A case study: The impact of low-cost carriers on inbound tourism of Saudi Arabia

This study investigates the impact of low-cost carriers (LCCs) on Saudi Arabia's tourism demand. It also provides an understanding of the relationship between air transport development and tourism development in the Gulf region. The Box–Jenkins SARIMA-X models were employed to model and forecast international tourist arrivals to Saudi Arabia, using monthly international tourist arrivals to Saudi Arabia from July 2010 to December 2015. The forecasting models were significantly accurate, with lower values of MAPE, MAP, and RMSE. The findings suggest that an increase in airline capacity, religious travel, and airline competition are associated with the increasing international tourist arrivals to Saudi Arabia. This also indicates that there is a positive relationship between air transport development and tourism development. Further aviation liberalisation in the Gulf region is discussed to give opportunities for the region's LCCs to increase their share of the increasing air travel demand, thereby enhancing tourism development.     

Quantity price discrimination in the air transport industry: The easyJet case

This paper extends the literature on low-cost carriers' pricing strategies by investigating the presence of quantity price discrimination implemented through a two-part tariff in offered fares. By analysing Internet fares for all easyJet flights departing from the Amsterdam Schiphol airport between March and April 2015, we search for price differentials based on the number of seats booked by a single consumer. We find that the lowest average unit price is associated with a single consumer reserving 5 seats. On average, the per-seat discount for a single consumer reserving 5 seats is €9.48, which is 14% of the single-seat fare. Additionally, a multivariate analysis shows that quantity discounts are greater for flights with a larger fraction of available seats at the time of booking, the seats are booked longer in advance, and the destination's gross domestic product per capita is greater. Conversely, quantity discounts are lower for longer routes, larger destination airports, and routes for which easyJet's market share is higher.     

Grounded: Characterising the market exit of European low cost airlines

The aim of this paper is to undertake a comprehensive study of low cost carrier (LCC) market entry and exit in Europe between 1992 and 2012. In the 20 year period between 1992 and 2012, 43 LCCs have taken advantage of the progressive liberalisation of the European aviation market and commenced scheduled flight operations within the continent. Of these 43, only 10 remain operational, a failure rate of 77%. This paper contributes to extant literature on LCCs by examining the market entry, business practices, operating longevity and fate of failed operators to characterise European LCC market exit. Drawing on the findings of a detailed continental-wide study, the paper identifies that an airline's start-up date, the nature and size of its operation and the size and composition of its aircraft fleet are key factors which influence LCC success and failure. The implications for both European and emerging LCC markets are discussed.     

The impact of low-cost carriers on airport choice in the US: A case study of the Washington–Baltimore region

Previous research has shown that low-cost carriers (LCCs) may stimulate traffic at an airport by offering low fares. Using passenger survey data from the Washington–Baltimore region’s three airports, we find that the benefits of LCCs to airports extend beyond the traffic generated directly by the LCCs through their low fares. In addition, we find that the mere presence of an LCC at an airport can attract passengers, even to competing carriers. These “halo effects” from LCC presence increase the significance to airport managers of attracting LCCs in order to generate passenger demand.     

The effect of LCCs operations and scheduled services deregulation on air charter business in Japan

Recent aviation deregulation is producing structural changes within leisure industries in many parts of the world. This paper reviews the development of low cost carriers (LCCs) and assesses its effects on both of domestic and international charter markets in Japan since 2007. Furthermore, this paper analyzes the effect of scheduled services deregulation on international tourism to Japanese regional areas in relation to charter services. The results suggest that in the domestic market, LCC operations have seldom impacted charter traffic due to the differences in target markets and routes. In the international market, LCCs launched scheduled services to Japan but mainly on high demand routes. The deregulation of scheduled services led to a passenger shift from charters to newly scheduled flights and a concentration of tourist arrivals in regional centres. It also led to a decline in international tourist arrivals in some remote destinations. This paper indicates a current trend in which charter business is still an important sector in aviation and leisure markets.     

Multi-dimensional price elasticity for leisure and business destinations in the low-cost air transport market: Evidence from easyJet

This study investigates the price elasticity of demand in the European low-cost carrier (LCC) industry by analysing Internet fares for all easyJet flights departing from the Amsterdam Schiphol airport towards 21 European destinations between March and September 2015. Results suggest that the price elasticity of demand greatly varies across different dimensions, ranging from −0.535 for the business-oriented route of Hamburg to −1.915 for the leisure-oriented route of Split. Price elasticity is also found to be higher for reservations made more days in advance, for reservations and departures occurring on weekends, and for flights taking off during lunchtime and in the summer period. All results are consistent with the different behaviours of leisure and business passengers and the ongoing increase in the business component of the LCC passenger mix.     

An empirical investigation of European airline business models: Classification and hybridisation

Airline business models are evolving and what was once a clear distinction between low-cost carriers (LCCs) and full-service carriers (FSCs) is now less apparent. LCCs and FSCs are merging into new hybrid carrier business models, a convergence accomplished in different ways by various airlines. This paper aims to establish how many types of business models exist and to examine the defining characteristics of the various levels of hybridisation. This is an empirical study based on a sample of 49 European airlines. Data are collected in a categorical format, where appropriate, or transformed into categorical variables if numerical. The methodology employed for analysis is the well-established k-modes technique. The clustering process indicates that there are four observable airline categories: FSCs, LCCs, and two hybrid types in between.