Abstract
Since the liberalization of the airline industry, the low-cost business model has been developed worldwide and a new business model of long-haul low-cost carriers (LHLCCs) has evolved. This chapter aims to investigate the LHLCC business model from a customer-oriented perspective in terms of service quality and perceived value. For this purpose, the authors investigated the effect of service quality on perceived value for money for LHLCCs. In this chapter, user-generated content was adopted to collect data, and 824 user-generated airline reviews were collected from TripAdvisor.com, the largest tourism-related repository. In order to investigate the relationship, a predictive correlational design was structured and a logistic regression analysis was applied. To contribute to the regression analysis, a receiver operating characteristic (ROC) analysis was performed to measure the classification success. As a result, the logit model describes well the relationship between variables for LHLCCs.
TopIntroduction
The airline industry has undergone many changes and created different business models to meet the needs of passengers. While these business models aim to satisfy consumers, they are also the key to differentiating airlines from the competitors (Wensveen & Leick, 2009). One of these business models is the long-haul low-cost carrier (LHLCC) that emerges from cost leadership strategy (Francis, Dennis, Ison, & Humphreys, 2007). As a rule of thumb, this business model has evolved from the LCC (Low Cost Carrier) business model and has a more sophisticated structure (Wensveen & Leick, 2009). The airlines, which adopt a point-to-point network structure, have also adopted different cabin classes, like full service carriers (FSCs). Contrary to LCCs, however, seat comfort is more critical in this business model due to long-haul operations. The aircraft utilization rate is very high, since flights can take up to 5-6 hours (Francis et al., 2007). Although the single fleet type is used in terms of fleet structure, LHLCCs are not conservative in the use of different aircraft according to their needs. In operations, hub airports are preferred to secondary airports (Morrell, 2008). Similar to FSCs, frequent flyer programs are an important factor in ensuring loyalty in this business model. Since catering services are an important need for long-haul flights, LHLCCs also focus on this attribute. Finally, air cargo has become a pivotal item in this business model to increase ancillary revenues (Francis et al., 2007). The comparison of the LHLCC business model with short-haul LCC operations is detailed in Table 1.
Table 1. A quick comparison between short-haul and long-haul LCC operations
| Attributes | Short-haul LCC Operations | Long-haul LCC Operations |
| Aircraft type | Regional jet or typical aircraft with high density seating (Boeing737 or Airbus A320) | Long range, aircrafts require lower operational costs (Airbus A330-300, Boeing 787-900, Airbus A350-900) |
| Seat Capacity | Approx. 160-189 seat capacity | 250-300 seat capacity |
| Cabin Class | Single class (economy) | Multiple class (generally “pseudo” business class and economy) |
| Airport | Secondary | Needs major airports but do not require airbridge etc. services. |
| Cargo | No | An important source of revenue |
| Connection | Point-to-point services and no baggage transfer | Point-to-point services and no baggage transfer |
| Distribution | Online channels and direct distribution | Online channels and direct distribution |
| Frequency | High | Lower because of the length of flight time |
| Seating | Small pitch | Comfort is more important |
| Catering | On-board sales | Passengers are likely to pay more attention to this |
| In-flight entertainment | Charges extra | Passengers are likely to pay more attention to this |
| Turnaround time | Important | Less important because of the length of flight time |
Source: (Francis, Dennis, Ison, & Humphreys, 2007;Whyte & Lohmann, 2015)
Key Terms in this Chapter
Value Co-Creation: It is the economic strategy that supports the joint production process by bringing different parties together to create value-added work.
Customer Oriented Approach: It is the conception that the customer is the key driver in all business activities and that the customer needs and wants are at the core.
UGC Repository: These are broad platforms that are mainly associated with crowdsourcing and contain user-generated content.
Voice of Customer: It implies insights reflecting the experiences and expectations of the customers towards the attitude object.
Airline Business Model: This is the basic framework that directs how airlines produce value and how they do business.
Forced Entry Method: It is a widely used variable selection method that allows all predictors to be added to the model at one time.
Wireless Streaming: It is the technology that enables traveling information to be delivered to different devices on a server through the wireless network.
F-Factor: A reference group that includes friends, families, fans and followers, which is highly influential on consumers' daily decisions and choices.
Systematic Sampling: This is the sampling method that allows the sampling to be taken at fixed intervals in large populations.
Seat Pitch: The distance between the seats in the plane.