Flying Cheap and Long-Haul

Flying cheap and
Long-Haul
A case study of Air France-KLMs launch of Boost and
an investigation into the views of passengers on the low-cost long-haul concept
Attif Bhuttoa
Abstract Introduction
Abstract
Low-cost carriers (LCCs) have evidenced a significant growth afterwards the
deregulation of the airline industry in 1978. The emergence and success of LCCs
on short-haul routes has transformed the airline industry putting pressure on full-
service carriers (FSCs). As a result, FSCs are considering to exploit the concept of
using the low-cost model on long-haul flights.
The aim of this research was to investigate the possibility of transferring the low-
cost model to long-haul flights by conducting a case study of Air France-KLM and
its new low-cost long-haul project Boost. A framework was developed involving a
PESTEL analysis to better understand the airline industry followed by a financial
and passenger analysis of Air France-KLM's performance. Additionally, the SAFe
evaluation criteria was applied to determine the possibility of Boost. Finally, 145
participants responded to an online questionnaire about the concept of low-cost
long-haul flights.
Research revealed that despite some passengers willing to fly on a low-cost long-
haul carrier, passengers still require a level of comfort on long-haul flights. Also,
the low-cost long-haul model will need to be unique to convince passengers. In
general, there are also significant limitations for FSCs as in the case of Air France-
KLM the labour costs are high while productivity is low, these two factors are
crucial for low-cost long-haul flights. Similarly, passengers also have a different
perception of FSCs as opposed to LCCs.
The research, therefore, concludes that there is limited scope for transferring the
low-cost model to long-haul flights and provides recommendations to conduct
further research and recommendations to Air France-KLM.
Keywords: Low-cost carriers, LCC, low-cost long-haul flights, LCLH, FSC, full-
service carrier.
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Abstract Introduction
Acknowledgements
The author would like to thank all the people who assisted the author during the
research as without their help the project could not have been completed.
Mr. Bill Sutherland Supervisor
Over the course of the project, Mr Sutherland has been a great support. His
knowledge and expertise have not only been valuable but also made it great to
work with him. Therefore, the author would like to express his appreciation for the
help and support.
Participants
The author would also like to thank all the participants who contributed to the
primary research. Primary research was crucial for this project and the author is
very thankful for the help received. Special thanks to all the mediums that allowed
the distribution of the questionnaire, in particular, Airliners.net and members. The
author would also like to thank every individual that shared the questionnaire.
Friends and Family
Finally, the author would like to thank friends and family especially my mom, dad
and brother for their support over the years, without their support the author
would not have been able to be at this stage.
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Table of Contents Introduction
Table of Contents
ABSTRACT ................................................................................................ I
ACKNOWLEDGEMENTS .............................................................................. II
TABLE OF CONTENTS ............................................................................... III
LIST OF FIGURES ..................................................................................... VI
LIST OF TABLES..................................................................................... VIII
LIST OF APPENDICES ............................................................................... IX
GLOSSARY ................................................................................................ X
INTRODUCTION ..................................................................... 1
1. INTRODUCTION ............................................................................ 2
1.1 THE SUBJECT .................................................................................. 3
1.2 AIR FRANCE-KLM BACKGROUND ............................................................ 4
1.3 RESEARCH AIM ................................................................................ 5
1.4 RESEARCH OBJECTIVES ...................................................................... 5
1.5 OUTLINE ........................................................................................ 6
LITERATURE REVIEW .............................................................7

2. LITERATURE REVIEW .................................................................... 8
2.1 RISE OF LOW-COST CARRIERS .............................................................. 8
2.2 DEFINING LOW-COST CARRIERS ........................................................... 9
2.3 IMPACT OF LCCS ON THE AIRLINE INDUSTRY ........................................... 12
2.4 RESPONSE OF FSCS ........................................................................ 13
2.5 LOW-COST MODEL ON LONG-HAUL FLIGHTS ........................................... 15
METHODOLOGY ................................................................................. 20
3. METHODOLOGY ........................................................................... 21
3.1 RESEARCH DESIGN AND METHODS ........................................................ 21
3.1.1 Literature review ...................................................................... 24
3.1.2 Secondary Research .................................................................. 25
3.1.3 Survey .................................................................................... 25
3.2 RATIONALE FOR METHODS ............................................................. 26
3.3 SAMPLING .................................................................................... 27
3.4 DATA ANALYSIS............................................................................. 27
3.5 LIMITATIONS ................................................................................ 28
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SECONDARY ANALYSIS ........................................................30

4. INTRODUCTION .......................................................................... 31
4.1 PESTEL .........................................................................................31
4.1.1 POLITICAL AND LEGAL FACTORS........................................................... 31
4.1.2 ECONOMIC .................................................................................... 32
4.1.3 Technological and Environmental ................................................ 36
4.2 PESTEL SUMMARY ............................................................................ 36
4.3 FINANCIAL ANALYSIS .......................................................................... 38
4.4 FINANCIAL PERFORMANCE .................................................................... 38
4.4.1 Debt........................................................................................ 40
4.4.2 Labour costs vs productivity ....................................................... 40
4.5 PASSENGER CAPACITY ......................................................................... 43
4.5.1 Load factors ............................................................................. 43
4.6 SAFE ............................................................................................ 44
FINDINGS ........................................................................... 46
5. INTRODUCTION .......................................................................... 47
5.1 DEMOGRAPHICS ................................................................................ 48
5.1.1 Gender .................................................................................... 48
5.1.2 Age ......................................................................................... 48
5.1.3 Region ..................................................................................... 49
5.1.4 Discussion................................................................................ 50
5.2 INFLUENCE ON TICKET PURCHASE .............................................. 51
5.2.1 Brand Perception ...................................................................... 52
5.2.2 FSCs vs LCCs ........................................................................... 53
5.2.3 Discussion................................................................................ 56
5.3 LCC EXPERIENCE AND PERCEPTION ............................................ 57
5.3.1 Perception................................................................................ 57
5.3.2 Taking LCLH flights ................................................................... 58
5.3.3 Discussion................................................................................ 62
5.4 ANCILLARY ................................................................................ 63
5.4.1 Discussion................................................................................ 65
5.5 LOW-COST LONG-HAUL FLIGHTS AND FSCS ................................ 66
5.5.1 More Choice ............................................................................ 66
5.5.2 Viability .................................................................................. 67
5.5.3 Success .................................................................................. 68
5.5.4 Discussion............................................................................... 70
CONCLUSION ....................................................................... 72
6. CONCLUSION .............................................................................. 73
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RECOMMENDATIONS ............................................................ 75
7. RECOMMENDATIONS ................................................................... 76
7.1 RECOMMENDATIONS AIR FRANCE-KLM .................................................. 76
7.1.1 Focus on customers .................................................................. 76
7.1.2 Focus on product ...................................................................... 76
7.2 FURTHER RESEARCH ........................................................................ 77
7.2.1 Impact on airports .................................................................... 77
7.2.2 Development of airline models.................................................... 77
SOURCES ............................................................................. 78
REFERENCES ........................................................................................... 79
BIBLIOGRAPHY ........................................................................................ 88
APPENDICES ....................................................................... 89
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List of Figure Introduction
List of Figures
FIGURE 1 - LCC AND FSCS MARKET SHARE EUROPE (CAPA 2017) .............................. 2
FIGURE 2 - AIR FRANCE -KLM AIRLINE PORTFOLIO (AIRFRANCEKLM 2017) ................... 4
FIGURE 3 - OVERVIEW OF LITERATURE (AUTHOR 2017) ............................................ 8
FIGURE 4 - PRODUCT AND ORGANIZATIONAL ARCHITECTURE OF AIRLINES ..................... 11
FIGURE 5 - STRATEGIC DRIFT BY LCCS (GUDMUNDSSON 2015) ................................ 15
FIGURE 6 - DATA ANALYSIS PROCESS ................................................................ 28
FIGURE 7 - GDP GROWTH VS PASSENGER GROWTH EUROPE 2004 - 2016 ................... 34
FIGURE 8 - CRUDE OIL AND FUEL PRICES ............................................................ 35
FIGURE 9 - OVERVIEW OF FINANCIAL PERFORMANCE AIR FRANCE-KLM HOLDING ............ 38
FIGURE 10 - OVERVIEW OF DEBT AND CASH AIR FRANCE-KLM ................................. 40
FIGURE 11 - AIRLINES LABOUR COSTS % OF REVENUE ............................................ 41
FIGURE 12 LABOUR PRODUCTIVITY OF AIRLINES PER EMPLOYEE ............................... 42
FIGURE 13 - AIR FRANCE-KLM LOAD FACTORS .................................................... 43
FIGURE 14 - OVERVIEW OF LOAD FACTORS AIR FRANCE-KLM 2012-2017................... 44
FIGURE 15 - GENDER ................................................................................... 48
FIGURE 16 - AGE GROUP ............................................................................... 49
FIGURE 17 - REGION .................................................................................... 49
FIGURE 18 - INFLUENCE ON TICKET PURCHASE ..................................................... 51
FIGURE 19 - BRAND PERCEPTION ..................................................................... 52
FIGURE 20 - FLOWN WITH LCC ....................................................................... 57
FIGURE 21 - PERCEPTION OF LCCS................................................................... 57
FIGURE 22 - TAKING AN LCLH FLIGHT ............................................................... 58
FIGURE 23 - OVERVIEW OF MILLENNIALS AND LCLH FLIGHTS .................................. 59
FIGURE 24 - BUYING ANCILLARY ...................................................................... 63
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List of Figure Introduction
FIGURE 25 - BUYING SAME ANCILLARY ON AN LCLH FLIGHT ..................................... 63
FIGURE 26 - SUCCESSFUL LCLH FLIGHTS ........................................................... 68
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List of Tables Introduction
List of Tables
TABLE 1 - AIRLINE CHARACTERISTICS (GILLEN AND MORRISON 2003) ........................ 10
TABLE 2 - TYPES OF LCLH CARRIERS (GUDMUNDSSON 2015) .................................. 18
TABLE 3 - RESEARCH OBJECTIVES, APPROACH, DATA COLLECTION AND OUTCOME. ........... 23
TABLE 4 SEARCH STRATEGY AND KEYWORDS USED TO LOCATE LITERATURE ................. 24
TABLE 5 - SURVEY DESIGN PROCESS USED DURING THE RESEARCH ............................. 26
TABLE 6 - EVENTS AFFECTING THE AIRLINE INDUSTRY ............................................. 33
TABLE 7 - OVERVIEW FINANCIAL PERFORMANCE AIR FRANCE-KLM ............................. 39
TABLE 8 - SAFE EVALUATION CRITERIA BOOST ..................................................... 45
TABLE 9 - FSC VS LCC: NO INFLUENCE ............................................................. 53
TABLE 10 - FSC VS LCC: LOWEST PRICE ........................................................... 53
TABLE 11 - FSC VS LCC: EXTRA SERVICE .......................................................... 53
TABLE 12 - FSC VS LCC: FSCS DROPPED SERVICE QUALITY .................................... 54
TABLE 13 - PREFERENCE FOR FSCS .................................................................. 54
TABLE 14 - FSC VS LCC: DISTANCE ................................................................. 55
TABLE 15 - PRICE AS MAIN DRIVER FOR LCLH FLIGHTS ........................................... 59
TABLE 16 PRICE AND SERVICE QUALITY ........................................................... 60
TABLE 17 - PRICE AND SERVICE QUALITY LCLH FLIGHTS ......................................... 60
TABLE 18 - NOT TAKING AN LCLH FLIGHT: LACK OF SERVICE AND COMFORT ................. 61
TABLE 19 - MOTIVES FOR BUYING ANCILLARY ON LCLH FLIGHTS ................................ 64
TABLE 20 - LOW-COST LONG-HAUL GOOD IDEA: TICKET PRICE TRANSPARENCY ............... 67
TABLE 21 - LCLH FLIGHTS BY FSCS: WRONG STRATEGY ......................................... 68
TABLE 22 - POSSIBLE MOTIVES FOR SUCCESS OF LCLH FLIGHTS ................................ 69
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List of appendices Introduction
List of Appendices
APPENDIX A QUESTIONNAIRE ....................................................... 90
APPENDIX B DATA CODING ........................................................... 96
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Glossary Introduction
Glossary
Ancillary Source of revenue generated by airlines besides the sales of tickets
by selling additional service elements to passengers such as baggage seat
selection, food or baggage.
ASK Available Seat Kilometres: Tool used to measure the passengers carrying
capacity of a flight. This is calculated by the number of seats on an aircraft
multiplied by the flown distance in kilometres.
ATK Available tonnes Kilometres: The capacity available including cargo and
passengers traffic that carries revenue load multiplied by the flown distance
(British Airways 2009).
CWC Carrier-within-Carrier: Also known as Airline-within-airline (AWA). A

