Travel Transportation: All the lectures
Lecture 1: Business models
The travel transportation is part of the intermediaries between demand and supply, we focus
especially on the aviation sector.
The first four model are called the Full Service Carriers (FSC)
All the main big airlines are in this group, such as KLM
The ultra-value, traditional value and modern value are Low Cost Carriers (LCC)
The third group is the charter business model
Full Service Carriers
Geo-Focused Network:
Concentrated on one specific geographic region
High frequency: the fly from A-B, several connections, 3-4 flights a day
Limited flights to other areas: it doesn’t mean no flights to other regions but it is limited
May join alliances or codeshares
Intercontinental Network:
They cover the entire domestic market: for example Lufthansa is the main transport carrier in
Germany. They have a huge market share
In the Netherlands KLM has an international network
Hub-and-spoke network sometimes with multiple hubs: the hub is the big central airport of
that airline. (Schiphol- KLM, Frankfurt-Lufthansa) The spokes are the connections to and from
that hub.
Routes to multiple global markets: KLM has access to the American and Asian market
Participate in global alliances
Global Luxury Connector:
Significant global reach: you can find this kind of airlines nearly all over the world
, Luxury service and product (very high-end product)
Long-haul with one primary hub and select 5 th freedom routes
Capitalize on hub location to capture 6 th freedom flows
Alternative to non-stop service: you can fly straight away from A-B but also via the hub
airport.
Network Extender/independent
Primarily extends reach of partner carriers into smaller markets: KLM has a daughter
company which is called city-hopper. City-hopper is acting on behalf of KLM and they take all
the passengers to the hub of KLM
Operate under co-brand, code share or pro-rate agreements
Occasionally subsidiary of larger carrier: a small airline that act on or on behalf of a larger
airline.
Low Cost Carriers
All local airlines nearly fly from point-to-point
Ultra-value
Aggressive stimulating pricing policy: the price make sense so they have to be the cheapest
‘Seat-only’ product: so you have to pay for every extra service (e.g. checked bags)
Leisure customer focus
Serve secondary airports: these are the smaller airports in a country, in the Netherlands for
example Eindhoven airport. It doesn’t mean that they have no flight from primary airports.
Primary airport are the hubs.
They fly there because they are cheaper, smaller airports have a lower fee than the
primary airports.
The second reason why they fly there is because the turnaround time is shorter. The
turnaround time is the time when they arrive, everybody has to leave the airplane, the
luggage has to taken out again everybody has to go in and then leave. The turnaround time is
shorter because the plane and airport are both smaller. This makes is possible to fly more
hours a day then a larger airline, only if you fly you can make money.
Traditional value
Point-to-point service: fly from A-B, B-C, C-D. They fly from point to point NOT via a hub
airport.
High frequency:
Target leisure and price-sensitive business travellers
Serve secondary and primary airports
Modern value:
Point-to-point and network: fly to New York has an transfer and fly onwards.
Target a mix of business and leisure travellers
Frequent flyer program
On-board product frills superior to competitors’ Economy Class (e.g. Live TV, XM Radio, Pitch)
Often serve primary airports
, Charter
Charter airline:
Focus on unscheduled service with some scheduled operations (during the high season)
Chartering means renting, once a tour operator go to a airline they want to hire the aircraft
Significant reliance on tour operators selling vacation packages
Target customers often agnostic to branding of airline component of vacation package
product: there is a person/group/family, they book a package holiday and these people don’t
care with which airline they fly as long as that airline take them to the right destination.
Alliances
Alliances are very important in the aviation industry, on a global basis you have three different airline
alliances: Skyteam, Oneworld and Star Alliance. You have to know the airline members of every all
these alliances.
Skyteam: KLM, Air France & Delta
Star Alliance: Lufthansa & United Airlines
One World: British Airways & American Airlines
For customers:
Prior to Alliances, global travel was complex and inconvenient (You had to use different
airlines if you wanted to travel from Amsterdam to Australia.)
Connections were uncoordinated, problematic and time consuming
Frequent Flyer Benefits, including lounge access, did not extend beyond and individual airline
offerings.
For the airline:
Prior to Alliances, cross border mergers are difficult/impossible
Global travel demand requires linking networks
Increasing competition from no-frills/low-cost carriers
Alliance cooperation:
Code sharing: there is flight of KLM these passengers have a ticket KL0222, on that flight
some passengers have an Air France ticket AF0222.
Joint venture: a cooperation between two airlines, they split the revenues and the cost on a
certain route. Everything will come together and will be divided.
Mercher: You take-over, buy another airline, for example KLM is owned by Air France. You
can also do it with a percentage of shares.
