducing the LCC business model to increase the company’s overall profits. In recent decades, several aspects such as competition, frequent changes in market requirements, and the increasing rate of new entrances force the companies to concentrate on strategic development and customer satisfaction. Apart from this, the involvement of LCC creates the scenario more complicated and challenging to survive with a profit for HQC (Snyder and Tai, 2014). This is a significant impact on the HQC, as the companies are continuously losing their grip due to these factors in the market. The customers' preferences frequently change based on the development of technologies for which the companies also need to enhance their facilities. Initially, due to lower competition, the airlines rarely concentrated on the service or other facilities. However, in the current market, every company focus on providing unique and innovative services to retain the customers. Concentrating on the situation of HQC, due to the increase of the LCC, the HQC is unable to generate high or expected revenue. The airline companies are continuously losing their customers, shifting to the LCC due to its satisfactory services within the comparatively lower price range. The customers prefer LCC services, which led HQC to face considerable problems to gain profit margin.

The HQC is facing the problem of the LCC that has taken over the region of the Middle East and revolutionized the air market in the region. The emergence of the LCC affected the revenue of the HQC and subsequently decreased customer loyalty towards the airline companies. The HQC has been losing its customer base, as the customer, due to low cost, prefers to travel through the LCC. The market shares of the HQC in on the decline, as the customers are more focused on the offers that the LCC provides (Vidović et al., 2013; Olipra, 2012). Figure 2 shows that the concept of the LCC recently started in the Middle East region and consisted of overall airlines operating in the same business model. Out of the 6 LCC airlines, three are from the UAE. The government of the UAE finally supports the LCC airlines, which further assists the airline companies to be more efficient by decreasing the cost. In the contemporary market scenario, customers mostly prefer quality services and a lower price range. Therefore, due to the growth of the LCC, HQC has been moving toward the launching of the LCC facilities to regain their lost customers. This will allow such companies to maintain the market share and a stable position in the air transport industry that will help them generate revenue and make a profit. The reason behind the growth in the LCC business in the Middle East is the increase in tourism. The airline companies in the Middle East also focus on providing quality service to their customers, such as providing food maintaining the internal environment of the aircraft, which helped to grow at a rapid pace. There has been significant growth in the LCC business of the Middle East, with Air Arabia being the first company to launch the concept in the region, which some more companies like Fly Dubai follow, RAK Airways, among many others (Al-Saleh, 2014).

Concentrating on the airline companies included in the research, it is apparent that the HQC has been affected negatively due to the fewer customers' preferences and reduced competitiveness within the market after the introduction of LCC. The HQC, although, provide satisfactory services, however, due to the high price, the customers nowadays mostly prefer the LCC companies. Therefore, to counter such issues, most HQC companies like Emirates are now categorizing the service into HQC and LCC, which concentrate on high-quality service for people with the high-income range and a low-cost carrier for budget-concerned people (The Emirates Group, 2015). This practice further helps the company to balance between quality service and price. Furthermore, the companies need to focus on several aspects such as maintaining the internal environment, food and another service, which on the other hand, increases the cost factor (Kalaiarasan et al., 2015). Hence, developing an appropriate business model and both the factors is an essential requirement of the companies within the Middle East market. The Federal government policies can also play a supportive role (Al-Saleh, 2014).

The research highlighted that Emirates Airlines had introduced some of the LCCsto enhance the company’s financial capabilities as a whole. During the financial crisis, the company has faced considerable difficulties surviving within the market. Therefore, it has divided its service into two parts, namely LCC and HQC, through which it has targeted to regain its position in the market. Including LCC within the business indicates that the company has a lower price range for which it can target the budget-concerned people. Thus, the company’s target market has also been increased, which successfully provided better service to the customers to increase the company goodwill. Based on the Figure 8 below, it can be stated that the company has continuously increased its sales since the year 2011–2012. It further shows that within five years, the company has earned revenue from AED (UAE Dirhams) 5,575 million to AED 10,360 million, in which the profit margin is AED 1,054 million in the fiscal year 2015–2016 (The Emirates Group, 2015).

Since its establishment, Air Arabia has solely concentrated on LCC business model and continuously serves people with high-quality service and lower prices (Air Arabia, 2013). Furthermore, based on the current financial situations of the company, it can be affirmed that the LCC has colossal potential in the long run compared to the HQC due to the cost factor. Thus, the HQC needs to adopt LCC so that the companies can balance between satisfactory service and profit (Al-Saleh, 2014).

6. Conclusions

This study presents compelling evidence that the LCC business model has solidified its position as a dominant strategy within today’s dynamic airline industry. Through the adept utilization of this model, airlines are empowered to strategically engage with cost-conscious consumers while simultaneously upholding high standards of service quality and operational efficiency. Furthermore, the strategic adoption of the low-cost strategy has emerged as a practical response to the intensifying competition that has defined the industry landscape in recent decades. This approach serves as a navigational tool for airlines seeking to effectively maneuver through the intricate challenges posed by an ever-evolving market environment.

Examining the Middle East market reveals significant shifts in the strategies of major players like Emirates Airline, which traditionally operated within the HQC segment. However, economic challenges prompted a re-evaluation of strategies, leading Emirates to embrace aspects of the LCC model to bolster competitiveness and financial resilience. This strategic pivot underscores the adaptability of airlines to changing market dynamics and consumer preferences. The sustained growth of airlines like Air Arabia underscores the potential of the LCC model in shaping the future aviation landscape. By integrating elements of the LCC approach into their operations, airlines can enhance revenue streams, expand market reach and optimize operational efficiency.

In recognizing the formidable challenges posed by escalating operational costs, airlines are acutely aware of the critical need to bolster sales volumes as a strategic means of offsetting expenditures. The symbiotic relationship between the LCC and HQC models serves as a cornerstone for airlines, facilitating a delicate equilibrium between stringent cost control measures and revenue enhancement initiatives, all while remaining attuned to the ever-shifting demands of the market. As the aviation industry undergoes continual transformation, airlines are increasingly embracing hybrid models that amalgamate elements of both LCC and HQC strategies. This strategic fusion empowers airlines to seize upon burgeoning market opportunities, optimize the allocation of resources and harmonize organizational objectives with the external dynamics of the market landscape. In essence, the integration of LCC and HQC models emerges as a strategic imperative for airlines navigating the competitive and fluid contours of the industry. Through a steadfast commitment to flexibility and innovation, airlines position themselves for enduring success, poised to meet the evolving expectations of discerning consumers and stakeholders alike.

Figures

Basic model of a low-cost carrier

Figure 1

Basic model of a low-cost carrier

Rank of different regions following LCC

Figure 2

Rank of different regions following LCC

Perceived service quality model

Figure 3

Perceived service quality model

Passenger range within ten years of Air Arabia

Figure 4

Passenger range within ten years of Air Arabia

Revenue generated by Air Arabia (2015)

Figure 5

Revenue generated by Air Arabia (2015)

Revenue generated by Emirates airline, 2005–2010

Figure 6

Revenue generated by Emirates airline, 2005–2010

Revenue generated by segment in Emirates Airline, 2010

Figure 7

Revenue generated by segment in Emirates Airline, 2010

Financial data of Emirates Airline, 2015

Figure 8

Financial data of Emirates Airline, 2015

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Corresponding author

Nizar Mohammad Alsharari can be contacted at: nizaralsharari@gmail.com

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