strategy with the aim to defend market share in which an airline owns more
brands.
FSC Full-Service Carrier: Airline with different classes such as the economy,
business and first class with service such as food and baggage included in the
ticket price.
GDP Gross Domestic Product: The value of products or services produced in a

domestic economy of a country over one-year containing spending, export,
consumption and government expenditure (Hollesen 2014).
HUB-and-Spoke A system in which passengers are transported from smaller

airports to a central airport (hub) to fly to their destination. This system is often
used by FSCs.
LCC Low-Cost Carrier: Airline with economy class only charging passengers
for additional services such as food or baggage.
Load Factor A tool used to assess how airlines fill seats efficiently to
generate revenue.
Long-haul A flight with a flying time of 6 hours or more.
Point-to-point A system in which a flight is operated directly between two

airports without connections. This system is used by LCCs.
Short-haul A flight with a flying time between 1 and 4 hours.
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Introduction
1
Chapter One | Introduction Background
1. Introduction
Since the deregulation in the late 1970s, the airline industry has evidenced a
significant increase in competition (Vasigh et al. 2013).
The emergence of low-cost carriers (LCCs) in particular has contributed
considerably to the increasing competition in the airline industry as LCCs have
grown 10.3% annually (Boeing 2015). Burghouwt and De Wit (2015) argue that
until 2013, there was no direct competition between full-service carriers (FSCs)
and LCCs. However, LCCs are currently applying similar route strategies as FSCs
and are coming closer to gaining market shares of FSCs (figure 1). Subsequently,
FSCs are struggling to retain market positions and airlines such as Air France-KLM
and International airlines group (BBC 2016; Clark 2017) are considering to launch
low-cost long-haul (LCLH) carriers in response to the increasing competition.
LCC 41%
FSC 59%
FSC LCC
Developed by the Author (2017) using CAPA (2017).
Figure 1 - LCC and FSCs market share Europe (CAPA 2017)
Nevertheless, LCCs focus primarily on short-haul flights and literature has
substantially discussed the success of the low-cost model on short-haul flights
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(Jiang 2013). Yet, it is unclear whether the low-cost model can be successfully
applied to long-haul flights. Moreover, current research on the LCLH model is
relatively limited due to the focus on profitability. Hence, the success of the LCLH
model appears not being comprehensively answered by this approach (Poret et al.
2015).
However, as more airlines are attempting to introduce LCLH flights, the success
of the model can boost the industry and assist airlines in strengthening market
positions. Alternatively, it may also cause implications for policy makers,
governments and airline managements (Morrison and De Wit 2016). Hence,
examining the transferability of the low-cost model to long-haul flights can help
to uncover what impact it can have on air travel and also the effect on the airline
industry itself.
1.1 The Subject
The research will contribute to understanding the aspects that are significant for
passengers and upon completion can help airlines to develop strategies. It will
discuss the diverse elements of the airline industry and the influences on
passengers. The subject will, therefore, be examined from a marketing and
strategic perspective by focussing on Air France-KLM and the launch of its LCLH
airline project Boost.

1.2 Air France-KLM background
The Air France-KLM group was created following a merger between the two airlines
in 2004 and has a network of 320 destinations with an operating fleet of 543
aircraft (AirFranceKLM 2017). Additionally, the airline has several subsidiary
airlines serving different customer segments (figure 2).
In February 2017, the airline announced the launch of an LCLH airline under the
project name Boost with operations to commence at the end of 2017. The main
purpose of this airline is to compete against LCCs and Gulf carriers to increase
profitability by targeting Millennials (CAPA 2017a).
Air France -
KLM holding
KLM Air France
KLM Martinair Transavia

Transavia C.V HOP!
Cityhopper BV Holland B.V France
(Low-cost) (Short-haul)
(Short-haul) (Cargo) (Low-cost)
Developed by Author (2017) using AirFranceKLM (2017)
Figure 2 - Air France -KLM Airline portfolio (AirFranceKLM 2017)

1.3 Research Aim
The aim of the study is to investigate the possibility of implementing the low-cost
airline model to long-haul flights by conducting a case study of Air France-KLM
and focus on the new low-cost long-haul project Boost.
1.4 Research Objectives
To critically review the existing literature addressing the growth of low-cost

carriers and the motivating causes for this growth and develop a framework to
determine the possibility of transferring the low-cost model to long-haul flights.
To identify and comprehend the current market environment of the airline

industry and the influence of low-cost carriers on the airline industry by
collecting and analysing market data of the airline industry and perform a
PESTEL for the period between 2006 and 2016.
To develop an understanding of passengers perceptions and experiences of

the low-cost model by conducting primary research among airline passengers
by carrying out a questionnaire and conduct a passenger and financial analysis
of Air France-KLM.
To examine and discuss whether there is an opportunity for Air France-KLM to

adopt a long-haul low-cost strategy by applying the framework and the
outcome of the primary research.
To provide recommendations to Air France-KLM and conclusions based on the

outcome of the research.

1.5 Outline
The outline of this paper is as follows:
Chapter two addresses the current debates with regards to LCCs and LCLH flights.
Chapter three contains the methodology, describing the research process;
discussing the design and the data collection methods and provides a justification.
Also, the means of gathering and analysing data is addressed followed by
highlighting limitations.
Chapter four examines the possibility of Boost by applying the PESTEL, analysing
the performance of Air France-KLM and applying the SAFe framework.
Chapter five presents and discusses the findings of the questionnaire.
Finally, chapter six will conclude, while chapter seven will provide
recommendations and suggest areas for future research.

Literature Review
Chapter Two | Literature Review Rise of LCCs
2. Literature Review
A substantial amount of research has been conducted within the airline industry
on different themes. The purpose of this literature review is to comprehend
existing research conducted within the airline industry, especially research on
LCCs. Therefore, the literature review will support in identifying the main themes
and gaps while also highlight key areas that entail further research. Figure 3,
highlights the main themes that will be further addressed in this literature review.
- Defining LCCs
- Impact of LCCs on the
Rise of LCCs industry
Literature revievw
-Response of FSCs
- Transfering the LCC

Low-cost model and long- model to long-haul flights
haul flights
- Possibility of LCLH flights
Figure developed by Author (2017)
Figure 3 - Overview of literature (Author 2017)
2.1 Rise of Low-Cost Carriers

A frequent theme addressed by the literature is the growth of the LCC on short-
haul routes which occurred afterwards the deregulation of the airline industry in
the late 1970s (Goll and Rasheed 2011). Ryans (2009), claims that LCCs have
put industry leaders under intense pressure, whereas Casey (2010) claims that
the development of LCCs can be recognised as a major revolution in the air travel

and tourism industry. Subsequently, LCCs have transformed air travel and also
influenced competition between airlines (Dobruszkes 2013).
2.2 Defining Low-Cost Carriers
The original low-cost model was introduced in 1971 by Herb Kelleher the founder
of Southwest airlines who based its strategy on cost structures and routes (Vasigh
et al. 2013). Button and Ison (2008) claim that LCCs, in general, can be described
as airlines competing on lower costs structures. The lower cost structures allow
them to offer reduced fares which FSCs have not been capable of.
In contrast to FSCs, LCCs offer less service that requires passengers to pay
additional charges for elements such as baggage or meals. Hence by selling
ancillary, LCC generate extra revenues (Budd and Ison 2016). A difference is also
the routeing strategy, De Wit and Zuidberg (2012) claim that LCCs apply the point-
to-point strategy where passengers board the plane at one origin and disembark
the plane at the destination. Whereas FSCs operate the hub-and-spoke strategy
which besides the passengers that have the hub as a destination also focusses on
passengers transferring via the hub, which leads to higher expenses (Cook and
Goodwin 2008; De Wit and Zuiderberg 2012). Table 1 provides an overview of the
low-cost model.

Descriptor FSC LCC

Fleet Mixed Uniform
Product design Long/short haul No frills

Code sharing
Network alliances
Process design Full service No frills

Business and coach Economy
Costs High operating and Low operating and

maintenance costs maintenance costs
Airport affiliation Hub and periphery Periphery and non-hub

Capital investment airports
Control pax throughput
Table reproduced by Author (2017) from Gillen and Morrison (2003)
Table 1 - Airline Characteristics (Gillen and Morrison 2003)
Most of the point-to-point destinations consist of second-tier airports, airports that
are not located in major cities, which require lower landing and airport charges.
The last elements that help LCCs to reduce expenses are the short turnaround
times, the use of one single type of aircraft demanding; less training for staff and
lastly, the ability to only book tickets directly (OConnell and Williams 2005).
However, it can be argued that not all LCCs apply the exact similar cost reducing
strategies. Therefore, it can be claimed that there is no accurate definition of the
low-cost model. This can be concluded from research by Francis et al. (2006), who
identified five different types of LCCs such as Southwest copy cats, Subsidiaries,
Cost Cutters, Diversified charter carriers and state subsidised competing on price.
Mason and Morrison (2008) examined the different types of LCCs and also
concluded that there are diverse types of LCC models. However, a noteworthy
aspect is the fact that most authors claim that Ryanair is the best competent in
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terms of profitability. A number of studies have used Ryanair as an example by
emphasising the success of the airline and categorising it as a pure LCC (OConnell
and Williams 2005; Graham and Vowles 2006; Mason and Morisson 2008;
Dobruszkes 2009). Mason and Morrison (2008) also argue that the business
models of airlines are difficult to identify and therefore demonstrate the elements
of the airline business model by the product and organizational architecture
approach (POA) (figure 4).
Figure applied from Mason and Morison (2008)
Figure 4 - Product and organizational architecture of airlines
Despite the differences between the LCC models, it appears that one of the major
difference is the productivity of staff and lower wages as opposed to FSCs that are
beneficial for LCCs (Dennis 2007).
Nevertheless, some scholars argue that the low-cost model has other significant
limitations which will create challenges at some point, especially in transferring
the model to long-haul flights. Klaas and Klein (2005), claim that besides cost
leadership strategies and the simple product, positioning is also a key driver for
success. Whereas, De Wit and Zuidberg (2012) argue that growth of LCCs is
decelerating due to route density issues which may require them to seek other
growth strategies. Gramham (2013), investigated the choice of airports of LCCs
and argues that the choice of airport plays a substantial role in determining the
success of LCCs because of lower charges. Yet, flying from major airport cities will
increase operational costs (Budd and Ison 2016).
The literature has clearly highlighted the rise of LCCs and it is evident that cost
strategies and simple product have led to success. However, the limitations linked
to the model also indicate that LCCs can experience growth challenges in the
future while also experiencing competitive pressure. Hence, it can be argued that
on long-haul flights cutting costs may create a significant challenge, not to
mention operational complications.
2.3 Impact of LCCs on the Airline Industry
The emergence of LCCs, in general, has had a substantial impact on the industry.
The entry of LCCs has altered attitudes towards prices and service something that
is a challenge for FSCs. As Borenstein (2011 p. 235) states:
Among industry and labor leaders, a common view is that new low-cost
entrants and LCC incumbents have made excessive capacity investments during
growth periods, and sometimes even during downturns, that have depressed
prices for all.
Westermann (2012) acknowledges this by arguing that LCCs have made flying
accessible in contrast to FSCs by unbundling products and offering lower fares. A
notable aspect is the fact that LCCs have transformed air travel, they have forced
FSCs to change business models, particularly the way of revenue management
and pricing in the industry has changed substantially (Gillen and Morrison 2003;
Maligetthi et al. 2009; Casey 2010). For example, by selling tickets directly to
passengers, similar strategies are now also applied by FSCs, transforming the
industry as FSCs are moving away from previous strategies (Budd and Ison 2016).
The low-cost model has been successful on short-haul routes and has changed the
landscape of the airline industry considerably. In consequence, it has forced FSCs
to seek new strategies due to pressures from LCCs.
2.4 Response of FSCs
Over the recent years, FSCs have attempted to reinvent their business model. Yet,
they have experienced challenges in coming close to LCCs due to higher cost
structures and changes that can impact service levels (Borenstein 2011; Pereira
and Reis 2011). Nevertheless, it seems that FSCs have to a certain degree come
closer to the business model of LCCs. For example, some airlines such as Delta,
have introduced basic economy concepts with the aim to minimise the cost
difference (Elliot 2016). Morrell (2005) claims that the difference between costs
can however not be fully minimised. This has been confirmed by Pearson and
Mekert (2014) who argue that FSCs apply cost-cutting strategies to compete
against LCCs have a rather short-term effectiveness.
Another endeavour by FSCs is by expanding their brand portfolio strategically by
introducing LCC subsidiaries which is known as a carrier within carrier (CWC), to
protect themselves against aggressive expansions of LCCs (Lin 2012). As of 2014,
there were 31 LCCs subsidiaries active worldwide (Pearson and Mekert 2014).
However, Gillen and Gados (2008) emphasise the failures of subsidiaries among
major US carriers such as Delta Express, Song and Ted. An investigation on the
success of LCCs subsidiaries under the same airline brand by, Pearson and Mekert
(2014) found that the average length of existence of former subsidiaries was 4.48
years, and of the 27 subsidiaries that have failed the highest rate of failure is
among European airline subsidiaries by 48.1%. Conversely, CWCs that are
successful, appear to create challenges for the parent company as they cannibalise
the core business (Button and Ison 2008).
Yet, in comparison to launching CWCs, Dennis (2007), argues that alternative
approaches such as the reduction of labour costs, the efficient practice of regional
aircraft and also the use of secondary hubs appear to be effective strategies to
compete.
It can be argued that the CWC strategy deployed by FSCs has limited impact. This
suggests that it is challenging to operate different brands with one parent
company, not only does it cause brand confusion among passengers, but due to
the difference of models it also leads to difficulties in combining two models that
are controlled by the same parent company. There are significant disadvantages
associated with certain elements such as HR, pricing, marketing but also the
management and cost efficiency issues which lead to negative returns (Gillen and
Gados 2008). Furthermore, this may also indicate that LCLH flights are difficult
when there are diverse brands, especially for Air France-KLM. However, for LCLH
airlines to be successful, changes will be required to different aspects such as the
business model, but more importantly the employment system of the airline which
will require the airline to have a cheaper staff base as opposed to the parent
company (Budd and Ison 2016).
Chapter Two | Literature Review Low-cost model and long-haul flights
2.5 Low-cost Model on Long-Haul Flights
Francis et al. (2007), suggest that a flight can be considered as long-haul when
the flying time is 6 hours or more. Due to the significant difference in distance,
some elements of the LCC model are, therefore, difficult to transfer to long-haul
flights and consequently make it complex to achieve cost-cutting benefits
(Williams et al. 2003). Hence, it appears that due to a strategic drift, LCLH carriers
lose their cost positions (figure 5) (Gudmundsson 2015).
Innovate to lower Innovate to generate Innovate to

