Airline companies : how does the low-cost business model emerge in Latin America's inflicting environment?

Abstract

This thesis examines the socioeconomic factors characterizing the emergence of Low-Cost airlines in the Latin American aviation market. As a Business Model, Low-Cost operations require an appropriate environment to ensure their sustainable development. On the institutional level, many trends, regulative authorities and business stakeholders demarcate the margin left to companies in their strategical options. It is therefore interesting to recontextualize the inflictions of the surrounding environment into the Low-Cost airline industry.

To this end, the theoretical framework confronts institutional theories with concepts related to the business of Low-Cost airlines. Hence, market barriers and entry mode choices are found to be extremely relevant in depicting the industrial aspect of the Business Model. As for the demand, Customer Behaviour theories illustrate how passengers appreciate the opportunity of flying at a cheap cost. Concretely, the aviation demand is a constent driving force for Low-Cost flight offers in Latin America, but carriers can be hindered in their attempt to fulfill the needs of regional populations. Low-Cost airlines tend to internationalize their operations and target the most hospitable markets through different types of strategic expansions.

This way, the thesis is build through a qualitative method that is meant to capture the reasons behind the ongoing emergence of the Low-Cost Business Model. Interviews and full text searches offer a clear overview of the regional market, which explains how each airline in activity have been exploiting its institutional environment with appropiate business strategies. By confronting plausible market shocks coming from these different environments, the region’s economic recovery or managerial decisions of Low-Cost operatives, room is made for a discussion regarding the possible directions that the Business Model may take in the future. The application of a scenario analysis allows to anticipate a climate of relative attractiveness for the regional Low-Cost market. Carriers are expected to manage tough contractual negotiations and multiply their business strategies in order to face regulative taxes, making Low-Cost flights accessible to a population that clearly supports a sustainable trend for flight democratization.