Incompatibility of the Low-Cost and Network Carrier Business Models Within the Same Airline Grouping

Many attempts to set up a no frills low cost carrier as an internal unit of subsidiary of a full service network carrier have failed, in particular in the United States airline industry. This paper's aim is to investigate the rationale of the incumbent airlines to set up a parallel low cost carrier, to understand the economic logic for a company to condone the operation of several business models with the same basic output inside the organization boundary that appears to run counter to the traditional logic of efficiency. The paper then considers the incompatibilities in operating the business model of the no frills low cost carrier and full service network carrier simultaneously. Finally, a set of propositions is developed following contingency theory, in which the incompatibilities can be controlled in such a way that the overall benefits are higher than the costs. It is believed that incompatible positions and the resulting negative impacts arise automatically, when a company operates two business models simultaneously which are turning out the same basic output.


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  • Accession Number: 01004559
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Sep 29 2005 2:51PM