Network geographies and financial performances in low-cost carrier versus network carrier competition: The case of Norwegian versus SAS

Joost Zuidberg

Journal of Transport Geography, 2019, vol. 79, issue C, -

Abstract: This paper sheds further light on the competitive dynamics between low-cost carriers and network carriers through a case study of the network developments and financial performance of the low-cost carrier Norwegian and the network carrier SAS. The case study includes a comparison of the networks and financial indicators of both airlines for the period 2005–2019, using scheduled traffic data from the Official Airline Guide (OAG) and publicly available annual reports of both airlines. The results show that, regarding network focus and development, both airlines do not actively seek competition, but rather focus on their own business strategies, resulting in different network developments. This is especially remarkable for a low-cost carrier. In addition, Norwegian does not have the financial characteristics of large low-cost carriers, like Ryanair and easyJet. In fact, its liquidity and solvency are merely in line with those of large European network carriers. Recently, it has suffered from considerable losses, which likely affects its competitive strength. In general terms, the results suggest that low-cost carriers that do not have a low enough unit cost base and therefore are not profitable cannot generate massive competitive pressure for incumbent network carriers. At the same time, among those incumbents, the urgency to cut operating costs is instigated as a result of (the threat of) low-cost carrier competition.

Keywords: Airline competition; Low-cost carrier; Airline network geography; Financial performance; Case study (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jotrge:v:79:y:2019:i:c:13

DOI: 10.1016/j.jtrangeo.2019.102462

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