Airline business models and their network structures

Abstract

Network structure is one parameter that feeds into airline business models. We analyze the networks of 58 European airlines including full service carriers, low cost carriers, regional and charter airlines. Eight network metrics are calculated to describe the various aspects of network structure. A principal component analysis is conducted and indicates two components in the metrics. The components address network coverage and service network. The airline networks are clustered based on the identified components. Findings from the analysis include that the resulting clusters based on only network structure appear to be consistent roups of airline business models. It indicatesthat only judging from network structure allows to reason on airline business models. In more detail, full service carriers are structured in three subgroups differing in coverage as well as in the operated services. At the same time, low cost carriers, charter and regional airlines appear as clusters in the analysis. A few airlines are identified as outliers and investigating their business model confirms this network observation.

Keywords

• metrics
• graph theory
• principal component analysis
• airline business model
• network structure