Business model hybridization but heterogeneous economic performance: Insights from low-cost and legacy carriers in Europe
Abstract
Over the last decade, low-cost and legacy carriers have evolved their respective business models, leading to business model “hybridization”. However, the economic performance impacts of such convergence remain underinvestigated. We therefore evaluate whether airline business model hybridization has led to homogeneous economic performance in Europe. Using 2019 data for 25 European airlines, we implement hierarchical clustering based on principal components. We show that regardless of the analysis level (i.e., the number of clusters into which we group airlines), low-cost and legacy carriers remain distinct groups with specific economic performance characteristics (e.g., volume, revenue, cost and profitability). That is, despite increasing hybridization, the economic performance of airline business models is not homogeneous; overall, low-cost carriers remain more profitable (with lower costs and more affordable fares) than legacy carriers.