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Network Carriers Losing Control Of Domestic Market

Thu Aug 09, 2007 7:32 am

LCC's certainly have matured and are a power of their own.

Network Carriers Losing Control Of Domestic Market, Study Finds

The U.S. network airlines, which relearned how to be strong global competitors, have lost their competitive superiority in the domestic market and are unlikely to regain it, according to a new study.

In the past six years, the "balance of influence" has completely shifted from the network airlines to the low-cost carriers in the U.S., according to a new study published by Washington-based Gerchick-Murphy Associates.

As major airlines significantly realign the balance between costs and revenues, the study says, they face two important differences, compared with the early 1990s -- the mature presence of LCCs and the shrinking pool of passengers willing to pay high fares.

The study concludes that the business model of the low-cost airlines will "continue to expand and shift domestic market share away from the large network airlines." But the degree of this impact is still being underestimated. LCCs have expanded their scope and developed their own traffic flows. "Given how this airline sector has evolved, it is not reasonable to think that this evolutionary process has stopped."

Given the gap between cost levels of the network versus low-cost airlines, and the major carries' inability to charge higher fares, the study concludes that network carriers are not likely to regain their dominance in the domestic market.

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