The evolving low-cost business model: Network implications of fare bundling and connecting flights in Europe

Abstract

The evolving low-cost business model: network implications of fare bundling and connecting flights in Europe 1. Introduction Low-cost travel is becoming the dominant way of flying within Europe (Dobruszkes, 2013). However, there are signs of a slowdown in the organic growth of low-cost carriers (LCC) due to decreasing average frequencies and increasing average route distances, which is forcing LCC to adopt other business strategies for growth (de Wit and Zuidberg, 2012), including the possibility of establishing long-haul low-cost operations (Morrell, 2008) and hybrid low-cost business models (Klophaus et al., 2012). These evolutions make it more difficult to define the LCC business model; in fact, according to Mason and Morrison (2008) several business models coexist and can be categorised under the "low-cost carrier" label. Yet, discussions on long-haul low-cost and hybrid low-cost have developed relatively independently from each other, but both are related with changes in two fundamental principles of the low-cost business model: fare unbundling and point-to-point operations. The unbundling of fares is one of the characteristics of the archetypical LCC business model. Fare unbundling strategy is aimed at attracting price-sensitive passengers and competing on base ticket fares. In Europe, this strategy can be traced back to easyJet discounting fares for tickets booked through their preferred channel (direct online tickets were discounted at point-of-sale by £2.50 per sector in 1997), and the introduction of separate fees for various items (by 2005 these included credit card fees, change fees, partner fees, excess baggage and in flight food and beverage). These innovations were introduced to customers as a way of aligning the variable costs borne by the airline to provide such services to the cost of providing them. If a customer does not want to pay for a bag to be carried in the hold, the airline will have lower ground handling costs, which may be reflected in a lower base fare for that customer. All passengers paid a similar base fare, but those looking for a better level of service (e.g., larger leg-room) or additional services (e.g., inflight meals) could purchase them as an ancillary service (i.e., "à la carte fees"). 1 However, the unbundling strategy is rapidly changing and by 2013 an increasing number of low-cost carriers have introduced a fare category system in order to offer bundles of different services that used to be sold as independent ancillary products. Bundling services can help airlines to standardise their offering and have better control on the level of service provided to the customer, which

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Os Impactos Das Variáveis Macro-Economicas No Setor De Aviação Comercial Brasileira

“…O setor aéreo passou por uma desregulamentação mundialmente, como verificado por Fageda et al (2015), o que proporcionou para as companhias flexibilização na escolha de tarifas Todos as informações e direitos sobre o presente artigo são de total e única responsabilidade do(s) autor(es). mais tardiamente, quando os sucessivos esforços para conter a inflação no final da década de 1980 fracassaram e as políticas de controle de preços reduziram as receitas das companhias aéreas.…”

Low cost carriers and the changing fortunes of airports in the UK

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