An Empirical Investigation of the Relationship between Profitability Persistence and Firms' Choice of Business Model: Evidence from the U.S. Airline Industry

2011 ◽  
Vol 23 (1) ◽  
pp. 37-70 ◽  
Author(s):  
Denton L. Collins ◽  
Francisco J. Román ◽  
Hung C. (“Leon”) Chan
Keyword(s):  
Business Model ◽  
Airline Industry ◽  
Low Cost ◽  
Profit Margin ◽  
Pricing Policy ◽  
Low Cost Carriers ◽  
Asset Turnover ◽  
The Individual ◽  
The U.S ◽  
Relative Persistence

ABSTRACT This paper examines the influence of a firm's business model on the relative persistence of profitability in the U.S. airline industry. The strategic management literature describes a firm's business model as reflecting how that firm chooses to compete in the marketplace. Given this linkage between business model, competition, and the marketplace, we conjecture that the persistence of profit margin and asset turnover ratios will be influenced by firms' choices of business model. Further, we hypothesize that this choice of business model influences the relative persistence of the individual revenue and expense components of current profit margin and asset turnover ratios for future profitability ratios. We test these conjectures by (1) partitioning our sample firms according to business model (network carriers versus low-cost carriers), and (2) decomposing sample firms' profit margin and asset turnover ratios into components relating to pricing policy, input cost control, and productivity. We find that the profit margin and asset turnover ratios of network carriers tend to be more persistent than those of low-cost carriers, and that this differential persistence is reflected in the associations between current revenue and expense components, and future profit margin and asset turnover ratios.

An Evaluation for Long-Haul Low-Cost Carriers Using User-Generated Content

2020 ◽  
pp. 231-251
Author(s):  
Mahmut Bakır ◽  
Sahap Akan ◽  
Ozlem Atalik
Keyword(s):  
Regression Analysis ◽  
Service Quality ◽  
Business Model ◽  
Airline Industry ◽  
Low Cost ◽  
Perceived Value ◽  
User Generated Content ◽  
Low Cost Carriers ◽  
New Business ◽  
The Relationship

Since the liberalization of the airline industry, the low-cost business model has been developed worldwide and a new business model of long-haul low-cost carriers (LHLCCs) has evolved. This chapter aims to investigate the LHLCC business model from a customer-oriented perspective in terms of service quality and perceived value. For this purpose, the authors investigated the effect of service quality on perceived value for money for LHLCCs. In this chapter, user-generated content was adopted to collect data, and 824 user-generated airline reviews were collected from TripAdvisor.com, the largest tourism-related repository. In order to investigate the relationship, a predictive correlational design was structured and a logistic regression analysis was applied. To contribute to the regression analysis, a receiver operating characteristic (ROC) analysis was performed to measure the classification success. As a result, the logit model describes well the relationship between variables for LHLCCs.

scholarly journals ANCILLARY REVENUE PRICING

2015 ◽  
Vol 6 (2) ◽  
pp. 43-62 ◽  
Author(s):  
Andreas Wittmer ◽  
Nicole Oberlin
Keyword(s):  
Airline Industry ◽  
Low Cost ◽  
Performance Ratio ◽  
Major Influence ◽  
Service Network ◽  
Price Performance ◽  
Low Cost Carriers ◽  
The Individual ◽  
Buying Behaviour ◽  
Network Carrier

The airline industry has evolved from a system of long-established state owned carriers operating in a regular market to a dynamic, deregulated industry. This development – especially the emerging competition of low-cost carriers – has had a major influence on the price setting behaviour of airlines. Profitability of airlines is limited and pricing systems are reconsidered. To stay competitive, traditional full service carriers consider the implementation of ancillary revenue systems, which are similar to low-cost carriers. This paper investigates challenges of an ancillary revenue pricing approach for full service network carriers. A qualitative means-end approach is used to find attributes, which are important for air passengers, and influence their ticket buying behaviour. In addition, the study provides insight into the perception of an ancillary revenue system in the full service network carrier market. The findings present 18 ticket purchase attributes and 15 behavioural terminal values in hierarchical value maps. Based on these values, it is evident that most passengers appreciate if some services are included in the price and not offered as ancillaries. Benefits of ancillary revenue systems include the individual ticket creation, customisation, improved price-performance ratio, flexibility gains and progressive ideas. The main drawbacks of the system include a complicated and complex booking process, feelings of uncertainty, branding problems, a distortion of competitive behaviours, a system similar to that of low-cost carriers, feelings of paying extra for every service and a perceived decline in service and quality.

Hedonic and Utilitarian Values Behind Engagement of Online Consumers

2021 ◽  
pp. 1242-1263
Author(s):  
Farrah Zeba ◽  
Musarrat Shaheen ◽  
Raveesh Krishnankutty
Keyword(s):  
Lived Experience ◽  
Airline Industry ◽  
Low Cost ◽  
Marketing Strategies ◽  
The Self ◽  
Customer Engagement ◽  
Third Order ◽  
Diary Method ◽  
Low Cost Carriers ◽  
Order Construct

In the hyper-competitive Indian airline industry, the low-cost carriers as well as full-service airlines are in dire need of innovative marketing strategies to engage their customers. To understand the dynamics behind the process of customer engagement, the purpose of this paper is to gain insights into the lived experience of consumers about their online air-ticket bookings experiences. In total, 60 frequent air travellers were approached to participate in the study and the self-completion diary method was incorporated to record their ticket booking experiences. The responses recorded in the diaries were analyzed on the basis of their content from which eight themes were derived. The findings bring forth the importance of hedonic experiential values along with utilitarian experiential values toward the engagement of customers during the online air-ticket booking process. The current study is one of the pioneers in conceptualization of customer engagement as a third-order construct by uncovering the sub-dimensions of the second order factors—utilitarian and hedonic experiential values.

Ailing Kenyan carrier will face more competition

2016 ◽  
Keyword(s):  
Airline Industry ◽  
Low Cost ◽  
Air Travel ◽  
Recovery Strategy ◽  
East African ◽  
Content Type ◽  
Profit Margins ◽  
Low Cost Carriers ◽  
Fuel Costs ◽  
Air Carriers

Significance Despite low fuel costs and the global airline industry running profitable operations, Kenya Airways has recorded multiple years of losses, leading the company to consider a recovery strategy that includes selling aircraft and shedding jobs. Impacts East African air carriers could benefit from industry rationalisation, but domestic political concerns could obstruct regional reforms. Low-cost carriers have emerged in Africa but struggle to make headway against publicly owned airlines. Once Kenya Airways exits fuel-hedging commitments, lower prices should improve profit margins. Without airline liberalisation and local carrier rationalisation, foreign airlines will benefit most from growing African air travel. Government protectionism, high taxes and regulation will restrict competition, especially from low-cost carriers.

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