End of the free lunch? The responses of traditional European airlines to the low-cost carrier threat

Abstract

The short-haul operations of traditional European airlines such as British Airways and Lufthansa have come under increasing pressure from the growth of low-cost carriers. This paper examines their competitive responses. These are found to include reductions in labour costs, greater use of regional aircraft and a run-down of secondary hubs. Minimum stay requirements on cheap fares have been axed in many markets, while changes to the onboard service and a move to direct-sell bring these airlines closer to the low-cost carrier product. The network strength is largely maintained however, which appears a better strategy than setting up a low-cost subsidiary.