costs revenue differentiate
Figure reproduced by author (2017) from Gudmundsson (2015)
Figure 5 - Strategic drift by LCCs (Gudmundsson 2015)
As evidenced earlier the success of the LCC model is mainly achieved due to the
lower costs. However, Francis et al. (2007) argue that it is not essential to include
all the cost cutting strategies of LCCs. In addition, FSCs have more experience
with regards to long-haul operations and thus there is an opportunity (Francis et
al. 2007).
Evidence seems to suggest that there is some scope to apply the model to long-
haul flights. Other scholars including Pels (2008), Morrell (2008), Wensveen and
Leick (2009), Douglas (2010), Moreira et al. (2011), Daft and Albers (2012), Poret
et al. (2015) and Whyte and Lohman (2015) have examined the opportunity of
LCLH flights.
Morrell (2008) conducted a comparison on the cost advantages of the LCLH model
and found that the cost advantages are 50%-60% lower as opposed to low-cost
short-haul flights. The author argues that turnaround times are crucial to save
expenses and LCCs on short-haul flights have short turnaround times that allow
them to operate more daily flights. Yet, on long-haul flights refuelling and cleaning
requires additional time. Lastly, to be profitable a minimum load factor of 82% is
critical, which is difficult to achieve.
Moreira et al. (2011) examined the costs of LCCs and FSCs by focusing on different
flight distances and came to similar conclusions, suggesting that cost advantages
of LCLH flights are not greater than 10%. Moreover, the authors also argue that
this is evident from the list of airlines that have provided LCLH flights and have
failed due to a lack of planning (Wenseveen and Leick 2009). Conversely, Whyte
and Lohman (2015) examined the possibility of LCLH flights between Australia and
the UK and claimed that LCLH carriers in contrast to FSCs can accomplish a 13%-
17% cost advantage. However, they also acknowledge that more research is
required in whether passengers are willing to neglect luxury aspects.
Besides costs advantages, there are other possible motives why LCLH carriers fail.
For example, due to poor fit of activities, LCLH carriers not being unique and
copying network carriers instead, being unable to create economies of scale, not
being able to lower fares and create demand and lastly, also the lack of innovation
to generate lower costs (Gudmundsson 2015).
The concept of LCLH carriers is not new, Gudmundsson (2015) categorises the
different types of LCLH carriers (table 2), notably a substantial amount of airlines
have failed. There are, however, also some active LCLH carriers such as AirAsiaX
and Scoot. These airlines are primarily focusing on the Asian market. Alternatively,
Norwegian has recently established LCLH operations between Europe and US (The
Economist 2017). This indicates that there is a possibility especially for FSCs to
exploit the opportunity. Nevertheless, LCLH airlines are at the starting phase of
their operations and it remains unclear whether such airlines will be successful as
LCCs on short-haul routes.
Type of LCLH Description Airlines

Entrepreneurial LCLH (E- Set-up by airline Zoom*, Lavion*, Laker*
LCLH) entrepreneurs EOS*, Maxjet*, Silverjet*,
Oasis*
LC offshoot LCLH (LC- Set-up by existing LC Air Asia X, Norwegian LH
LCLH) operators as a separate
entity
NC offshoot LCLH (NC- Set-up by network carriers Jetstar, Scoot, Nokscoot,
LCLH) Transavia France, open
skies
LC long-haul extension Airlines that also operate Southwest, Jetblue
(LC-LHE) on long-haul routes
Two tier charter (LCLH (C- Set-up by charter airlines LTU* TuiFly
LCLH)
*Defunct or Acquired before 2015
Developed by Author (2017) using Gudmundsson (2015)
Table 2 - Types of LCLH carriers (Gudmundsson 2015)
Other scholars present a more positive view, findings by Francis et al. (2007) and
Pels (2008) suggest that there is a possibility for LCLH flights. Francis et al. (2007)
compared the cost advantages of LCCs. While Pels (2008), examined the basic
elements of the LCC model. Findings suggest that in large markets there is an
opportunity for LCLH flights. Francis et al. (2007) argue that it is not necessary to
achieve all the cost-cutting strategies as they argue:
It should also be noted that a cost leadership strategy applied to long-haul routes
is not necessarily dependent on achieving all the cost efficiencies in the same way
as Southwest or other short-haul low-cost carriers (Francis et al. 2007 p. 4).
Wensveen and Leick (2009) also suggest that the LCC model especially the one
focussing on price can be successful, however, innovating the model and a solid
business plan are more critical for success. Alternatively, Poret et al. (2015)
examined the opportunity of LCLH flights by concentrating on the transatlantic
market and analysing the costs for flights with a Boeing 787-8 aircraft and
concluded that despite challenges there are possibilities to increase revenue.
It is evident that scholars have contrasting viewpoints on the LCLH model and
therefore, it can be said that there is no strong conclusive evidence on the success
or failure of the LCLH model. A noteworthy aspect is the fact that there are a
limited amount of studies with regards to the possibility of the LCLH model and in
all instances, their focus has been on the profitability of routes without specifically
focussing on an airline.
As FSCs are considering the launch of LCLH flights, it remains unclear whether it
is a successful strategy because of the lack of passengers views on the concept.
Despite, the demand for air travel increasing (IATA 2016), customer preferences
are shifting and this can ultimately have an impact on strategies of airlines.
Moreover, it is essential to consider how LCLH flights can transform the industry
but also whether it will have any implications for airline managements or policy
makers and governments.
Therefore, based on the literature review the success of the LCLH model will be
determined by examining different perspectives that can influence decision
makers by creating a framework (chapter 4 and 5). This involves an analysis of
the landscape of the airline industry, the recent financial and passenger
performance of Air France-KLM and more importantly the views of passengers on
the LCLH model.
Methodology
20
Chapter three | Methodology
3. Methodology
A mixed method approach in the form of a case study was applied. The author
decided to conduct a case study of Air France-KLM with the focus on the launch of
a new LCLH carrier under the project name Boost. The motive for this approach
was because there has only been a limited amount of research conducted on LCLH
carriers whereas the case study approach has not been used before (Chapter 2).
3.1 Research design and methods
Considering the explorative nature of the research, a mixed methods approach
was applied in the form of a case study. This involved different qualitative and
quantitative methods; a literature review, secondary analysis, and a survey
(Creswell 2014). This approach of doing research was appropriate as it helped to
understand the managerial process of the airline based on an actual example (Yin
2014) and no previous research has used mixed methods. However, previous
research has also not examined the passengers views on the LCLH model and
therefore, the mixed methods approach was the most suitable as it helped to gain
a broader understanding of the research problem (Creswell 2014).
Table 3, illustrates the data collection methods and sources utilised for each
objective.
Research Aim:
The aim of the study is to investigate the possibility of implementing the low-cost airline
model to long-haul flights by conducting a case study of Air France-KLM and focus on the
new low-cost long-haul project Boost.
Research Objectives Research Applied method of data Result

approach/ collection
strategy
1. To critically review Deductive/ Secondary data collected Literature
the existing Inductive from academic resources. Review
literature
addressing the Databases: Google Scholar, Keywords used
growth of low-cost Business Source Complete, (see table 4).
carriers and the Emerald, ScienceDirect.
motivating causes
for this growth Journals: Journal of Air
and develop a Transport Management,
framework to Journal of Transport
determine the Geography, Research in
possibility of Transportation Economics,
transferring the Tourism Management,
low-cost model to Transport Reviews,
long-haul flights. Logistics and
Transportations,
International Business
Research, World Review of
Intermodal Transportation
Research.
Internet sources: Airneth.

International Air Travel
Association (IATA), The
Economist, Fortune.
Books: Air Transport

management, low-cost
competition.
2. To identify and Inductive Secondary data from Environment

comprehend the (Exploratory) industry reports, annual analysis
current market reports. PESTEL.
environment of
the airline industry Sources: CAPA: Centre For
and the influence Aviation, International Air
of low-cost Travel Association (IATA),
carriers on the Air France-KLM investors
airline industry by website.
collecting and
analysing market
data of the airline
industry and
perform a PESTEL
analysis for the
period between
2006 and 2016.
3. (a) To develop an Deductive a. Primary data Survey data.

understanding of (Exploratory) Sources:
passengers questionnaire
perceptions and initially distributed
experiences of the online via social
low-cost model by media link was
conducting shared in aviation
primary research related groups on
among airline Facebook and
passengers by Linkedin, followed by
carrying out a Airliners.net and the
questionnaire University bulletin
after response rate
was low.
(B) conduct a passenger
and financial analysis of b. Secondary data from Passenger and
Air France-KLM. industry reports and financial
annual reports. analysis.
Sources: CAPA: Centre for

Aviation, International Air
Travel Association (IATA),
Air France-KLM investors
website.
4. To examine and Deductive/ Primary Literature

discuss whether Inductive Data and secondary data review,
there is an environment
opportunity for Air (Evaluative) analysis,
France-KLM to analysis of Air
adopt a long-haul France-KLM and
low-cost strategy survey.
by applying the
framework and
the outcome of
the primary
research.
5. To provide n/a Primary The outcome of

recommendations Data and secondary data all the processes
to Air France-KLM will lead to a
and conclusions framework.
based on the
outcome of the
research.
Table developed by Author (2017).
Table 3 - Research objectives, approach, data collection and outcome.
3.1.1 Literature review
The literature review established the foundation of the research. Therefore, a
varied range of academic literature was consulted (table 3) concerning the
development of LCCs, the cause behind their growth, the role of FSCs and the
current developments and debates about the LCLH model. This resulted in a
theoretical framework to understand the topic which was later supported by the
PESTEL analysis. Table 4 demonstrates the process of locating the sources.
Search strategies Keywords

