Competitive effects of the airlines-within-airlines strategy – Pricing and route entry patterns

This paper investigates the effects of the airlines-within-airlines strategy adopted by Qantas airline group, which simultaneously runs a full-service airline (Qantas Airways) and a low-cost carrier (Jetstar Airways). Our empirical investigation of airline pricing and route entry patterns in the Australian domestic market suggests that Jetstar has been used as a fighting brand against rival low cost carriers. Such a strategy increases group airlines’ prices at the expenses of rival airlines. There is preliminary evidence that pricing benefits to Qantas Group come from increased market power as well as service quality improvements.     

Low-fare flights across the Atlantic: Impact of low-cost,long-haul trans-Atlantic flights on passenger choice of Carrier

The purpose of this paper is to gain insights into low-cost, long-haul (LCLH) and full-service carrier (FSC) passenger preferences in the trans-Atlantic market. A total of 1412 economy and premium economy passengers were surveyed at Los Angeles and Seattle-Tacoma International Airports. The underlying factors comprised of passenger travel attributes were: Operations, Comfort, Onboarding, Service, and Flight Schedule, along with a variable, Airfare. Satisfaction with Airfare (#1 priority) and Comfort (#2 priority) impacted choice of LCLH carrier, whereas satisfaction with Service (#3 priority) and Flight Schedule (#4 priority) impacted choice of FSC. Both carrier types have a place in the trans-Atlantic market, although passenger loyalty was stronger for an all-inclusive FSC offering (76%) than a no frills LCLH offering (55%).     

Intangible resources of competitive advantage: Analysis of 49 Asian airlines across three business models

Without sustainable competitive advantage firms have limited economic reasons to exist and will decline. Competitive advantage concerns the factors which provide competitive strength. This paper is based upon the resource-based view which considers firm resources to be heterogeneous and which believes that firms only have a small bundle of core resources irrespective of their overall performance. This research establishes the role of 36 intangible resources for 49 Asian airlines across three business models: network airlines; low-cost subsidiaries from network airlines; and low-cost carriers. It uses the VRIN framework which examines whether resources are valuable, rare, inimitable, and non-substitutable. Research participants distribute points between their chosen seven resources according to their perceived role in firm performance. Resources which meet all four requirements of VRIN are considered core competences and sources of sustained advantage. Across all 49 Asian airlines, the top-three most important resources of advantage are slots, brand, and product/service reputation. While these core resources are predictable, they have not previously been proven within the context of airlines, let alone geographically and by airline model. Results show that the core bundle of resources vary for each model, which helps to explain the difference in performance across models, and that some resources which were expected to be high-ranking, such as organisational culture and customer focus, were not.     

Key drivers of passengers' overall satisfaction at klia2 terminal

The purpose of this study is to examine the airport service quality dimensions based on the ASQ survey and investigate the best predictor for overall satisfaction. The context of this study is the klia2 terminal passengers, which are predominantly users of the low-cost carriers at Kuala Lumpur International Airport. Secondary data obtained from the airport operator on the 2016 ASQ survey for the klia2 terminal was analysed using the PLS-SEM method. The grouping and impact of the thirty-three service quality elements from the ASQ survey were tested against the overall satisfaction element. The findings indicated that twenty-two out of the thirty-three elements were valid measures for the klia2 terminal users which forms the eight dimensions i.e. access, airport environment, airport facilities, arrival services, check-in, finding your way, passport and security. Airport environment was found as the best predictor in determining passengers’ overall satisfaction at klia2 terminal and should be given particular focus by the airport operator for continuous improvements.     

What hurts the dominant airlines at hub airports?

This paper estimates a frequency equation to explain the determinants of network airline service levels at their hub airports. Drawing on European data for 2002–2013, we find that network airlines reduce frequencies when the share of low-cost airlines increases both on the route and at the hub airport. On the contrary, frequency choices of network airlines are not affected by competition from low-cost airlines operating in nearby secondary airports. We also find some evidence that mergers in Europe may result in a re-organization of the route structure in favor of the hubs of the larger airline.     

