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The blurring lines between full-service network carriers and low-cost carriers: A financial perspective on business model convergence

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  • Azadian, Farshid
  • Vasigh, Bijan

Abstract

Airlines rely on different business strategies in order to meet today's intensive competition and erratic market conditions. In the US, the low-cost carriers (LCC), posed a strong challenge to full-service network carriers (Legacy airlines) since their inception after the deregulation act of 1978. Encouraged by the success of the LCC, we have observed changes in the policies, practices, and strategies of legacy airlines. Similarly, some of the LCC such as Southwest Airlines adopted practices that are more expected from legacy airlines. In this research, we investigate the possibility of convergence of the LCC, especially Southwest Airlines, and the legacy airlines. We use econometric models to study the changes in the airlines' operation strategies for the last decade and provide a quantitative measure for convergence between the airlines. Our results support the hypothesis of convergence between the legacy airlines and Southwest Airlines. However, there is no evidence of strong convergence between the legacy airlines and other LCC.

Suggested Citation

  • Azadian, Farshid & Vasigh, Bijan, 2019. "The blurring lines between full-service network carriers and low-cost carriers: A financial perspective on business model convergence," Transport Policy, Elsevier, vol. 75(C), pages 19-26.
    • Handle: RePEc:eee:trapol:v:75:y:2019:i:c:p:19-26
    DOI: 10.1016/j.tranpol.2018.12.012
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