Low-cost airlines, LCC, Long-haul flights, airline
Start with books related competition, low cost airlines product features,
to the topic. LCLH, ancillary services airline, airline business
Locate recent articles model, airline competition, low cost carriers in
and use abstracts to Europe, low-cost carriers, legacy carriers, low cost
search for any possible long haul, low cost long haul airlines, *low cost*
keywords. airlines business model, airline industry competition,
Search with headings of long haul airlines, low cost long haul flight, full
key papers. service airlines, full service *airlines low-cost*
Citation searching. carriers, airline competition, airline competition
Examine Google Scholar deregulation, full service carriers, airline
profiles of key authors deregulation, low-cost airlines and full service
to locate more useful airlines, airline service quality, airline segmentation,
articles. full service airline challenges, low cost airlines
Search for conference strategy, low cost airlines vs full service airlines.
papers for the latest
development.
Table developed by Author (2017)
Table 4 Search strategy and keywords used to locate literature
3.1.2 Secondary Research
The PESTEL analysis was also a part of the developed framework and was
conducted to examine changes occurred in the airline industry. The aim was to
highlight how airlines are influenced by environmental factors and to support the
documentary analysis of Air France-KLM with the aim to identify how their
performance has been affected. According to Yin (2014), this approach allows
research to be conducted over a long-time span, providing a better overview.
3.1.3 Survey
The final method of the framework consisted of a survey in the form of a
questionnaire (Appendix A). The goal was to gain an insight of passengers
viewpoints on the LCLH model (Adams et al. 2014). The motive for using the
questionnaire was because of its ability to reach a wider audience in an economical
way (Bryman and Bell 2011). Moreover, the literature review (chapter 2) indicated
that there has been no previous research conducted about passengers viewpoints
on LCLH flights (Whyte and Lohman 2015). Therefore, combining this survey with
a case study made the research feasible (Walliman 2010). Table 4 outlines the
design process of the survey during the research.
Survey design of the research

1. Examine the aim of the research to determine the purpose of the
research to formulate suitable questions: The aim of the study is to
investigate the possibility of implementing the low-cost airline model to long-
haul flights by conducting a case study of Air France-KLM and focus on the new
low-cost long-haul project Boost.
2. Identify the rationale for using the survey design: Studies that have
focussed on LCLH flights have not researched the passenger perspective such as
highlighted by Whyte and Lohman (2015) and a survey design would, therefore,
help to provide the data required to fulfil the aim in contrast to observations or
interviews. Besides, the survey design reaches a wider target audience (in this
case air travellers or passengers) in an economical way and is less time-
consuming.
3. Consider the data collection type: Using an online survey design tool (Google
forms) as it is free of charge, reaches a wider audience which can help when
response rate is low but also makes the data analysis process easier as the data
entry process can be neglected (already Excel output).
4. Identify the sample: Snowball or random sampling; since the survey is based
on opinions about the LCLH model concept. Therefore, no specific experience is
required and the response rate can be increased. As a result, there is an ability
to generalise results.
5. Design questionnaire: Identified the possible themes by referring back to the
aim of the research and based the sections and themes of the questionnaire on
the literature (Appendix A).
6. Pilot questionnaire: Pilot of the questionnaire was conducted among 5 people,
who were asked to provide feedback. Small changes in terms of grammar and
some questions that were not understood were changed. Also, the data that
came out of the pilot was analysed to confirm if it did meet the aim of the
research. The questionnaire was piloted again among 5 people; no major points
of changes were required and the final version of the questionnaire was realised.
7. Distribute the survey: The survey was distributed online through social media
(Facebook and Linkedin). However, response rate appeared to be low in the
beginning, therefore, a message was placed in the university bulletin with a link
to the questionnaire in which more people were invited to fill in the questionnaire,
also aviation forum Airliners.net has been used resulting in a total of 153
responses.
Table developed by Author (2017) using Creswell (2014)
Table 5 - Survey design process used during the research
3.2 Rationale for methods
Other methods including observations, interviews and archival records were also
considered. However, there appeared to be more constraints associated. Firstly,
observations would not provide the required data. Besides, the method is time-
consuming which would make it challenging to complete the research in the given
timeframe. Furthermore, observations would require more resources as opposed
to a questionnaire (Jackson 2010; Adams et al. 2014). Lastly, a significant
drawback of observations, archival records and interviews is getting access to the
organisational setting (Bryman and Bell 2011).
Hence, in the context of this research, Air France-KLM has stated that it does not
take part in any research projects by students (KLM 2015). As a result, data had
to be collected from outside the organisation, thus documentary research was,
therefore, the most suitable.
3.3 Sampling
In order to maximise responses, it was decided to make use of snowball sampling
as this allowed the questionnaire to be shared among different networks of the
author (table 2) resulting in an increased response rate (Bryman and Bell 2011;
Adams et al. 2014). The only requirement of the sample was that they required
some experience of air travel.
3.4 Data Analysis
A strategy was developed to make data useful (Bell 2014; figure 6). Therefore,
quantitative data from the questionnaire was analysed in SPPS using descriptive
and cross-tabulation techniques. These techniques allowed data to be compared
across different variables; consequently, similarities and differences of the
viewpoints of air travellers have been identified and also how they can be
influenced (Norusis 2006; Pallant 2016).
Furthermore, qualitative data was analysed by examining themes and ideas that
occurred regularly by placing them into different categories (Thomas 2013), this
approach helped to identify the strong and weak areas of the LCLH model
suggested by the participants (Appendix B). Ultimately the data has been linked
to the case study. Finally, the data has been presented in graphs, charts and
tables developed in Excel/Word.
Create a plan
regarding desciptive
Confirm the amount Determine if there is analysis of data and
of respondents any response bias variables and
analyse data in
SPSS
Present data in
tables or figures
Figure developed by Author (2017) using Creswell (2014)
Figure 6 - Data analysis process
3.5 Limitations
There are some limitations linked to the research approach. A wide range of
research is available discussing various elements linked to LCCs and FSCs. Due to
time constraints, some of these aspects are not extensively discussed, including
the profitability of specific routes operated by airlines to carry out the research in
a limited scope. As a result, this may present different results as opposed to
previous studies.
Another limitation is linked to the findings of the study. A significant amount of
literature has been produced in Europe. However, while a majority of responses
were received from Europe, a comparable study in a different region may produce
different results. Moreover, since data is based on opinions, it cannot be verified
whether respondents have answered questions truthfully (Bryman and Bell 2011).
Secondary Analysis
30
Chapter Four | Secondary Analysis PESTEL Analysis
4. Introduction
External factors influence the way airlines operate. Therefore, the PESTEL
framework will help to understand the market environment and emphasise the
underlying drivers of change, the influences airlines may have to deal with and
also demonstrate the changes occurred in the airline industry over the years
(Johnson et al. 2014). Finally, the PESTEL will be combined with the analysis of
Air France-KLM in the SAFe framework to determine the possibility of Boost.
4.1 PESTEL
4.1.1 Political and Legal factors
The airline industry is subject to a considerable amount of regulations. The key
priority is the safety of passengers. Consequently, there is a substantial amount
of interference by governments and international organisations on local and
international level with safety as the main principle (ICAO 2017; Budd and Ison
2016).
4.1.1.1 Deregulation
The industry has also developed subsequently afterwards deregulation in 1978.
Deregulation and the open skies policy have encouraged airlines to operate
between different origins and destinations. The deregulation caused more freedom
for airlines and passengers, as airlines can now operate from whatever preferred
destination for lower fares while providing more flights to passengers (Kahn
1988). Similarly, the open skies policy that allows US or EU carriers to operate
flights between the two continents, caused a decrease of 9-10% in fares due to
competition (Peterson and Graham 2008; Vasigh et al. 2013; Morandi et al. 2014).
However, for national airlines deregulation had a bigger impact due to the loss of
competitive advantage as a regulated environment provided a cost structure that
allowed them to cover their costs and eliminated competition. Moreover, post-
deregulation has also evidenced the rise of LCCs (Fu et al. 2010; Rose and
Borenstein 2014).
4.1.1.2 Cabotage
Likewise, strict cabotage policies also influence competition. Cabotage prevents
foreign airlines from operating domestic flights within other countries (Vasigh et
al. 2013). However, Europe has less strict cabotage rules in contrast to the US
where no other foreign airline can operate domestically. It can be argued that
European airlines are in a disadvantageous position as it can increase the amount
of competition domestically in Europe while preventing European airlines from
competing in competitors markets (Button 2014; Rose and Borenstein 2014).
It could be said that because of policy changes airlines have to constantly adapt
their business models to remain competitive (Budd and Ison 2016).
4.1.2 Economic
Holloway (2012) claims that the airline industry experiences different phases; at
one phase airlines benefit from growth while during another phase they experience
declining rates caused by economic factors.
Previously, the industry experienced declines due to events such as terrorist
attacks, natural disasters, disease outbreaks and economic recessions. While most
of the external shocks required short recovery times, two events have had a
significant impact (Pearce 2012). The aftermath of the September 11 attacks in
2001, for example, led to a decrease in air traffic capacity by 3% globally due to
safety concerns (Gittell et al. 2005; OAG 2011). Also, the banking crisis of 2008
caused a 9% decline in demand globally, putting a substantial amount of pressure
on airline profits (OAG 2011; Pearce 2012). Table 6 demonstrates the events
occurred over the years including recovery time.
Event Year Event scale Recovery time
Flood North-Korea August 1995 Low Up to 3 Months
Drought-India May 2000 Low Up to 3 Months
WTC Attack US September 2001 High 12-36 months
First SARS alerts Hong- March 2003 Medium 3-12 months

Kong
SARS China January 2005 Medium 3-12 months
Earthquake China May 2008 Low Up to 3 months
Banking Crisis 2008 High 12-36 months
Swine Flu Mexico April 2009 Low Up to 3 months
Volcanic eruption April 2010 Low Up to 3 months

Iceland
Tsunami and nuclear March 2011 Low Up to 3 months
crisis in Japan
Hurricane Sandy October 2012 Low Up to 3 months
Flight MH370 lost March 2014 Low Up to 3 months
Flight MH17 shot down July 2014 Low Up to 3 months
Ebola virus 2014 Low Up to 3 months
Crisis between EU and 2014 Low Less than 3 months

Russia
Laptop ban by the US 2017 Low 3 Months
Table produced by author 2017 using OAG (2011) and Popova (2014)
Table 6 - Events affecting the airline industry
4.1.2.1 GDP
The GDP can be used to forecast future air travel demand and trends (Hollesen
2014).
Figure 7, shows the GDP growth of Europe between 2004 and 2016 and only in
2009 (-4.4%) and 2012 (-0.5%) there has been a negative growth rate. Suryani
et al. (2010) argue that when GDP growth is negative, air travel demand will
decrease, whereas when GDP growth is positive demand is likely to increase as
passengers have more to money to spend. While there is a link between GDP and
passenger growth rate, it could be argued that this is not in all instances similar
(figure 7).
6%
4%
2%
0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-2%
-4%
-6%
-8%
-10%
GDP growth Passenger growth
Figure produced by author 2017 using Eurostat (2016) and Eurostat (2016a)
Figure 7 - GDP Growth vs Passenger growth Europe 2004 - 2016
4.1.2.2 Fuel
Changes in oil prices have a significant impact on profit margins of airlines as
these are linked to jet-fuel prices (Naumann and Suhl 2013). Over the years, the
price of a barrel crude oil has dropped significantly (figure 8). Still, despite airlines
hedging fuel, there remains a substantial amount of risk as fuel prices remain
uncertain and price increases can place airlines in an unfavourable position (Vasigh
et al. 2013). Besides, in contrast to FSCs, jet-fuel costs are larger expenses for
LCCs which account for approximately 30% of their operating costs as opposed to
approximately 27% for FSCs (OAG 2014). Thus, profits of LCCs are therefore more
vulnerable to fluctuating jet-fuel prices.
Figure applied from Eurocontrol (2017)
Figure 8 - Crude oil and Fuel prices
4.1.2.3 Social
Budd and Ison (2016), suggest that purchasing decisions and travel behaviour of
passengers stimulate the product. Therefore, airlines should differentiate from
competitors to target diverse customer segments. Yet, a good business model is
critical (Bieger et al. 2007). For instance, the demand for LCCs has strengthened
over the years, whereas high service quality remains crucial among passengers
(Borenstein 2011). As a result, airlines need to distinguish the types of economy
and business class passengers to meet their demands (Akartunali et al. 2013).
It is estimated that millennials will spend more on air travel as opposed to other
generations Barton et al. (2013). Consequently, airlines need to constantly change
their product by for instance introducing more comfort. It can be claimed that
airlines need to gain more insight of Millennials preferences and change their
business model accordingly (Budd and Ison 2016). Subsequently, airlines can fulfil
requirements of passengers for a longer-term. Finally, economic factors can also
influence social factors due to change in demand (4.1.2).
4.1.3 Technological and Environmental

Technology can help airlines to increase profits as fuel costs are one of the highest
sources of expenditure (Ison and Budd 2016). Moreover, high fuel consumption
also leads to more CO2 emission. The introduction of new technology helps airlines
to reduce fuel consumption and CO2 emission, newer types of aircraft such as the
Boeing 787 are fuel efficient and environment-friendly (Lee et al. 2009).
New technologies are also used to develop substitutes for jet-fuel. For example,
the airline industry is experimenting the use of biofuel to reduce fuel consumption
and CO2 emission in the future (Gegg et al. 2014).
4.2 PESTEL Summary
The airline industry is volatile due to the influence of diverse factors. It can be
claimed that the deregulation of the industry had a significant impact competition
wise and can be considered as one of the principal drivers. Therefore, it seems
that the industry is shifting towards lesser regulation. Moreover, external shocks
influence the demand for air travel which affects airline profits. Additionally, social
factors are also critical as changed preferences among generations lead to
different travel demands.
However, it can be said that the airline industry is competitive which influences
the way airlines sell products. Therefore, constant revision of the business model
is vital to remain competitive.
Chapter Four | Secondary Analysis Air France-KLM Analysis
4.3 Financial analysis
Finance is required to improve or expand operations (Budd and Ison 2016).
Therefore, effective management of finance is critical. Assessing the financial
performance of Air France-KLM can help to determine whether Air France-KLM has
the capital to launch Boost.
4.4 Financial Performance

Figure 9 demonstrates the operating profit, net profit and the revenue of Air
France-KLM over the period 2006-2016. It is evident that between 2005-2008 the
airline was profitable. However, the following years results have been affected by
diverse environmental factors (table 7). While profits are improving, they have
not reached similar levels as prior to 2008 and therefore, it could be said that
profits are under significant pressure.
Figure applied from CAPA (2017)
Figure 9 - Overview of financial performance Air France-KLM holding
Year Profit/ Cause PESTEL Factors

(Loss)
2008/2009 (814) Global crisis Economic
High oil prices within the first
Million
half year
Downturn of oil prices leading
to a negative result of fuel
hedging strategy
2009/2010 (1.56) Global Crisis Economic, Legal
Billion Corporate passengers and Social.
switching from business to
economy class
Price sensitivity among
passengers
350 Million fine for price-
fixing in the US (BBC 2010).

