Viability of the Premium Airline Business Model - Analysis of business class-only services offered by Eos Airlines, MAXjet Airways and Lufthansa, Swiss, KLM in cooperation with PrivatAir Herausgeber: die

Between 2002 and 2005, Lufthansa, Swiss and KLM in cooperation with PrivatAir, start-up airlines Eos and MAXjet individually, launched scheduled business class-only services between Europe and the US. This paper qualitatively analyses the new business model from the strategic and operational point of view. Different approaches based on pull or push motivation have been identified and the characteristics of the service offerings extensively examined. From the strategic aspect, the analysis has proven that the products have an inherent value benefit for the respective target group. It has been established that short and ultra-long haul routes are not viable for the business model. The main shortcoming of the offering is the lack of connectivity as opposed to network carriers, resulting in dependency on the local demand. For the start-up airlines, establishment of market presence and goodwill is critical. In the area of operating economics, pilot crew and navigation charges have a higher impact than in the mixed class operation. Airport charges and administrative overhead build a larger portion of total expenses in case of traditional airline services. No significant evidence against the viability of the premium airline model could be found. (author's abstract)