The Strategic Developments of Airline Business Models Past, Present and the Future

Introduction

My research title is 'Strategic Developments of Airline Business Models Past, Present and the Future.' The primary driver for choosing the topic is to help the airline industry to develop and adopt business models that can see the production get more successful concerning profitability as well as customer satisfaction by discussing bring in view the past, the present and the future airline business models. Airline business models have gone through an evolution process with each successive evolution stage adding an improvement to the former regarding value creation. From the look of things, there are still more models yet to come, and airline businesses are to be keen not to be overtaken by the changes. There is the need for airline businesses to understand the past and the present to have a glimpse of what might come in future. The best way to embrace change is to be able to predict it, and the best way to predict change is by creating it. Due to my profound interest in the airline business, the research will help me to have the advisory importance of airline business which is experiencing a level of competition that was never heard of before.

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Literature Scope

In the research, I will focus on strategic developments of airline business models of the past, the present and the future. Some models have been invented both in the history and the present days as firms seek to outdo each other in the most ever competitive era. There are also loopholes for further inventions. There exists a lot of literature about the strategic business models that airlines have developed as discussed in the next part of this research. Research searching for the developments of airline business models should look critically at the following research questions as they look to understand various events: 'is the division of the airplane business into different models useful?', 'what are the needs be fulfilled by the different airplane business models?', 'what are specific airplane models required to perform specific needs?', 'how do the different business models generate revenue?', 'what adaptations and development are being made concerning changing needs of customers?' (Borgogna, Stroh, Hilz, Agarwalla, & Jakovljevic 2016). The primary factor motivating the development of the different models in the airline industry is the need to revitalize the broken airline business. (Tretheway, 2004). These questions help to formulate a strategy on how to gather information and even planning the research schedule.

Methodology

The reason for the study is to focus and analyze ways through which airlines influence business models. Here, we look at the methods used in the collection and analysis of data. Statistical data interpretation on airline models is made through analysis of the components of business models. Some of the business model components; network and financial review, market to be targeted and geographical location. This is a documentary focusing on different developments in the airplane industry with regards to changing times. Our goal is achieved satisfaction with the answers we obtain concerning the research questions. Various methods will be used in such as these answers.

The targeted analysis will be conducted on the secondary data collected. It is essential to understand the literature scope fully to ensure all the necessary methodology required to achieve our objectives adhere. We especially are dependent on the secondary data rather than primary data due to high costs and lack of the essential tools and equipment to obtain relevant data. To get specific relevant information, it is vital to good relations with persons in charge. This also establishes a foundation for further questions regarding the information received. Following a given structure, problems can be identified and analyzed by using the research questions hence the right methodology must be used. My approach is to determine the necessary data required, then try to use various ways to obtain the data. Majorly, literature studies are one of the most productive ways, especially with this thesis. Data collection from electronic documents online and official websites have proved to be the most reliable source. Through literature review, we can see research that was done previously which is more in theory. Continuous discussions have also been carried with friends of the colleagues on questions that emerged during the study. Sample study method used in this literature is going through the 'Airline business' magazine. In the magazine, airlines are ranked based on revenue, kilometers covered and the number of passengers using an airline in a fixed period. Visiting airline websites and reports compiled annually to obtain specific data relating to the research questions, for example, can solve any hanging questions on revenue.

Then came the final step, the analysis of data. This process was taken through four stages. The first step was to identify business models done through literature review. There is also the challenge of inconsistent data between different sources which may create doubt for a particular methodology used. It is also difficult to obtain data on individual airlines as some choose to post their annual report as corporations rather than as different airlines. Other appropriate methodologies which could be useful in getting data are quite expensive leading to a shortage of some crucial information.

Data

In this thesis, the primary data being collected is the secondary data. Some of the literature through which data will be obtained using books such as;' the global airline industry' and other materials such as the use of maps to survey various airplane routes being used by specific airlines. Data, in this case, is required from authentic sources to ensure the final report represents happenings on the ground. Data obtained from multiple sources requires keen analytical skills to achieve accurate representation regarding graphs and maps. Data taken from reading materials is not first hand, and the researcher can in no way prove the findings. Data has to be made from very reliable sources to guarantee credibility.