2010/2011 613 No significant impact on profits n/a
Million despite Ash cloud closing European
traffic and heavy snowfall
2011 (809) Tsunami in Japan Political, Economic
Million High fuel prices and Environmental
Political unrest in the Middle
East and Africa
2012 (1.19) Shifts in consumers demands Social and Political
Billion resulting in increased travel
with LCCs
Increased regulation in
Europe
2013 (1.82) High fuel prices Political and
Billion Changes in tax regulations Economic
2014 (198) Strike of Air France pilots Social and
Million Changes in pension Economic
regulations
2015 118 No significant threats of n/a
Million environmental factors
2016 792 No significant threats of n/a
Million environmental factors
Change of accounting year in 2011
Table developed by author using BBC (2010); CAPA (2017); annual reports Air France-
KLM from (2008-2016).
Table 7 - Overview financial performance Air France-KLM
4.4.1 Debt
In 2011, the debt of the airline was 6.5 billion, this has been reduced to 3.7
billion in 2016. Also, for the first time since 2008, in 2016 there is more cash (4.3
billion) available in contrast to debt (figure 10). Despite improvements, it could
be argued that it is critical to reduce debt to minimise the impact of any possible
events that can affect profits in the future, therefore, it remains a priority.
Nonetheless, the launch of a new airline can increase debt due to additional capital
required to start operations (Gillen and Gados 2008).
Figure 10 - Overview of debt and Cash Air France-KLM
4.4.2 Labour costs vs productivity

In contrast to other European airlines, the airline has the second highest % of
labour costs (30%). However, among the airlines with the lowest % of labour
costs, most are LCCs, this suggests that for Boost, the airline must reduce labour
costs drastically. Francis et al. (2007) argued that not all the cost-cutting
strategies of LCCs are required for an LCLH carrier, yet, it can be argued that
labour costs are critical.
Figure 11 - Airlines labour costs % of revenue
Also in terms of labour productivity, the airline is performing poor as can be
evidenced in figure 12 in available tonnes kilometres (ATK). The ATK indicates the
amount of traffic that can be produced per employee (CAPA 2013). Besides, the
airlines with the highest productivity are LCCs. In the literature review, it was
argued by Dennis (2007), that productivity and labour costs provide an advantage
to LCCs, this is clearly evident. Yet, for Boost, this will be challenging as new
working conditions will have to be negotiated with current staff and this can cause
HR implications as highlighted by Gillen and Gados (2008) and Budd and Ison
(2016).
Figure 12 Labour productivity of airlines per employee
4.5 Passenger capacity
Passenger growth, however, has evidenced an average annual growth of 1%.
Additionally, a load factor above 82% is also consistently maintained (figure 13).
It could be said that when launching an LCLH carrier the airline can achieve a load
factor of 82% (Morrell 2008).
Figure 13 - Air France-KLM Load factors
4.5.1 Load factors
A comparison between the load factors of long-haul flights and medium and short-
haul flights (figure 14) confirms that the airline performs better on long-haul
flights (above 82%) as opposed to short and medium-haul flights (approximately
75%). A possible motive of a lower load factor on medium and short-haul flights
might be due to the competition of LCCs (Casey 2010). However, since the airline
has also other LCCs, it seems that it is also cannibalising the core business as
passengers may choose LCCs for short and medium-haul flights. Launching, an
LCLH carrier can have a similar impact on load factors for long-haul flights (Button
and Ison 2008).
100
90
80
Loadfactor in %
70
60
50
40
30
20
10
0
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Jun-12
Sep-12
Mar-13
Jun-13
Mar-14
Jun-14
Sep-14
Mar-15
Jun-15
Mar-16
Jun-16
Mar-17
Sep-13
Sep-15
Sep-16
Long-haul Medium/Short-haul
Figure produced by author (2017) using Air France-KLM 2012-2017
Figure 14 - Overview of Load factors Air France-KLM 2012-2017
4.6 SAFe
The SAFe evaluation criteria (table 8), summarises the previously discussed
findings. Constraints appear in the feasibility and acceptability of the strategy and
therefore, Boost can be evaluated through partial implementation.
Suitability The PESTEL indicates that the most influential factors

that can possibly impact the profitability of Air France-
KLM are external shocks, especially recessions can have
a longer-term impact on profits. This can also affect
other airlines in the Air France-KLM group. The impact of
an increasing oil price can also have an impact on a
longer-term.
However, the demand for air travel is changing as more

people want to fly cheaper, this demand has to be
fulfilled especially considering the competitive nature of
the airline industry.
Also, concerning Air France-KLMs financial performance,

over the last two years, no major events have had an
impact on the profitability resulting in positive results.
Therefore, launching Boost is a suitable response to
address the demand and challenge competition.
Acceptability The most important stakeholder groups are the cabin
members and the pilots. The airline has to negotiate new
employment terms which can be challenging and much
will depend on their reaction. The consequences of hiring
new employees for Boost should also be considered in
particular the reaction among current employees.
In terms of risk, the airline has managed to reduce debt

to 3.7 billion from 6.5 billion and has now more cash
as opposed to its debt. Yet the risk of launching Boost is
that it can increase debt as investments are required to
start operations. However, the level of risk can be
reduced by using some aircraft from the existing fleet of
the other airlines. Nonetheless, this can impact the fleet
availability of the other airlines in the group.
Another significant risk is brand confusion among

passengers. The launch of Boost may lead to
cannibalising other airlines of the group.
In terms of returns, assessments by Moreira et al. (2011)

and Whyte and Lohman (2015) suggest that LCLH have a
cost advantage between 10%-17% which seems limited
despite load factors on long-haul flights indicate that an
82% load factor is constantly achieved.
Feasibility The airline seems to have cash available (4.3 billion),
however, a significant limitation is its current debt that can
still be considered high and any environmental factors can
also increase debt as the industry is volatile and also
competitive. Additionally, current labour costs are high as
opposed to other LCCs, this will have to be lowered first.
While the skills and people are available to the airline,

improving labour productivity can be considered as crucial.
Also, the type of aircraft will have an impact on the
profitability.
Therefore, feasibility in practice seems limited.

Evaluation It can be claimed that evaluation should take place
through partial implementation since it can be argued
that there is limited scope for Air France-KLM and only
experimenting can reveal how successful this strategy
can be. Partial implementation can either consist of a few
routes to test demand with profitability to gain a first-
mover advantage. On the other hand, the airline can also
start operations as a short-haul LCC to create brand
awareness first and to test the business model and the
impact on the other airlines in the group.
Table produced by author (2017) using Johnson et al. (2014)
Table 8 - SAFe evaluation criteria Boost
Findings
46
Chapter Five | Findings Introduction
5. Introduction
After distributing a questionnaire, a total of 145 valid responses were received.
This chapter has been divided into five sections. The first section will discuss the
demographic information. The second section will examine the factors that
influence respondents during ticket purchase. The third section addresses the low-
cost experience and perception of respondents. The fourth section presents
findings related to ancillary purchase and lastly the fifth section will discuss the
concept of FSCs and LCLH flights. Finally, after each section, data will be discussed
by referring back to the literature.
Chapter Five | Findings Demographics
5.1 Demographics
The purpose of demographical information was to have a better understanding of
respondents.
5.1.1 Gender
From the 145 respondents, 112 were male (77%) and 31 females (21%), while 2
respondents (1%), preferred not to reveal their gender.
100%
77%
80%
60%
40%
21%
20%
1%
0%
Male Female Prefer not to say
Figure produced by author (2017)
Figure 15 - Gender
5.1.2 Age
Respondents were asked to indicate their age group, to identify the preferences
among the diverse age groups and also to examine which age groups are
interested in LCLH flights. A majority of respondents belonged to the age group
between 21-29 (43% n=63), followed by respondents between 30-39 (19%
n=28). The age groups between, 18-20, 40-49 and 50-59 were all equally
represented (11% n=16). Whereas, 60 and over was underrepresented (4%
n=6).
Over 60 4%
50-59 11%
40-49 11%
30-39 19%
21-29 43%
18-20 11%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Figure 16 - Age Group
5.1.3 Region
A significant amount of respondents were located in Europe (63% n=92), followed
by respondents from Asia Pacific (14%, n= 20) and North-America (12% n=18).
Australia (3% n=4) and South-America (1% n=2) received the lowest total of
responses.
South-America 1%
North-America 12%
Middle East and Africa 6%
Europe 63%
Australia 3%
Asia Pacific 14%
0% 10% 20% 30% 40% 50% 60% 70%
Figure 17 - Region
5.1.4 Discussion
The first section revealed that a significant amount of responses came from males.
However, if more data related to females would have been obtained, it could have
been interesting to analyse the differences between male and females with
regards to service requirements.
Findings also indicated that the age groups between 21-29 and 30-39 were the
most represented, with most of the responses from Europe. Since Air France-
KLM aims to target millennials with Boost, this age group can provide valuable
insights on LCLH flights.
Chapter Five | Findings Ticket Purchase
5.2 Influence on ticket purchase

The aim was to understand the factors that influence passengers when booking a
ticket and whether there is a specific preference for LCCs or FSCs.
52% of the respondents (n=75) claimed that price is considered important. Hence,
this indicates that passengers are price sensitive and that budget is a critical
element when booking a ticket (Teichert et al. 2008). Conversely, 32% (n=46),
books a ticket based on schedule and convenient flight-times. It can be said that
both elements reflect the underlying cause behind the growth of LCCs as
evidenced in the literature review; it is mainly driven by price but also the point-
to-point connections that make it convenient for passengers (Cook and Goodwin
2008; De Wit and Zuiderberg 2012).
Price
Price
Schedule and
52% convenient flight time
32%
Frequent flyer benefits
Safety record
Figure 18 - Influence on ticket purchase
5.2.1 Brand Perception

When inquired about the most important factor that determines the brand
perception of the airline. Remarkably, 37% (n=54) indicated that it is the quality
of aircraft, other respondents (23%, n=33), indicated that on-time performance
determines the brand perception. A noteworthy aspect is that customer interaction
(17%, n= 24) and safety (16%, n=23), were among the less important factors.
Customer interaction, in particular, suggests that passengers are willing to
sacrifice service elements for a cheaper fare (Dobruszkes 2006).
Aircraft quality Quality of aircraft

16% 37% On-time performance
Safety
Customer interaction
23%
Figure 19 - Brand Perception
5.2.2 FSCs vs LCCs