Wholly owned foreign subsidiary relation-based strategies in volatile environments

Drawing from dynamic capability, institutional, nonmarket strategy, and social-network literatures, we detail wholly owned subsidiary (WOFSs) relation-based strategies (RBSs). We explain how deploying RBSs with key nonmarket and market actors will create competitive advantages for WOFSs operating in volatile emerging market environments. We posit that dynamic capabilities will drive the deployment of RBSs by WOFSs, and argue that the positive relationship between dynamic capabilities and RBS deployment will strengthen as perceived institutional uncertainty increases. We further suggest that the greater the strength and frequency of RBS deployment, the more likely that a WOFS will establish a combination of nonmarket-based and market-based embedded assets. Also, our theory proposes that greater integration of nonmarket-based and market-based assets will enhance WOFS financial performance outcomes. Implications for future research are discussed.     

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.     

Price rivalry in airline markets: a study of a successful strategy of a network carrier against a low-cost carrier

In the post-liberalization period, competition has increased in airline markets. In this context, network carriers have two alternative strategies to compete with low-cost carriers. First, they may establish a low-cost subsidiary. Second, they may try to reduce costs using the main brand. This paper examines a successful strategy of the first type implemented by Iberia in the Spanish domestic market. Our analysis of data and the estimation of a pricing equation show that Iberia has been able to charge lower prices than rivals with its low-cost subsidiary. The pricing policy of the Spanish network carrier has been particularly aggressive on less dense routes and shorter routes.     

Determinants of reverse marketing knowledge transfer potential from emerging market subsidiaries to multinational enterprises’ headquarters

Emerging markets (EM) are becoming increasingly important for multinational enterprises because of their high growth potential and future prospects. The unique circumstances in EM lead to increased pressure to offer creative marketing solutions that can be leveraged across the multinational network. Setting up subsidiaries to tap into these markets offers companies the opportunity to integrate in the local community and access its knowledge-base for local and global innovations. Literature, however, reveals that EM subsidiaries have been largely ignored concerning their potential for reverse knowledge transfer (RKT), and marketing initiatives are expected to be developed in mature, developed markets. Our paper fills this gap in research and contributes to extant literature by identifying factors at unit, relationship and knowledge levels influencing RKT potential specific to marketing knowledge from EM subsidiaries. The conceptual discussion leads to study propositions and conceptual framework.     

The ECFA and its expected effect on cross-strait trade and investment: a Taiwanese perspective

To come to terms with the realization of ASEAN+1, Taiwan had concluded with mainland China a special free trade agreement (FTA), the Economic Cooperation Framework Agreement (ECFA) in June 2010. This framework agreement provides an early harvest agreement of near-term tariff elimination, including detailed product schedules for goods and services from each side, with the final shape of fuller trade liberalization in goods and services taking years to negotiate and realize. The conclusion of the ECFA has been considered as a major breakthrough in cross-strait talks and economic relationships, even though it is by no means free from controversies inside Taiwan. The authors are therefore motivated by hot debates in Taiwan to reflect on the expected trade effect of the ECFA by taking into account the factor of cross-strait global production networks. In particular, we examine with a proposed model and statistical robustness, the trend of Taiwan-based firms' localization in mainland China, driven in part by constant movements in global production networks, which generates complicated and dynamic relationships between Taiwan's investment-induced trade and structural shift in Taiwan's exports to mainland China. Based on our empirical findings, we reflect on the conventional views on the trade effect of the free trade agreement. The results of our analyses tend to support a cautious view about the trade effect of the ECFA. Without denying the significance of the ECFA and deepening cross-strait economic relationships, we argue that the impact of the ECFA should be interpreted in a wider context than just the trade perspective, as the conventional wisdom and the existing evaluations suggested.