A Network-Design Analysis of Airline Business Model Adaptation in the Face of Competition and Consolidation

Renan P. de Oliveira (), Alessandro Oliveira and Gui Lohmann ()
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Renan P. de Oliveira: Center for Airline Economics, Aeronautics Institute of Technology, São José dos Campos, SP CEP 12228-900, Brazil; School of Engineering and Built Environment, Griffith University, Nathan, Queensland 4111, Australia
Gui Lohmann: School of Engineering and Built Environment, Griffith University, Nathan, Queensland 4111, Australia

Transportation Science, 2021, vol. 55, issue 2, 532-548

Abstract: By focusing on the intrinsic relationship between business models and network configurations in the airline industry, this paper develops a two-stage methodology to estimate the strategic drivers of network design of the major carriers in Brazil. The empirical approach decomposes their domestic network-building rationales into the ones adopted by virtual archetypical carriers. We consider the previously conceived low-cost, full-service, and regional carrier archetypes. Our main contribution is the development of a model that allows airlines’ networks to be strategically designed in a time-evolving pattern, reflecting a dynamically chosen blend of these archetypes. Moreover, we also consider the effects that mergers and acquisitions may have had in inducing changes in these blends. Our results suggest that all analyzed airlines have repositioned themselves through their trajectories to adopt a hybrid configuration, aiming at the intersection of at least two archetypical network-design rationales. Besides, the effects of consolidations point to certain diversions of the acquiring airlines’ domestic network-building rationales toward the ones of the acquired carriers, providing evidence that the consolidations may have served as stepping stones for market-repositioning moves.

Keywords: airline; business model convergence; econometrics; merger; air transportation network (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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