The trend to sacrifice service for a cheaper price was also visible when respondents
were asked whether the difference between FSCs and LCCs influences their choice
of airline. The respondents that answered with No argued that price is important:
No, I will go for cost-effectiveness- we get what we pay for (Respondent 19).
Table 9 - FSC vs LCC: No influence
This was also claimed by another respondent:
No, I will just pick the lowest price (Respondent 88).
Table 10 - FSC vs LCC: Lowest price
Another respondent had a similar view:
I don't need much and full service airlines always offer "too much" service.
(Respondent 103).
Table 11 - FSC vs LCC: Extra service
Other respondents, felt that there is no significant difference between the service
quality of LCCs and FSCs. As they argued that FSC quality has dropped. It can be
claimed that this explains why the price is influential.
Table 9 -
Respondent 3 It used to more than it does now. My change of opinion has
been caused by incidents such as the recent British Airways IT
system crash. It seems that the so-called quality airlines can
be just as chaotic and ill-prepared as the low-cost airlines
Respondent 8 Definitely. I require full service and am very disappointed in
the way British Airways are changing.
Respondent 27 Yes. Having said that BA are moving towards the unbundled
charging structure of EasyJet & Ryanair. Will there be much
difference in future?
Respondent 20 I find there often isn't a bug difference between the two any
more so wouldn't pay a lot more for a full service airline.
Especially if I had to connect rather than take a low cost
service point to point.
Respondent 96 No, lowcosts can be just as good with their soft product.
Table produced by author (2017)
Table 12 - FSC vs LCC: FSCs dropped service quality
Respondents that said Yes appeared to be concerned about service (Table 13).
Table 9 -
Respondent 5 Yes i would tend to book with a full-service airline if the price
isn't unreasonable. I would book with KLM or Qatar airlines
anyday over EasyJet and Ryanair etc.
Respondent 57 I would always go with full service unless the fare difference
is way too big
Respondent 60 yes, I would rather pay more for a full service then a low
cost, I like to see price but would always look at the airline /
service
Respondent 62 I will avoid low cost for long haul flight due nonavailability of
in flight service
Respondent 105 Yes, I would rather pay more and receive good service.
Respondent Yes it does. If the price difference between a full service

133 airline and a low cost carrier is less than $200, I tend to lean
towards spending the extra money to fly a full service carrier
to avoid having to pick my options through the unbundled low
cost carrier.
Table 13 - Preference for FSCs
According to OConnell and Williams (2005), FSC passengers are also concerned
about price but only to a certain degree as they are willing to pay for additional
services. This is partly evident, as other respondents argued that distance is also
influential for the type of airline that is chosen, in such cases passengers choose
FSCs for longer flights due to more service.
Table 9 -
Respondent 7 It depends on the flight. For short flights no for longer flights
yes.
Respondent 13 Yes, but only for long-distance flights, when available onboard
facilities are important
Respondent 14 Yes depending on the distance
Respondent Definitely. Being comfortable on a long haul flight is something
112 to consider, which would include meals, leg room and enough
baggage allowance already included in the price of the flight.
Having to worry about additional needs whilst travelling long
distances would just be too stressful.
Respondent 21 Yes depending on the distance
Respondent 16 Not for flights within Europe. Only for flights that take more
than 5 hours
Respondent 116 Yes especially for long haul flights as you spend a long time
on the airplane and you need a certain level of comfort. Also
meals are important on long flights because you have to eat
on the plane.
Table 14 - FSC vs LCC: Distance
5.2.3 Discussion
It is clearly evident from the responses that LCCs have put pressure on FSCs and
there is a change in the behaviour towards price and service (Borenstein 2011;
Westermann 2012). It could be claimed that price competition has an impact on
the service quality of FSCs, which explains why passengers select an airline based
on the price and LCCs are therefore more preferable (Borenstein and Rose 2014).
Moreover, it also confirms that the strategy of FSCs to come closer to LCCs is not
effective since it can be said that due to the higher labour costs (chapter 4), the
price gap cannot be closed with LCCs (Pereira and Reis 2011).
Nevertheless, the fact that findings indicate that distance is also important,
suggests that that LCCs are only preferred on short-haul flights due to the lack of
service. Klaas and Klein (2005) and De Wit and Zuidberg (2012) highlighted the
limitations of LCCs and it could be argued that the lack of service is a limitation of
the low-cost model and on long distance flights, FSCs are preferable since they
offer more service and comfort.
Chapter Five | Findings LCC Perception and Experience
5.3 LCC experience and perception

Respondents were also inquired about their experience and perceptions of LCCs.
94% (n=137) claimed to have flown with an LCC, whereas only 6% (n=8) said
that they have never been on board an LCC. The findings support the success and
the rise of LCCs observed in the literature review.
100% 94%
80%
60%
40%
20% 6%
0%
Yes No
Figure 20 - Flown with LCC
5.3.1 Perception
When asked about the general perception of LCCs, 42% (n=61), said that LCCs
provide an average service, followed by 31% (n=45) who claimed that LCCs have
a good service. Finally, only 12% (n=17) indicated that LCCs provide a poor
service while 7% (n=10) claimed that LCCs provide excellent service.
Excellent Service 7%
Average Service 42%
Good Service 31%
Poor Service 12%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Figure 21 - Perception of LCCs
5.3.2 Taking LCLH flights

Although respondents earlier suggested that for longer-flights they prefer more
service, 37% (n=53), is willing to consider taking an LCLH flight. Interestingly,
the difference between respondents that said maybe (30% n=44) and no (32%
n=46), is not significant. Which means that they need to be convinced about the
concept and it will depend on the business model.
40% 37%
32% 30%
30%
20%
10%
1%
0%
Yes No Maybe Don't know
Figure 22 - Taking an LCLH flight
When asked if respondents would consider taking an LCLH flight, the influence of
price as the main driver was again visible, especially among respondents that
would take an LCLH flight (table 15).
Table 9 -
Respondent 18 Price would be the key driver (If they offer cheaper tickets
than other airlines, I would definitely use low-cost airlines for
long-haul flights)
Respondent 26 If Its cheaper then I would

Respondent 41 Price difference with low cost airline is main factor.
Respondent 76 I have flown longhaul on lowcost airlines before, and if the

price is good, the seat pitch is comfortable, and there is a
reasonable buy-on-board offering I'd happily choose this
option.
Respondent 81 If flying Economy the seat is broadly the same and the money
you save on ticket price you can spend on food/amenities for
the flight so usually there is not as huge as a difference once
you pay for baggage and other extras if required..
Respondent If long haul low cost is cheaper or more convenient I will book
82 them. For long haul price difference must be more than on
shorthaul, as I will most likely have to bring a piece of hold
luggage.
Respondent 91 If it saved money id happily deal with less room/food for 6
hours
Respondent 101 Cheap
Respondent 121 If price was good and departure times suited.
Table 15 - Price as main driver for LCLH flights
Examination of age groups that answered yes, revealed that millennials are
interested. Especially, passengers between 30-39 (Goldmansachs 2015) as 54%
(n=15) of this age group is willing to take an LCLH flight. More indecisiveness was
shown among 21-29-year-olds as only 29% (n=18) is interested while 33%
(n=21) said no and 35% (n=22) said maybe. This can be due to the fact that they
may want to travel cheaper while having luxury elements (Barton et al. 2013).
30-39 (No) 25%
30-39 (Maybe) 21%
21-29 (No) 33%
21-29 (Maybe) 35%
21-29 (Yes) 29%
30-39 (Yes) 54%
0% 10% 20% 30% 40% 50% 60%
Figure 23 - Overview of Millennials and LCLH flights
LCCs have a simple product charging additional fees for ancillary and service to
offer cheaper prices (Ison and Budd 2016). However, the respondents that
indicated that they would maybe consider an LCLH flight argued that besides price,
service and comfort are more important. Moreover, the price difference must be
significant.
Price would need to be much better, a heightened service compared to a 2 hour flight
would be needed too (Respondent 2).
Table 16 Price and service quality
This view was also shared among other respondents (table 17).
Table 9 -
Respondent 9 I'd rather fly with a full-service airline to have a better
customer experience
Respondent 13 it would depend on the price, flight schedule/timings and
onboard facilities
Respondent 25 If the aircraft is new with comfortable seats, equipped with

iFEs. Then I would consider flying with low-cost airlines for
long haul flight.
Respondent 27 I could book it if the quality and comfort level is good.
Respondent 37 Depends on ticket price difference
Respondent 40 I have flown long haul on a now defunct LCC (Canada 3000)
twice from London Gatwick to Toronto in 1999 and 2000.
Back then, the airline was giving 20 Kg baggage allowance
though you still had to pay for food should you want it (we
took our own sandwiches) plus seat allocation. So, if the
maths works out correct, I might still consider it.
Respondent 53 If long haul low cost is cheaper or more convenient I will book
them. For long haul price difference must be more than on
shorthaul, as I will most likely have to bring a piece of hold
luggage.
Respondent 77 If its considerably cheaper than a full-service airline, I might
be more inclined to book with a low-cost airline. Otherwise, I
wouldn't mind paying an extra $100-$200 for a full-service
option.
Table 17 - Price and service quality LCLH flights
Respondents that are not willing to take LCLH flights argued that there is less
comfort (table 18).
Table 9 -
Respondent 6 Lack of space, facilities, enjoyment, etc.
Respondent 14 Because I look for quality and high level of service and foods.
Alothough low cost is good service it is only good for short
haul
Respondent 22 They are usually less comfortable flying experiences with less
seat space and so on. For a long flight comfort is one of the
main factors.
Respondent 23 I think that on low-cost airlines the space is much smaller and
as I am tall I prefer to have as much room as possible. Also,
it's easier for the plane to get hotter than necessary which
would make the whole flight just uncomfortable. I struggle to
sit in one place for a long period of time so to be as comfy as I
can be is a must for a long-haul flight.
Respondent 35 Long haul travel requires a certain level of comfort that the
LCC wont give .
Respondent 40 Comfort, in flight entertainment and quality of food are
important factors.
Respondent 42 It want a comfortable flight and good service for a flight of
minimum 6 hours
Respondent 86 Would always pay more money if the travel is longer then 3
hours. Worth the money every time.
Respondent 135 No, if the service of a LCC short haul was the same as o. The
long haul, I'm happy to endure reduced service for a couple of
hours at the right price but not for longer flights
Respondent 142 Seat comfort and also longer the journey the bigger the
issues when things go wrong, i.e. cancellations
Table 18 - Not taking an LCLH flight: Lack of service and comfort
5.3.3 Discussion
LCCs are quite popular this can be evidenced by the fact that a majority of the
respondents have flown with LCCs. This could relate to the fact that on short-haul
flights luxury is not a requirement (Mason and Alamdari 2007). The results
highlight the different perceptions related to LCCs and the service provided by
LCCs on short-haul routes emphasises that the service quality is not high, which
can also have an influence on the perception of LCLH carriers (Saha and Theingi
2009).
Although a majority of the respondents are willing to consider taking an LCLH
flight, evidence from the respondents who are maybe or not willing to take an
LCLH flight implies that they are not prepared to neglect the luxury elements, only
if the price difference is significant (Whyte and Loman 2015). This is also evident
from millennials in particular between 21-29. It was argued by Francis et al.
(2007), that it is not necessary to achieve all the cost-cutting strategies of LCCs.
However, it could be argued that this is challenging, as, in order to create a
significant price difference, an LCLH carrier will need to charge extra for service,
which indicates that all the elements of the low-cost model will need to be
transferred (Williams et al. 2003; Budd and Ison 2016).
Since passengers are not willing to sacrifice luxury elements, it can be said that
an innovative model with a competitive price can be more effective (Wensveen
and Leick 2009).
Chapter Five | Findings Ancillary
5.4 Ancillary
More than half of the respondents consider buying a combination of ancillary
(72%, n=104) (figure 24). The combination of excess baggage and onboard food
and beverages were among the most preferred.
Buying more than one ancillary 72%
Upgrades 6%
None 7%
Excess bagage 5%
Assigned seats 3%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Figure 24 - Buying ancillary
73% (n= 106) will also buy the same ancillary for an LCLH flight (figure 25).
80% 73%
60%
40%
20% 12% 12%

