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Book part
Publication date: 31 May 2016

Kevin E. Henrickson and Wesley W. Wilson

Following deregulation, the airline industry has dramatically changed. In addition to numerous mergers and bankruptcies, the industry has also seen an influx of small, …

Abstract

Following deregulation, the airline industry has dramatically changed. In addition to numerous mergers and bankruptcies, the industry has also seen an influx of small, “low-costcarriers who offer differentiated competition to the traditional legacy carriers. These low-cost carriers traditionally avoided the hub-and-spoke networks of legacy carriers, offering point-to-point service often on adjacent routes. However, events of the past 10–15 years, including the terrorist attacks of 9/11, rising fuel prices, and economic recessions, have led to a shift in the operations of these airlines. The legacy carriers have unbundled many of their services, most notably through baggage fees, seeking to improve efficiency. Low-cost carriers have expanded services into major airports and have shifted to more direct route level competition with the legacy carriers as they use their cost efficiency advantages to their advantage. In this chapter, we examine airport and route choice decision to serve by legacy and low-cost carriers over time. Our descriptive and econometric models point to convergence of operations in terms of the airports and routes that low-cost and legacy carriers serve, with the implication that the current competitive atmosphere improves efficiency as the distinctions between legacy and low-cost carriers have become less obvious.

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Airline Efficiency
Type: Book
ISBN: 978-1-78560-940-4

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Article
Publication date: 1 August 2005

Dawna L. Rhoades and Blaise Waguespack

The purpose of this paper is to explore the changing face of airline quality by analyzing the reported service and safety data for the traditional and low cost carriers.

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6697

Abstract

Purpose

The purpose of this paper is to explore the changing face of airline quality by analyzing the reported service and safety data for the traditional and low cost carriers.

Design/methodology/approach

Data were gathered from Department of Transportation records on service and safety quality from 1996‐2004. A safety rate was calculated for each carrier by adding accidents, incidents, near mid‐air collisions, and pilot deviations and dividing the total number by yearly departures. The service rate was calculated by adding all complaint categories and dividing by yearly departures. Averages and confidence intervals were calculated. Analysis of variance was performed on group means.

Findings

The findings of this study indicate that the low cost carrier group examined here has closed the gap on its traditional rivals in the area of safety quality, posting safety rates that are not statistically different from the traditional carriers over the period of this study. On the other hand, it has not as a group yet addressed the problem of basic service quality, posting a statistically lower level of quality (as measured by consumer complaints).

Research limitations/implications

The study did not specifically examine airline amenities such as seat pitch, schedule, meals, or in‐flight entertainment.

Practical implications

Low cost airlines appear well placed to continue taking market share away from their traditional rivals who continue to struggle with high costs.

Originality

This paper is the first to examine the changing dynamics between traditional and low cost carriers following September 11.

Details

Managing Service Quality: An International Journal, vol. 15 no. 4
Type: Research Article
ISSN: 0960-4529

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Article
Publication date: 1 May 2006

Maik Huettinger

No‐frills carriers have revolutionized Europe's aviation market and have changed the airline business in a dramatic way. Having entered most of the countries in Central…

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5077

Abstract

Purpose

No‐frills carriers have revolutionized Europe's aviation market and have changed the airline business in a dramatic way. Having entered most of the countries in Central Europe, the wave has also reached the Baltics. The purpose of this paper is to reveal how a Scandinavian carrier entered the market with a subsidiary airline, by combining elements of low‐cost and traditional carriers.

Design/methodology/approach

The paper starts by giving a brief overview of the different airline operating philosophies. It is followed by an introduction into the Nordic airline market. The main focus will be on the operating strategy of Air Baltic and its relation towards the extension policy of Scandinavian Airlines.

Findings

The paper provides an independent and structured analysis about the strategy of Air Baltic. Theory was applied to determine how much the airline was influenced by the “low‐fare wave” of the aviation branch and its implications. The hybrid character of Air Baltic reflects the Central European/Baltic business environment.

Research limitations/implications

Research is partly limited to the information published by the airline itself. Because international aviation journals have not yet covered Air Baltic, newspapers and popular journals were used as a base of information. To fill this gap, two semi‐structured interviews with Air Baltic executives were carried out.

Practical implications

The study is a useful source of information for scientists and managers dealing with the airline industry or/and the Baltic Sea region. Lecturers might use the paper for case‐based courses.

