Research - 16.09.2025 - 12:00
Aviation is undergoing radical change. To better understand this transformation, a research team from the Centre for Aviation and Space Competence (CFAC-HSG) at the University of St.Gallen has been conducting research in collaboration with Lufthansa Consulting over the past two years. Based on this analysis, Andreas Wittmer and his team, together with representatives from Lufthansa Consulting, have developed a new model that differentiates between the business models of airlines.
The Airline Business Model Framework, or ABMF for short, classifies airlines based on 17 components – from price structure and service level to target markets and fleet strategy. The study shows that the boundaries between low-cost airlines and traditional network carriers are becoming increasingly blurred. This has consequences for passengers – both when booking and when flying.
Until now, industry observers have distinguished between low-cost carriers (LCCs) such as EasyJet and Ryanair, full-service carriers (FSCs) such as Lufthansa and Swiss, and niche providers such as regional and holiday airlines. According to the researchers, this classification is too simplistic. Instead, four new airline models can be identified for the future:
The value carrier in particular represents the evolution of the industry. It combines low prices with slightly improved service, uses distribution through many channels and offers its own loyalty programme – in other words, it is more than a low-cost airline, but not quite at the level of traditional premium providers. This new flexibility allows airlines to respond more specifically to the needs of different customer groups.
This transformation has a direct impact on passengers – and not just in terms of comfort on board. Anyone booking a flight ticket today normally has to click their way through an increasingly complex pricing and service model. Base prices remain low, but additional costs are rising. Baggage, seat selection, in-flight catering – all of these are increasingly being charged separately. This practice of “unbundling” has long since arrived at “network airlines”. Even premium providers such as Swiss are now introducing fare models without checked baggage.
This can be frustrating for frequent flyers: “The same flight can look completely different depending on how you book it, the fare and the services included,” says Dr Andreas Wittmer, co-author of the study. At the same time, customers can benefit from more choices and potentially cheaper offers – if they are willing to compromise comfort.
Despite rising ticket prices, margins remain thin. Flying remains expensive, but for many airlines it is only profitable through additional sales. This explains the increasing focus on so-called ancillaries – i.e. revenue from in-flight sales, upgrades or travel insurance. According to the newly developed model, these sources of income are becoming increasingly important. Ticket sales alone hardly cover the costs anymore.
This trend is particularly evident on long-haul flights. New providers are emerging here, such as the long-haul value carrier (up to 9 hour maximum flight time) , which scores with cheap intercontinental flights – often with minimal comfort but clearly segmented fare classes. One example was Norwegian's now failed attempt at long-haul flights. New players such as Icelandic airline PLAY and British start-up Global Airlines are now trying again – with mixed success.
The route network is also changing. While traditional network airlines continue to rely on hubs such as Zurich and Frankfurt, many modern continental providers are focusing on point-to-point connections. This saves costs and opens up new destinations, for example in holiday traffic. The study shows that the choice of airport is a central component of the business model – and varies greatly depending on the target group. For Swiss travellers, this means that it is more important than ever to look closely when booking flights. Those who used to blindly choose the national airline now have to compare carefully – not only in terms of price, but also in terms of service.
The diversification of airline models offers opportunities – for providers and consumers alike. Customers benefit from greater choice and more personalised offers. At the same time, they have a growing responsibility to navigate the fare structure and make informed choices. The old categories of cheap and luxury are outdated. Those who don't look closely when booking often pay too much.
Please find the report here to download. Further information about the project please click here.
Image: Adobe Stock / 06photo