1%
0%
Figure 25 - Buying same ancillary on an LCLH flight
The respondents argued that such ancillary is necessary for a long-distance flight
and that only if they are cheap they will purchase them (table 19).
Table 9 -
Respondent 5 Yes, long haul flights can be really draining so i would buy in-
flight entertainment and wifi. If the price was low, i would also
try to upgrade.
Respondent 8 I would not choose this method I travel. I want all the basics
included in the price
Respondent 11 On a long haul flight, I'd be more likely to purchase wifi and
food or drink. But I avoid the others as unnecessary costs
anyway.
Respondent 13 Price-dependent..
Respondent 18 Except for a couple of these I believe these should all be

included in the costs of the flight and ideally for low cost
airlines as well as long haul flights. The only ones that I think
need an extra cost are excess baggage (in the hold only not
the cabin) and access to lounges. Priority boarding should only
be offered to people with health issues and the elderly.
Respondent 58 If i can get these services for cheaper than full service
carriers then its worth it
Respondent 83 if the price was good
Table 19 - Motives for buying ancillary on LCLH flights
5.4.1 Discussion
In large markets, there is an opportunity for LCLH flights (Francis et al. 2007; Pels
2008). This can be concluded from the fact that passengers are still willing to buy
ancillary onboard an LCLH flight only if there is a significant difference in ticket
price. Yet, it seems that passengers accept the fact that they will need to buy
ancillary to be comfortable. According to Gudmundsson (2015), one of the causes
LCLH carriers fail is due to the lack of uniqueness and copying network carriers. It
could be argued that with only a price difference an LCLH carrier is not unique as
they are copying LCCs. Moreover, as argued earlier by Wensveen and Leick (2009)
the business model will need to be innovative in which positioning will play a
critical role (Klaas and Klein 2005).
Interestingly, it can be observed from the findings (figure 24), that there is not
one single type of ancillary preferred but rather a combination. It can be said that
FSCs already offer a combination of ancillary and it may be argued that they can
do more to convince customers in demonstrating the value of their current product
since a majority of the passengers want to be informed about the elements that
are included in the ticket price (OConnell and Warnock-Smith 2013).
Chapter Five | Findings LCLH flights and FSCs
5.5 Low-cost long-haul flights and FSCs
The final section of the questionnaire addressed the opinion of respondents about
FSCs and LCLH flights.
5.5.1 More Choice
Overall, respondents were positive about the LCLH concept, as it would provide
more choice. However, findings also highlight limitations, as most respondents
also argued that they want to have different ancillary included in return for a lower
price (table 20). Hence, passengers want to have more transparency with regards
to the ticket price.
Table 9 -
Respondent 7 I think it is worth trying.
Respondent 9 As long as the service provided/ meals are kept the same, it
would be good
Respondent 11 They'd be used. People like an itemised bill.
Respondent 12 It would be a welcome development to at least try
Respondent 13 A welcome introduction.
Respondent 15 They should only do so where they can include hold luggage,
meals, etc. in the price paid.
Respondent 17 Depends on whats included
Respondent 21 As long as the minimum service level is defined before

purchasing a ticket there should be no problem.
Respondent 23 There is nothing wrong with that. I think most people are
always looking for a low-cost flight so would consider this.
Respondent 27 It can be a good alternative for the high cost flights if they
guarantee you the same quality and comfort.
Respondent 29 OK; If the services and price were correct.
Respondent 30 Depends on what services they offer
Respondent 55 As long as the service being provided is good for the fare
Respondent 76 I think it's a good idea to cater for those who want to travel
low cost, aswell as those who want to travel with the
traditional services included
Respondent 81 I don't like the idea on the same aircraft like selling Basic
Economy tickets and excluding but in the case of a new airline
like IAG has done with Level is a good idea to get more of the
market.
Respondent 106 This is a positive development, if the flights are truly lower-
cost than their other offerings.
Table 20 - Low-cost Long-haul good idea: ticket price transparency
5.5.2 Viability
Other respondents are concerned about the viability and argued that it would be
a wrong strategy, as it will have an impact on the brand or service quality and
FSCs should improve their product instead (table 21). This illustrates that
passengers have different expectations and perceptions of FSCs (Parasuraman et
al. 1985).
Table 9 -
Respondent 1 I'm not sure that the market actually wants Full Service
airlines to dilute their service to compete with the LCC's.
Imagine a 'less British' British Airways! The response has
always been to offer 'more for less' while protecting margins,
to find economies by restructuring internally, for example BA's
latest cabin crews whose contracts of employment are on
significantly less attractive terms than long-term employees.
Respondent 2 Understandable, but possibly not sustainable
Respondent 3 I'm sceptical. I think they would have to provide a better and
more substantial service compared with their short-haul
efforts.
Respondent 16 I think they should rather focus on their service quality than
on offering cheap flights.
Respondent 20 Dangerous tactic - leads to lack of differentiation. Could be

costly as infrastructure of a low cost airline is typically far
different to a legacy carrier. BA trying to deal with this with
new separate low cost airline (Level).
Respondent 60 BA for eg does a very poor service and feels more like a
budget airline thne BA
Respondent 65 Wrong strategy: you are full service or lcc, trying to mimic
the competition is usually not a good idea and doomed to fail.
Respondent 71 I am not sure if they will be able to achieve a significantly
lower cost base to justify the lower fares. Will be interesting to
see how it turns out.
Respondent 72 I think it is pointless and anti-competitive. I think they will
ruin their brand too
Respondent 80 I am not totally for it as it is not as simple as just copying an
LCC. Full Service airlines should focus more on their own
structures as LCC Longhaul carriers still lack Business
passengers comparison to full service carriers which is an

advantage for them.
Respondent 82 I don't like the seperate brands.
Respondent 87 I think it will cheapen the airlines reputation
Respondent 97 Good for them. Then they should make sure their full-service
airline is really full-service, and can clearly be differentiated
from their low-cost arm.
Respondent 100 Destined to fail as it will dillute the perception of the airline
being full service.
Respondent 133 I think it helps generate extra revenue for the company, but
it really lowers brand equity as the service doesn't quite match
the expected level of elevated customer service.
Respondent 141 Might cause some product perception issues if the brands are
not completely different
Table 21 - LCLH flights by FSCs: wrong strategy
5.5.3 Success
When respondents were asked if they believed that LCLH carriers can be
successful, 56% (n=81) ticked Yes, while 35% (n=50) was unsure and 6% (n=8)
believed that it will not succeed.
60% 56%
50%
40% 35%
30%
20%
10% 6%
2%
0%
Figure 26 - Successful LCLH flights
Most of the respondents argue that it can open-up new markets, especially for
people who cannot afford to fly (table 22). This clearly suggests that price is critical
for success. Hence, it may suggest that the target market is different in contrast
to the respondents (Budd and Ison 2016).
Table 9 -
Respondent 2 Depends on audience, it may enable those who could not
afford long-haul flights previously so potential new market.
However, majority of existing long haul customers probably
would prefer to stay with long-haul suppliers.
Respondent 7 I think there are some people who would choose to fly like
that because it could potentially be the cheapest option.
Respondent 16 If they are much cheaper than the full-service ones, they will
become attractive for people with a low disposable income
such as students.
Respondent 40 It will make long haul travel available to more people. From
the past Sir Freddie Laker's "Sky Train" model was
revolutionary.
Respondent 48 There are poor people who want to travel
Respondent 71 I think low cost long haul will definitely be successful as in

being able to attract travellers. I believe this is already proven
by Norwegian. Whether they will be commercially successful is
yet to be seen I believe. I dont have enough insight into the
economics of airlines to make a judgement.
Respondent 120 More people would be able to visit our wonderful world down
under and us aussies can visit your amazing history in Europe,
really meaning that tourism will boast in each area resulting in
better economic situations
Table 22 - Possible motives for success of LCLH flights
5.5.4 Discussion
Findings present an interesting insight on FSCs applying the low-cost model on
long-haul flights. LCLH carriers can provide more choice, this suggests that there
is scope for an LCLH carrier. Nevertheless, passengers appear to be concerned
about the impact on the level of service quality. Francis et al. (2007) argued that
FSCs have experience in long-haul flights and this seems to be evident from the
responses. It can be claimed that passengers have a different perception of FSCs
(Parasuraman et al. 1985). Yet, it seems that FSCs have failed to understand
passengers. While price seems a critical element, on long-haul flights passengers
want to receive a certain level of comfort.
Still, passengers believe that LCLH flights can be successful as it will open-up new
markets for other target segments which can help to achieve the 82% load factor
(Daft and Albers 2012). Yet, there is no conclusive evidence that the core business
will be cannibalised as argued by Ison and Button (2008).
However, a crucial point for success is the price. In the literature review, Morrell
(2008) and Moreira et al. (2011) claimed that the cost advantages for LCLH
carriers are low, this seems true as it can be said that lowering costs is challenging
for FSCs. For instance, Air France-KLMs labour costs account for 30% of their
total revenue, which makes it complex to provide lower prices as short-haul LCCs
do. Consequently, the cost gap cannot be fully minimised (Morrell 2005;
Gundmundsson 2015).
Bruckner et al. (2013) discuss the significant impact of LCCs on fares. If FSCs
manage to lower ticket prices for long-haul flights, it can be said that LCCs such
as Norwegian that will operate long-haul flights have a greater impact on the
competition of fares and thus the strategy will have a short-term effectiveness
(Pearson and Merkert 2014). Nonetheless, a similar view was reflected when
respondents argued that it could be a wrong strategy. Therefore, there is limited
scope for transferring the low-cost model to long-haul flights.
Conclusion
72
Chapter Six | Conclusion
6. Conclusion
The aim of this research was to investigate the possibility of transferring the low-
cost airline model to long-haul flights in the form of a case study of Air France-
KLM and its project Boost as well as gaining an insight of passengers view on LCLH
flights.
The views of scholars on LCLH flights varied and a framework was developed
involving a PESTEL analysis and an analysis of Air France-KLMs performance to
examine the possibility of Boost. The results of the PESTEL showed the competitive
nature of the airline industry and it is evident that the key driver has been
deregulation. However, demand is also crucial as external shocks have a
significant impact on air travel demand. This is also reflected in the financial
performance of Air France-KLM.
After combining the performance of Air France-KLM and the PESTEL with the SAFe
framework, some clear constraints are evident in terms of feasibility and
acceptability of the strategy, since the airline has high labour costs and low
productivity; two vital elements for an LCLH carrier.
Results of a questionnaire distributed among 145 air travellers revealed a
combination of different responses with regards to LCLH flights. While Price is
critical, passengers prefer FSCs for long-distance flights due to comfort and
service and they claim that the price difference has to be significant to fly on an
LCLH carrier. Remarkably, it appears that the quality of FSCs has dropped
significantly, which is why some people are still willing to fly with an LCLH carrier.
Conversely, there are still people that need to be convinced about the concept
which requires a unique business model as argued by Wensveen and Leick (2009).
Chapter Six | Conclusion
The concept of LCLH flights is a positive development. However, it can be
concluded that there is a limed scope for LCLH flights as highlighted by some
scholars (Gillen and Gados 2003; Morrell 2008), particularly when applied by FSCs
it has significant limitations. Besides, much will also depend on the business model
of the LCLH carrier.
For Boost, success will depend on a lower price to generate demand. Nevertheless,
this challenging as Air France-KLM will need to lower labour costs and increase
productivity, additionally, it can also have an impact on other airlines in the Air
France-KLM group. Instead, the airline can focus on improving its long-haul
product as findings clearly provide evidence of FSCs quality being dropped.
Recommendations
75
Chapter Seven | Recommendations Further Research
7. Recommendations
Based on the findings, the following sections will provide recommendations for Air
France-KLM followed by areas for further research.
7.1 Recommendations Air France-KLM
7.1.1 Focus on customers

Airlines seem to neglect customer focus (section 5.2.2). As more people are using
the internet especially social media (Kemp 2017), big data can be beneficial to
identify the most common needs and trends among passengers and assist in
targeting passengers individually to create a better product and fulfil changing
customers demands.
7.1.2 Focus on product

Improvement of the current product can provide Air France-KLM with a type of
uniqueness. Especially, using the POA can be helpful. The airline can, for example,
introduce a basic economy class besides the normal economy class concept on
long-haul flights to meet the demand of price sensitive passengers. This concept
might be able to fulfil empty seats by providing less service. Conversely, the
normal economy class can be turned into premium economy to meet demands of
passengers that want comfort.
Chapter Seven | Recommendations Further Research
7.2 Further research
7.2.1 Impact on airports

Further research could focus on the potential impact of LCLH carriers on airports
and the possible impact on the network and competitive advantage of national
carriers.
7.2.2 Development of airline models

The development of airline business models is extensively discussed in the
literature (section 2.2). The research highlighted that the difference between the
service quality of FSCs and LCCs is becoming smaller. Analysing the different types
of airline business models can provide new ideas for unique and innovative models
that might be better suitable for long-haul flights.
Sources
78
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Appendices
89
Appendices
Appendix A Questionnaire
An example of the questionnaire that was distributed.
Low-cost Long-haul Flights

