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Evolving passenger demand and changing airline business models

From the early days of commercial air transport, passengers were mainly classified into business and leisure travellers. However, these traditional distinctions started to blur over the past years and will continue to do so in the future. This is driven, for example, by newly emerging markets, an ageing society and an increasing digitalisation in private and business life. Today, passenger groups are called “urban hoppers”, “culture seekers” or “screenagers” and are no longer characterised by the purpose of travel but by the varying requirements along their journey. Bauhaus Luftfahrt investigates these developing future needs and expectations, defines new passenger groups and analyses the resulting requirements for stakeholders in the aviation sector.

Airlines continuously evolve their business models to meet these needs and establish new revenue sources. Applying the low-cost model to long-haul routes, for example, requires focusing on routes with high demand, operating a single aircraft type with only one seating class and maximising capacity utilisation as critical success factors. Furthermore, changing passenger requirements and external conditions lead to an increasing differentiation of business models in terms of offered service level, geographical focus or network structure.

A study at Bauhaus Luftfahrt uses a range of parameters to identify new business model clusters such as the “global niche network carrier”: Compared to traditional network carriers like Lufthansa or United Airlines, the cluster comprises smaller airlines operating a hub and spoke network and focusing on a particular geographical market.

  • Airline business models: To persist in the highly competitive airline market, carriers strive to differentiate their business model, for example in terms of offered services or geographical focus.Airline business models: To persist in the highly competitive airline market, carriers strive to differentiate their business model, for example in terms of offered services or geographical focus.
  • Source: Own depiction based on Klemm, M. (2015), Development of a new airline business model classification using cluster analysis methodology, Diplomarbeit, November 2015, Lehrstuhl für Betriebswirtschaftslehre –Unternehmensführung, Logistik und Produktion der Technischen Universität MünchenSource: Own depiction based on Klemm, M. (2015), Development of a new airline business model classification using cluster analysis methodology, Diplomarbeit, November 2015, Lehrstuhl für Betriebswirtschaftslehre –Unternehmensführung, Logistik und Produktion der Technischen Universität München
  • Definition of passenger groups based on various parameters: The figure shows a range of passenger groups that are classified according to the aspired travel experience and their use of technology throughout their journey.Definition of passenger groups based on various parameters: The figure shows a range of passenger groups that are classified according to the aspired travel experience and their use of technology throughout their journey.