THE COMPONENTS OF AIRLINE BUSINESS STRATEGY AND THEIR IMPACT ON REVENUES

Abstract

This study hypothesizes that, as a result of government's bilateral agreements and regulations that limit the impact of globalization, a set of components which constitutes the airlines' business strategies have a direct affect on airlines' revenues. The hypothesis is tested on a sample of 15 US airlines, which substantiates that three out of four suggested components have a positive significant influence on the airlines' revenues. Markets - confirms that international flights help to increase the airline revenue; Product - with a significant positive impact on revenue when the airline offers low cost flights; and Operation - flights from hubs where found to have a significant negative affect on airlines' income while point-to-point flights, characterized by low cost airlines, are more advantageous. The fourth component, Generic Competitive Advantage, was found to be a choice component; namely, an airline may succeed by being either a cost leader or a differentiator in the markets and products it is serving.