Thank you for taking the time to fill in this questionnaire. This questionnaire is part of my capstone
research project which I am completing to achieve my Masters degree in International Business.
Low-cost airlines have become popular and most of us may have heard of airlines such as Ryanair,
Southwest airlines or Easyjet and many other low-cost airlines. I am currently investigating whether
the business model of low-cost airlines can be used on long-haul flights. A flight is considered long-
haul when the flight time is more than 6 hours. Also, low-cost airlines charge additional fees for
elements such as baggage, catering or choosing seats. Whereas when flying with full-service airlines
these elements are included within the ticket price. A few examples of full-service airlines are: KLM,
British Airways or Lufthansa.
In the following pages, you are asked to share your experiences regarding air travel and thoughts on
long-haul low-cost airlines. This questionnaire should not take more than 10 minutes.
In all cases are responses anonymously and your participation will be very much valued, however,
you can withdraw at any point if you wish not to take part. All the gathered data will be only used for
this project.
In case you have any questions, please feel free to contact me. Participants are encouraged to share
any comments at the end of the questionnaire.
Thank you.
General Information
Q1. What is your gender? *
Markeer slechts n ovaal.
Male
Female
Prefer not to say
Q2. What age group do you belong to? *

18-20
21-29
30-39
40-49
Appendices
50-59
60 and over
Q3. Where are you located? *

Middle East and Africa
North-America
South-America
Europe
Asia Pacific
Australia
Factors influencing ticket purchase

Q4. When booking a ticket, what is the most important factor that influences
your purchase? *
Price
Schedule and convenient flight time
Frequent flyer benefits
Inflight entertainment systems
Safety record
Catering
Use of technology (e.g on-board WiFi, self-check in kiosk)
Anders:
Q5. What is the most important factor that determines the brand perception of
the airline? *
Appendices
On-time performance
Quality of aircraft
Safety
Appearance of staff
Anders:
Q6. Do you think the difference between full-service airlines and low-cost
airlines influences your selection of airline? please motivate your answer *
Low-cost airlines experience and perception

Q7. Have you ever been on-board a low-cost airline? *
Yes
No
Prefer not to mention
Q8. What is your general perception of Low-cost airlines *

Poor service
Average service
Good service
Excellent service
Don't know
Anders:
Q9. Would you consider booking a flight on a low-cost airline for a long-haul
flight (a flight time of 6 hours or more). *
Appendices
Yes
No
Maybe
Don't know
Q10. Please motivate your answer on the previous question (Q9) below *
Buying extra options

Q11. Which of the listed services below do you or would you consider buying ?
(more options are available). *
Vink alle toepasselijke opties aan.
Excess baggage
On-board food or beverages
Assigned seats
Upgrades
Access to internet/WiFi
Priority check-in/Priority boarding
Access to lounges
In-flight entertainment
None of the above
Other (please explain below)
Anders:
Q12. Would you consider buying, any of the services mentioned in question 11
on a low-cost long-haul flight? *
Yes
No
Appendices
Maybe
Don't know
Anders:
Q13. Please motivate your answer on the previous question (Q12) below. *
On-board activities
Q14. What is your favourite activity on-board a long-haul flight? *
Watch movies
Sleep
Catch up on work
Reading
Chat with fellow passengers
Play games
Eating/drinking
Anders:
Q15. What is your favourite activity on-board a short-haul flight? *

Watch movies
Sleep
Catch up on work
Reading
Chat with fellow passengers
Play games
Eating/drinking
Appendices
Anders:
Full-Service airlines and low-cost long-haul flights

Q16. What do you think about full-service airlines offering low-cost long-haul
flights? Please motive your answer below. *
Q17. Do you think low-cost long-haul flights will be successful? *

Yes
No
Maybe
Don't know
Anders:
Q18. Please justify your answer on the previous question (Q17) below. *
Appendices
Appendix B Data coding
CODE Difference between LCC and FSC selection (Q6). Instances

PR Professional 8
P Price 36
DS Distance 11
S Service 14
SA Safety 4
SCE Schedule 4
DN Routes 3
FS Facilities 1
SA Save money 1
OBF On-board facilities 1
CM Compromise 1
TM Timing 4
SM Similar 3
QA Quality 7
FQ Frequency 3
SA Seat Availability 1
AN Ancillary 14
BR Brand 4
CF Comfort 4
AF Aircraft 2
PB Better Product 1
PP Purpose 3
CV Convince 2
OTP On-time performance 2
CON Connection 3
ECL Exclusive 1
FF Frequent flyer 1
Appendices
CODE YES (Q10). Instances

AF Already flown 7
COM Compared to other industry 1
P Price 32
S Service 2
AN Ancillary 4
SC Scheduling convenience 10
QUAL Quality 1
SA Safety 1
REL Reliability 1
AC Aircraft 4
T Timing 1
SE Seating 1
VFM Value for Money 4
BR Brand 1
AP Airport 1
CODE NO (Q10) Instances

P Price 13
S Service 8
EMO Emergency only 1
SAF Safety 1
COM Comfort 22
AN Ancillary 7
QUAL Quality 2
BUD Budget 1
PE Previous experience 1
CODE MAYBE Instances

P Price 15
S Service 6
AN Ancillary 7
BUD Budget 1
FA Flight Availability 2
SCH Schedule 5
COM Comfort 4
QUAL Quality 3
T Time 1
A Airline 1
AC Aircraft 1
SE Seat 1
LR Legroom 1
Appendices
BEN Benefit 1
CIR Circumstances 2
BR Brand 1
CODE FSCs using LCC model (Q16) Instances

LOS LOSS of Service 3
U Unsustainable 1
EX Expensive 1
SAF Safety 1
GI Good Idea 33
WT Worth trying 3
AW Awful 1
AN Ancillary 4
S Service 15
MC More choice 4
LOD Lack of differentiation 1
QUAL Quality 1
COM Comfort 1
P Price 4
COM Comfort 1
AC Aircraft 1
RES Response 1
WC Welcome 1
NP No problem 1
NI No interest 1
BF Beneficial 1
WS Wrong strategy 1
IMP Impossible 1
TR Trust 1
NGI Not a good Idea 1
LC Lower cost 3
BR Brand 15
NG Not good 9
DB Doubts 1
NS Necessary 2
SE Separate entity 2
CODE NO Instances
COM Comfort 22
AN Ancillary 7
QUAL Quality 2
BUD Budget 1

P Price 15
S Service 6
Appendices
AN Ancillary 7
BUD Budget 1
FA Flight Availability 2
SCH Schedule 5
COM Comfort 4
QUAL Quality 3
T Time 1
A Airline 1
AC Aircraft 1
SE Seat 1
LR Legroom 1
BEN Benefit 1
CIR Circumstances 2
BR Brand 1
CODE YES (Q18) Instances

LCSH Low-cost Short-haul 1
AFB Affordable 4
REL Reluctance 1
P Price 20
WEL Welcoming 1
BS Better standards 1
PRE Preference 1
S Service 1
SAF Safety 1
AN Ancillary 3
DEM Demand 3
BR Brand 1
MAR Market 4
NT New target market 5
CS Costs 1
MR More Routes 1
NI Niche 1
OPP Opportunity 1
COM Comfort 1

P Price 7
NT New target market 3
Qual Quality 2
S Service 3
PD Product 1
COM Comfort 3
NL Not liked 1
IND Industry 1
OPS Operations 1
AN Ancillary 1
VAL Value 1
MAR Marketing 2
Appendices
CS Costs 3
NI Niche 2
BR Brand 2
DIFF Different 1
MAN Management 1
CODE NO Instances
SAF Safety 1
S Service 2
PR Poorly received 1
DS Difficult Situation 1
QUAL Quality 1
CODE DONT KNOW Instances

DT Different target market 2
P Price 1
CP Concept 1
Com Comfort 1

Attif Bhuttoa
MSc International Business
a.bhuttoa@rgu.ac.uk
September
2017

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MSc Capstone Page | i

Mr. Bill Sutherland Supervisor

Friends and Family

LITERATURE REVIEW .............................................................7

MSc Capstone P a g e | iii

SECONDARY ANALYSIS ........................................................30

MSc Capstone Page | v

FIGURE 2 - AIR FRANCE -KLM AIRLINE PORTFOLIO (AIRFRANCEKLM 2017) ................... 4

FIGURE 3 - OVERVIEW OF LITERATURE (AUTHOR 2017) ............................................ 8

FIGURE 4 - PRODUCT AND ORGANIZATIONAL ARCHITECTURE OF AIRLINES ..................... 11

FIGURE 5 - STRATEGIC DRIFT BY LCCS (GUDMUNDSSON 2015) ................................ 15

FIGURE 6 - DATA ANALYSIS PROCESS ................................................................ 28

FIGURE 7 - GDP GROWTH VS PASSENGER GROWTH EUROPE 2004 - 2016 ................... 34

FIGURE 8 - CRUDE OIL AND FUEL PRICES ............................................................ 35

FIGURE 9 - OVERVIEW OF FINANCIAL PERFORMANCE AIR FRANCE-KLM HOLDING ............ 38

FIGURE 10 - OVERVIEW OF DEBT AND CASH AIR FRANCE-KLM ................................. 40

FIGURE 11 - AIRLINES LABOUR COSTS % OF REVENUE ............................................ 41

FIGURE 12 LABOUR PRODUCTIVITY OF AIRLINES PER EMPLOYEE ............................... 42

FIGURE 13 - AIR FRANCE-KLM LOAD FACTORS .................................................... 43

FIGURE 14 - OVERVIEW OF LOAD FACTORS AIR FRANCE-KLM 2012-2017................... 44

FIGURE 15 - GENDER ................................................................................... 48

FIGURE 16 - AGE GROUP ............................................................................... 49

FIGURE 17 - REGION .................................................................................... 49

FIGURE 18 - INFLUENCE ON TICKET PURCHASE ..................................................... 51

FIGURE 19 - BRAND PERCEPTION ..................................................................... 52

FIGURE 20 - FLOWN WITH LCC ....................................................................... 57

FIGURE 21 - PERCEPTION OF LCCS................................................................... 57

FIGURE 22 - TAKING AN LCLH FLIGHT ............................................................... 58

FIGURE 23 - OVERVIEW OF MILLENNIALS AND LCLH FLIGHTS .................................. 59

FIGURE 24 - BUYING ANCILLARY ...................................................................... 63

FIGURE 25 - BUYING SAME ANCILLARY ON AN LCLH FLIGHT ..................................... 63

FIGURE 26 - SUCCESSFUL LCLH FLIGHTS ........................................................... 68

MSc Capstone P a g e | vii

TABLE 2 - TYPES OF LCLH CARRIERS (GUDMUNDSSON 2015) .................................. 18

TABLE 3 - RESEARCH OBJECTIVES, APPROACH, DATA COLLECTION AND OUTCOME. ........... 23

TABLE 4 SEARCH STRATEGY AND KEYWORDS USED TO LOCATE LITERATURE ................. 24

TABLE 5 - SURVEY DESIGN PROCESS USED DURING THE RESEARCH ............................. 26

TABLE 6 - EVENTS AFFECTING THE AIRLINE INDUSTRY ............................................. 33

TABLE 7 - OVERVIEW FINANCIAL PERFORMANCE AIR FRANCE-KLM ............................. 39

TABLE 8 - SAFE EVALUATION CRITERIA BOOST ..................................................... 45

TABLE 9 - FSC VS LCC: NO INFLUENCE ............................................................. 53

TABLE 10 - FSC VS LCC: LOWEST PRICE ........................................................... 53

TABLE 11 - FSC VS LCC: EXTRA SERVICE .......................................................... 53

TABLE 12 - FSC VS LCC: FSCS DROPPED SERVICE QUALITY .................................... 54

TABLE 13 - PREFERENCE FOR FSCS .................................................................. 54

TABLE 14 - FSC VS LCC: DISTANCE ................................................................. 55

TABLE 15 - PRICE AS MAIN DRIVER FOR LCLH FLIGHTS ........................................... 59

TABLE 16 PRICE AND SERVICE QUALITY ........................................................... 60

TABLE 17 - PRICE AND SERVICE QUALITY LCLH FLIGHTS ......................................... 60

TABLE 19 - MOTIVES FOR BUYING ANCILLARY ON LCLH FLIGHTS ................................ 64

TABLE 20 - LOW-COST LONG-HAUL GOOD IDEA: TICKET PRICE TRANSPARENCY ............... 67

TABLE 21 - LCLH FLIGHTS BY FSCS: WRONG STRATEGY ......................................... 68

TABLE 22 - POSSIBLE MOTIVES FOR SUCCESS OF LCLH FLIGHTS ................................ 69

MSc Capstone P a g e | viii

CWC Carrier-within-Carrier: Also known as Airline-within-airline (AWA). A

GDP Gross Domestic Product: The value of products or services produced in a

HUB-and-Spoke A system in which passengers are transported from smaller

Long-haul A flight with a flying time of 6 hours or more.

Point-to-point A system in which a flight is operated directly between two

Short-haul A flight with a flying time between 1 and 4 hours.

MSc Capstone Page | x

significant increase in competition (Vasigh et al. 2013).