Originality/value

This paper is one of the first comprehensive publications in the English language about Air Baltic and the Baltic aviation market.

Details

Baltic Journal of Management, vol. 1 no. 2
Type: Research Article
ISSN: 1746-5265

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Case study
Publication date: 2 August 2013

Terence P.C. Fan

Strategic management and marketing.

Abstract

Subject area

Strategic management and marketing.

Study level/applicability

Executive education; postgraduate; undergraduate.

Case overview

By 2004, the low-cost carrier model had just recently been introduced to Southeast Asia. Airlines under this model quickly began taking market share. Singapore's first budget carrier, Valuair, finds itself in fierce competition between two rapidly emerging competitors in the second half of 2004. Valuair needs to expand in order to remain competitive. However, for this to happen the company needs additional access to capital. The CEO, Sim Kay Wee, has begun pitching to investors that his company is a smart low-risk investment. Is Sim right, given Valuair's competitive position and the market environment in which it operates?

Expected learning outcomes

Students will be able to apply strategic frameworks in order to develop an understanding of Valuair's market position and use this understanding to advice investment decisions.

Supplementary materials

Teaching notes are available for educators only. Please contact your library to gain login details or e-mail support@emeraldinsight.com to request teaching notes.

Details

Emerald Emerging Markets Case Studies, vol. 3 no. 4
Type: Case Study
ISSN: 2045-0621

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Book part
Publication date: 25 August 2014

Bruce Prideaux and Randall Whyte

In recent decades there have been substantial changes in the structure of the global airline industry commencing with deregulation closely followed by the emergence of…

Abstract

In recent decades there have been substantial changes in the structure of the global airline industry commencing with deregulation closely followed by the emergence of Low-Cost Carriers (LCCs). LCCs have greatly increased the opportunities for affordable air travel by generating considerable opportunities for many destinations to tap into new markets. This paper examines a range of issues related to the operation of LCCs and how destinations may be adversely affected when problems emerge. Specifically the paper examines problems that arose in Australia in 2011 when Tiger Airways Australia was grounded for an extended period. Until its grounding the airline, while having a poor reputation for on-time service and customer service, did have a significant impact on airfares which rose on average by 15% during the period of it was grounded.

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Advances in Hospitality and Leisure
Type: Book
ISBN: 978-1-78190-746-7

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Article
Publication date: 1 January 2001

M.R. Pitt and A.W. Brown

As airports strive to attract new carriers, a new strategic direction is necessary to address the differing needs of the two main types of airline – network carriers and…

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6593

Abstract

As airports strive to attract new carriers, a new strategic direction is necessary to address the differing needs of the two main types of airline – network carriers and low‐cost airlines. The problem for the airport’s manager is compounded by the different management styles and philosophies that operate within the carriers themselves, meaning that the requirements of each airline may be subtly, or even fundamentally, different from one which might be expected to be placed in the same category. For strategic reasons, the facilities manager must understand the fundamental differences that exist between the two types of carrier. Examines the strategic response of Dublin airport to the presence of the two types of carriers requiring different services, and the difficulties faced by airport managers in the provision of the differing levels of service required by different customers. Sets out the strategic differences and suggests the resultant implications for facilities requirements. Shows that, in most cases, the provision of differing levels of “side by side” service to airlines is not possible with the existing strategic direction and that new directions are needed to facilitate the long‐term expansion of air transport.

Details

Facilities, vol. 19 no. 1/2
Type: Research Article
ISSN: 0263-2772

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Article
Publication date: 31 October 2018

Seoki Lee, Bora Kim and Sunny Ham

Considering the increasing significance of corporate social responsibility (CSR) in the corporate world and the mixed findings of the financial implication of CSR…

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1850

Abstract

Purpose

Considering the increasing significance of corporate social responsibility (CSR) in the corporate world and the mixed findings of the financial implication of CSR investment in the financial economics literature, the purpose of this study is to examine the relationship between (im)material CSR investment and firm performance and the moderating role of airline type and economic conditions based on the stakeholder theory and institutional pressure argument.

Design/methodology/approach

This study uses a two-way random-effects model by firm and year along with using clustering coefficient estimation by firm to control for the possibility of inflated standard errors because of autocorrelation across years within a given firm.