Lecture 1: Business models
The travel transportation is part of the intermediaries between demand and supply, we focus
especially on the aviation sector.
The first four model are called the Full Service Carriers (FSC)
All the main big airlines are in this group, such as KLM
The ultra-value, traditional value and modern value are Low Cost Carriers (LCC)
The third group is the charter business model
Full Service Carriers
Geo-Focused Network:
Concentrated on one specific geographic region
High frequency: the fly from A-B, several connections, 3-4 flights a day
Limited flights to other areas: it doesn’t mean no flights to other regions but it is limited
May join alliances or codeshares
Intercontinental Network:
They cover the entire domestic market: for example Lufthansa is the main transport carrier in
Germany. They have a huge market share
In the Netherlands KLM has an international network
Hub-and-spoke network sometimes with multiple hubs: the hub is the big central airport of
that airline. (Schiphol- KLM, Frankfurt-Lufthansa) The spokes are the connections to and from
that hub.
Routes to multiple global markets: KLM has access to the American and Asian market
Participate in global alliances
Global Luxury Connector:
Significant global reach: you can find this kind of airlines nearly all over the world
, Luxury service and product (very high-end product)
Long-haul with one primary hub and select 5 th freedom routes
Capitalize on hub location to capture 6 th freedom flows
Alternative to non-stop service: you can fly straight away from A-B but also via the hub
airport.
Network Extender/independent
Primarily extends reach of partner carriers into smaller markets: KLM has a daughter
company which is called city-hopper. City-hopper is acting on behalf of KLM and they take all
the passengers to the hub of KLM
Operate under co-brand, code share or pro-rate agreements
Occasionally subsidiary of larger carrier: a small airline that act on or on behalf of a larger
airline.
Low Cost Carriers
All local airlines nearly fly from point-to-point
Ultra-value
Aggressive stimulating pricing policy: the price make sense so they have to be the cheapest
‘Seat-only’ product: so you have to pay for every extra service (e.g. checked bags)
Leisure customer focus
Serve secondary airports: these are the smaller airports in a country, in the Netherlands for
example Eindhoven airport. It doesn’t mean that they have no flight from primary airports.
Primary airport are the hubs.
They fly there because they are cheaper, smaller airports have a lower fee than the
primary airports.
The second reason why they fly there is because the turnaround time is shorter. The
turnaround time is the time when they arrive, everybody has to leave the airplane, the
luggage has to taken out again everybody has to go in and then leave. The turnaround time is
shorter because the plane and airport are both smaller. This makes is possible to fly more
hours a day then a larger airline, only if you fly you can make money.
Traditional value
Point-to-point service: fly from A-B, B-C, C-D. They fly from point to point NOT via a hub
airport.
High frequency:
Target leisure and price-sensitive business travellers
Serve secondary and primary airports
Modern value:
Point-to-point and network: fly to New York has an transfer and fly onwards.
Target a mix of business and leisure travellers
Frequent flyer program
On-board product frills superior to competitors’ Economy Class (e.g. Live TV, XM Radio, Pitch)
Often serve primary airports
, Charter
Charter airline:
Focus on unscheduled service with some scheduled operations (during the high season)
Chartering means renting, once a tour operator go to a airline they want to hire the aircraft
Significant reliance on tour operators selling vacation packages
Target customers often agnostic to branding of airline component of vacation package
product: there is a person/group/family, they book a package holiday and these people don’t
care with which airline they fly as long as that airline take them to the right destination.
Alliances
Alliances are very important in the aviation industry, on a global basis you have three different airline
alliances: Skyteam, Oneworld and Star Alliance. You have to know the airline members of every all
these alliances.
Skyteam: KLM, Air France & Delta
Star Alliance: Lufthansa & United Airlines
One World: British Airways & American Airlines
For customers:
Prior to Alliances, global travel was complex and inconvenient (You had to use different
airlines if you wanted to travel from Amsterdam to Australia.)
Connections were uncoordinated, problematic and time consuming
Frequent Flyer Benefits, including lounge access, did not extend beyond and individual airline
offerings.
For the airline:
Prior to Alliances, cross border mergers are difficult/impossible
Global travel demand requires linking networks
Increasing competition from no-frills/low-cost carriers
Alliance cooperation:
Code sharing: there is flight of KLM these passengers have a ticket KL0222, on that flight
some passengers have an Air France ticket AF0222.
Joint venture: a cooperation between two airlines, they split the revenues and the cost on a
certain route. Everything will come together and will be divided.
Mercher: You take-over, buy another airline, for example KLM is owned by Air France. You
can also do it with a percentage of shares.