In this case, I analyzed data of various airlines received from their websites and got my results through comparing and contrasting the different data. For example, I would compare data for airlines whose costumers decide to book directly from the airport to those whose clients would have their bookings online. There is a wide range of data on airline business models hence we have to limit ourselves to a particular type of data that would give our desired results. In low-cost carriers, for example, data shows how the people from the small social class seem to make a large number of their customers. We can tell and understand why low-cost carriers tend to make several flight connections through different cities. It is essential to collect, analyze and conclude the findings in ways people reading the report can understand to solve problems with ease.

The airlines are also concern about the data they release to the public; this depicts how the company is doing concerning revenue, their connections around the world and their level of competitiveness towards other competitor airlines. The data collected for this thesis was well scrutinized by other colleagues to ensure a favorable degree of accuracy. This goes to show how data analysis requires teamwork to provide elimination of errors. This helps to give the researcher confidence in his research findings when a group of analysts can prove his work right.

The sources of data have mainly been literature work, maps, and photographs. This kind of data is easily stored for future use and can be filed online for storage and secure storage.

Airline Business Models Developed in the Past: Legacy Airlines

Also known as full network service airlines (FNSA), legacy airlines focus on the provision of a large variety of services which include many passenger classes within the aircraft cabin as well as the connected flight's possibility. Other people refer to them as traditional airlines because they trace their invention to the airline invention days. Now that majority of FNSA run the hub-and-model in their operations, these airlines can also be referred to as the hub-and-spoke airlines (Eliot, 2016). In the majority of European nations, national carriers can be used as a perfect illustration of how traditional airlines work. Suitable examples include Australian Airlines, British Airways, Lufthansa, and Air France among others. Whereas a good number of the European Union countries' former national airline carriers are now entirely or partially privatized, a few states, particularly smaller ones, still have state-owned national carriers. Outside the European Union, the structure and number of ownerships differ from country to another. It is only in the United States of America where a significant amount of traditional airlines operate under the private sector. In many Asian and African countries, there usually is one conventional state-owned airline operation.

Characteristics of Traditional Airlines That Drive Income for the Legacy Airlines

To begin with, legacy airlines have a reasonable level of reliability as well as the slowly varying timetable. The safety gives customers a great sense of security concerning the flight connections which they require. Another income driving characteristic of legacy airlines is the convenience programs for loyalty that offer various rewards for using a particular airline. There are also rewards for sticking to the airline. Customers end up feeling appreciated and thus coming again and again.

The legacy airlines also have many diversified fares. The fares range from low cost to the tariffs to quite expensive first class and business class seats. The airlines also have the aspect of increased comfort due to the meals that are served on board as well baggage charges that are contained in the fare paid. There are also airport business launches (Qualitative data analysis, 1994). If there is the need for connecting flights, legacy airlines are a good idea because they have a wide range of the connecting flights. A customer can thus pay for several trips just with one ticket, thus getting convenience. The last of the most critical income driving characteristics of legacy airlines is the excellent reputation that brings about a good business both with government and corporate clients.

The main undoing of the hub-and-spoke model includes the utilization of high capacity in the course of peak periods and flights connecting complexities in a particular period. Since flights of point-to-point between majorities of destinations globally are low, it is only through the massive hubs that offering of air services between destinations can be possible (Williams, 2002).

The hub-and-spoke model implementation also had legal reasons whereby there existed strict air service agreements between countries which set out a rule that just one or a limited airports number were determined to be the landing points in each state. On their to choose without the legal restrictions, however, airlines are shifting away from traditional airline business models to the latest business models as will be discussed in the next segment of this research.

Latest Developed Airline Business Models

Due to the growing competition and struggle for survival, airlines have developed various business models. These models have been configured to be able to satisfy and cater to the demands of passengers and cargo through a functional and their integrated models (Burghouwt and De Wit, 2005),). Each of the models come with variou...