Findings

This study finds that both material and immaterial CSR initiatives do not directly influence firm performance, but airline type and economic conditions do moderate the relationship. In specific, the study found that airlines’ investments in material CSR initiatives show an indifferent effect on firm performance between low-cost and full-service carriers and also between non-recessionary and recessionary periods. On the other hand, investments in immaterial CSR initiatives present different impacts on firm performance between low-cost and full-service carriers and between non-recessionary and recessionary periods. In details, the effect is more negative for low-cost carriers and recessionary periods than full-service carriers and non-recessionary periods.

Originality/value

This is the first empirical investigation of materiality for the airline industry in relation to firm performance using the industry-specific Materiality Map developed by the Sustainability Accounting Standards Board. Further, this study incorporates two additional moderators (airline type and economic conditions) to enhance the understanding of the proposed relationships between (im)material CSR and firm performance.

Details

International Journal of Contemporary Hospitality Management, vol. 30 no. 12
Type: Research Article
ISSN: 0959-6119

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Article
Publication date: 18 September 2009

Sameer Kumar, Kevin L. Johnson and Steven T. Lai

The purpose of this paper is to analyze some of the issues US airlines are facing to control costs and improve operations.

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5491

Abstract

Purpose

The purpose of this paper is to analyze some of the issues US airlines are facing to control costs and improve operations.

Design/methodology/approach

A detailed comparison of two major airlines (American Airlines and Southwest Airlines) is performed to identify key differences and to confirm the areas on which airlines need to focus improvement efforts. Cause and effect diagrams are used to identify the factors triggering the issues. Process analysis is also used to offer improvements to reduce costs and improve customer service. Analysis is based on publicly available airline and industry information.

Findings

Revenue, costs, growing economic concerns and an extremely competitive environment are the major areas on which airlines need to focus to be successful. Recommendations are offered in these areas. Owing to the impact of the internet and travel consolidators such as Expedia, revenue increases are challenging, but suggestions are tendered to improve this area.

Originality/value

The study may cause airline management to consider the operational improvement possibilities that are still available within their industry. Be they major network carriers or growing low cost carriers, potential opportunities are identified for improved operational profitability, while maintaining and enhancing customer service. The use of process analysis can provide insights into the inefficiencies which exist within current processes and place more emphasis on demand pull type processes which require forecasting operational schedules.

Details

International Journal of Productivity and Performance Management, vol. 58 no. 7
Type: Research Article
ISSN: 1741-0401

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Book part
Publication date: 14 December 2018

Shinya Hanaoka

This chapter examines the issues of the low-cost carriers (LCCs) in Japan and their impact on the domestic and international aviation markets. “Genuine” LCCs, such as…

Abstract

This chapter examines the issues of the low-cost carriers (LCCs) in Japan and their impact on the domestic and international aviation markets. “Genuine” LCCs, such as Peach Aviation and Jetstar Japan, began their operations in 2012 to follow the new movement of low-cost and low-fare airlines, which are different from the “new emerging” airlines, such as Skymark and AIRDO that appeared in the late 1990s. We discuss the recent history of LCCs in Japan, the characteristics of each LCC, the competitiveness of the high-speed railway in the domestic market, the impact of open sky policies, and the contribution of inbound foreign visitors to the international passenger volume increase. As LCCs in Japan have recently begun operations, they can continue to play a significant role in the Japanese aviation market.

Details

Airline Economics in Asia
Type: Book
ISBN: 978-1-78754-566-3

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Case study
Publication date: 1 December 2011

Raghavan Parthasarthy and C. Gopinath

The competitive landscape of the U.S. domestic airlines dramatically changed when the industry was deregulated in 1978. While airline traffic and revenues grew…

Abstract

The competitive landscape of the U.S. domestic airlines dramatically changed when the industry was deregulated in 1978. While airline traffic and revenues grew exponentially, aided by unfettered market competition and resulting efficiency, airline profitability had mostly stayed lackluster due to cost pressures, chronic oversupply of seats, and intense price-based rivalry to fill seats. Thirty-two years into deregulation, the major airlines were still searching for the Holy Grail that would defend them against industry threats and deliver sustained profitability. This case describes the evolution of the U.S. domestic airline industry over the years, the cost pressures and revenue uncertainties airlines faced at the beginning of 2010, and the strategic options they were contemplating to effectively deal with these issues. The options ranged from shaping the industry structure to achieving differentiation through service offerings. The exact choices they made would determine their survival and long-term success.

Details

The CASE Journal, vol. 8 no. 1
Type: Case Study
ISSN: 1544-9106

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