A FRAMEWORK FOR ASSESSING THE LOW-FARE MODEL IN THE AIRLINE INDUSTRY
technical_value
Maik Huettinger
Benas Adomavičius
Published 2011-01-01
https://doi.org/10.15388/Ekon.2011.0.952
115-130.pdf (Lithuanian)

How to Cite

Huettinger, M. and Adomavičius, B. (2011) “A FRAMEWORK FOR ASSESSING THE LOW-FARE MODEL IN THE AIRLINE INDUSTRY”, Ekonomika, 90(1), pp. 115–130. doi:10.15388/Ekon.2011.0.952.

Abstract

Despite the popularity of the “low-fare” (or sometimes called “no-frills”) airline business model, no comprehensive framework has ever been developed to evaluate the level of implementation of this business model. In the paper, we propose a framework for evaluating the extent to which an airline has implemented a “low-fare” business model. The framework (SFC) consists of three dimensions: (a) strategic direction factors; (b) pricing factors; (c) cost structure factors (COFA).
Strategic direction factors primarily focus on the top-level strategic decisions of an airline: growth concepts, the range of flights, spatial strategy and target group selection. These factors serve to differentiate the “lowfare” airlines from more traditional rivals on a strategic level.
Pricing factors evaluate differentiators at the level of market offer: relative ticket prices, the number of booking classes, ticket restrictions, interlining, penalties, non-ticket income and target load levels. These factors differentiate the “low-fare” business model on the value proposition level. Cost structure factors focus on internal cost-saving measures designed to significantly reduce the average costs per passenger: outsourcing, aircraft type homogeneity, levels of aircraft utilization, labour factors, airport costs, distribution and in-flight arrangements.
The SFC framework allows academics and practitioners to coherently analyze and identify gaps between current and desired levels of the “low-fare” business model implementation.

115-130.pdf (Lithuanian)

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