Air Transport Management and Technology:
9. Airline business models
Methodological concept to effectively support technical key competencies using foreign languages
ATCZ62 – the CLIL as a university teaching strategy
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•Based on regularity
ØScheduled - Flights according to the flight schedule
ØNon-scheduled - Charter or leisure airlines
•Based on served markets
ØDomestic
ØInternational (US vs EU approach)
•Based on payload type
ØPassengers - traditional airlines vs. Low-Cost Carriers model (LCC)
ØCombi - cargo on the main deck behind the passengers’ area and in the belly
ØCargo
ØMail
ØIntegrators
1)
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Airline business models – basic distribution

•There are two very different ideas for planning flight routes:
ØHub-and-Spoke model (H&S);
ØPoint-to-Point model (P2P).
•Hub-and-Spoke (benefits):
ØSignificantly less routes are needed to serve the network.
ØSince there are less routes, assuming the number of planes are the same, airlines can schedule
more frequent flights along each route and make full use of the capacity of each plane.
ØCentralizing operations at the hub leads to economies of scale.
•Point-to-Point (benefits):
ØMinimizes connections and travel time.
ØNo interdependency of flights and hubs – a delayed flight or a closed airport will not
significantly affect other flight schedules.
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Air routes network conceptions
Source: Rodrigue et al., 2006

•Main features:
ØSeat capacity is offered to general public according to published schedule
ØHub and spoke system
ØTraditional services (2-3 classes, food and beverages, on-board entertainment, business lounges,
frequent-flyer programmes, other)
ØOffering of flights via travel agents
ØCooperation with other airlines – multisector tickets offered also on flights of partner airlines
(complex revenue management)
ØTransfer flights
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Traditional passenger airlines
8

•How is it possible they are offering flight tickets for low prices? (main examples)
ØOperating at costs consistently below its revenues
ØStrategy of operating short sectors, low and unrestricted fares, high point-to-point frequencies,
excellent punctuality
ØNo traditional frills such as free meals, pre-assigned seats or connecting flights
ØMainly using secondary airports – lower airport charges
ØOperating aircraft longer hours – spreading fixed costs over more hours
ØMainly using single type fleet (of economic aiplanes with high density seats)
ØMainly using on-line booking
ØSelling the meals, drink and souveniers on-board.
Ø
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Low-Cost Carriers (LCCs)

•Main features:
•Low cost model – no frills, high seat density
•Whole capacity sold to the customer (usually travel agencies or interest clubs) under a “charter
contract”
ØCompetitive pricing based on real costs but also external factors
ØLow utilisation during winter season (wet lease as solution)
ØVery high utilisation during tourist season (15 to 17 hours)
ØAbsolute necessity of flying during the night
•Customer responsible for using the seat capacity
•Customer’s choice of destinations
•
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Charters

•General (or heavy) air freight
Ølarger commodities
Øtraditional airport-to-airport services (pure cargo carriers - for example CargoLux)
Øaround 85% of the total
•Express freight
Øintegrated door-to-door services (Integrators - for example FedEx, UPS, DHL, TNT)
Øaround 11% of the total
•Mail
Ødistribute as part of the national mail system
Øinternational shipping by airlines contracts
Øaround 4% of the total
•
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Cargo airlines – all airplane capacity for freight

•The highest form of cooperation, especially of traditional passenger airlines - the globalization
of offer and distribution of air transport services. Main features:
ØCoordination of Alliance partners flight schedules;
ØHarmonization of seat capacities offered on flights;
ØUnification of reservation and check-in systems;
ØOffering of continual prices of tickets to Alliance destinations;
ØCreating a common "frequent flyer program" (FFP);
ØAlliance offer of additional services to passengers;
ØUnification of the fleet and repair capacities;
ØIntegration and sharing other activities ..
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Global Alliances of airlines