A quantitative means of comparing competitive advantage among airlines with heterogeneous business models: Analysis of U.S. airlines

Abstract

Increasing heterogeneity amongst airline business models makes objectively comparing their competitive advantage increasingly difficult. In this study, we develop an instrument that objectively quantifies the competitive advantage of airlines within a single market, the US. The data sample includes nine US airlines with product and financial data gathered from 2011 to 2013. The consolidated data enable the calculation of a product index and a cost index. The product index incorporates four sub-indices (revenue, connectivity, convenience and comfort), while the cost index incorporates three sub-indices (unit cost, aircraft and labour). The developed model enables the identification of the hybrid business models that are successfully pursuing an integrated cost leadership and differentiation strategy. The results also confirm that competitive heterogeneity exists whilst demonstrating that competitive advantage can be mutually exclusive to the respective airline's strategic proposition.