ناسازگاری های مدل های کسب و کار کم هزینه و شبکه حامل در دسته بندی های هواپیمایی مشابه
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|7518||2005||15 صفحه PDF||سفارش دهید||9635 کلمه|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Air Transport Management, Volume 11, Issue 5, September 2005, Pages 313–327
This paper examines the strategy of setting up a low-cost unit adopted by some incumbent airlines to the threat and opportunity of the low cost incursion. Based on the analysis of five case studies in the European airline industry, the chances and risks of establishing a low-cost carrier within the same grouping of a network carrier business model are explored. The paper examines the hypothesis that incompatibilities of the two business models are the causal reason for failure of earlier attempts. By following this idea, a set of propositions is developed that contribute to the debate of how to control these incompatibilities and when it is favorable to follow other strategic response options.
Many attempts to set up a no-frills low-cost carrier as an internal unit or subsidiary of a full-service network carrier have failed, in particular in the US airline industry. One of the most prominent examples was the effort of Continental Airlines in establishing its low-cost spin-off Continental Lite. In 1994, Continental Airlines suffered a monthly loss of nearly $55 million, of which up to 70% could be attributed to Continental Lite (Bethune and Huler, 1998). Moreover, the idea of running two different and actually conflicting airline business models simultaneously resulted in poor quality, dissatisfied customers, and discouraged employees (Porter, 1996). The move nearly drove the parent company into bankruptcy, which had been prevented only by the US law Chapter 11 protection clause. The endeavor was soon closed, and the activities of Continental Lite were reintegrated into Continental Airlines. In the mid- and late 1990s, other airlines in North America and in Europe followed the example, but most attempts to set up an internal low-cost carrier failed again. Despite these experiences, the airline incumbents in Europe and Asia are in recent time's increasingly adopting low-cost strategies in addition to their premium services, while setting up a parallel no-frills business model. Interestingly, some of the major US American network carriers, which already have made their experiences with this strategy before, are re-implementing the same idea. Table 1 gives an overview of closed down, active, and planned low-cost units of incumbent airlines which also operate the business model of a full-service network carrier. The large number of attempts underlines the spread of this strategy in the airline industry as one of the options for the incumbents to participate in the growth market for budget air travel, and to react to the spread of the low-cost carriers.1 It seems that the management of these airlines is not completely aware of the negative impacts and the reasons behind these, and hypothesizes that incompatibilities of the business models are the causal reason for failure. Apparently, the existence of the incompatibilities and the resulting negative impacts makes it difficult to successfully implement such a strategy. To understand the rationale of the incumbent airlines, this paper first highlights the motives for setting up a parallel low-cost carrier: it seems useful to understand the economic logic for a company to condone the operation of several business models with the same basic output inside the organization boundary that appears to run counter to the traditional logic of efficiency. Secondly, the goal is to consider the incompatibilities in operating the business model of the no-frills low-cost carrier and full-service network carrier simultaneously. When talking about incompatibilities of the business models, reference is made to any inconsistencies or the missing fit of strategic positions from which conflicts or negative impacts arise, and where it becomes necessary to make trade-offs. Finally, a set of propositions is developed following contingency theory, in which the incompatibilities can be controlled in such a way that the overall benefits are higher than the costs. It is believed that incompatible positions and the resulting negative impacts arise automatically, when a company operates two business models simultaneously, which are turning out the same basic output. It is, however, assumed that the number and extent of the negative impacts can be reduced, depending presumably on organizational and market-driven conditions, thus on controllable and non-controllable contingencies.
نتیجه گیری انگلیسی
4.1. The cases Go. Go was founded in 1998 as a separate entity but as a one-hundred-percent subsidiary of British Airways (BA). It started operations at Stansted airport, situated in the north of London, and opened up a second base in Bristol in May 2001, operating up to 15 aircraft at that time when it was still in affiliation with BA. Moreover, it was intended to inaugurate East Midlands as a third base in May 2002, with plans to operate up to 45 aircraft in total. Before BA launched its low-cost carrier subsidiary, it held talks with Ryanair about a possible investment in the Irish low-cost carrier. As indicated by the chosen name of the carrier, a separate brand was created. However, the close relationship with BA was underlined by Go, also been promoted as being “the low-cost airline from British Airways”. In regard to the destinations chosen, Go was flying to markets where BA was also operating, the difference being that the latter was flying out of London-Heathrow or London-Gatwick. Though being designed to address the leisure segment, Go also directly approached passengers flying for business purposes by having established a key account management for corporate customers. The organization of Go was set up as a completely separated team, working in offices at Stansted airport, disconnected from the organization of BA. The parent company merely performed central functions as the safety supervision, cabin crew selection and training and revenue accounting. Overall, the organization of Go was autonomous in deciding about any issues in production and network planning, distribution, purchasing, organization, human resources, product design but not regarding investments. Go also established its own corporate culture, independently to the one of BA. But by intention of BA, the company was unionized with one single union selected and responsible for all unionized employees. Considering its product, Go was established as a low-cost carrier that also presented service features of a differentiated premium carrier, such as a higher number of daily flights, serving primary airports, and offering a fancy design. Commenting on the low-cost carrier's performance, Go lost £20 million in each of its first two years, but it was moving into profit for the third year of operation. Nevertheless, in 2001, BA decided to sell Go, and accepted a management buy-out proposal supported by the venture capitalist 3i. The deal was worth £100 million. Prior to that, KLM made a bid for acquiring and then merging Go with buzz. One year later, EasyJet acquired and integrated Go into its operations, while it paid four times as much as 3i. Buzz. Buzz started flying in January 2000. Following intense pricing competition by other low-cost carriers in London-Stansted, KLM UK decided to transform some of its operations into the low-cost carrier business model. Buzz was barely a brand with the corporate entity of KLM UK behind. The latter firm was a subsidiary of KLM, bought as Air UK in the nineties to feed the hub in Amsterdam out of Great Britain, and to benefit from domestic earnings in the United Kingdom. KLM UK assigned a rather unfavorable fleet for low-cost operations of two types and 10 aircraft to the activities of Buzz. Under the new brand and business model, Buzz operated mostly on the same routes that were previously flown by KLM UK, which are however not corresponding with routes of KLM. These destinations comprised markets for passengers traveling both for business and for leisure reasons. Thus, Buzz was also equipped with a more precious low-cost product, flying to primary airports abroad, and using the best airport facilities available. Additionally, Buzz was in charge of the operation of the Stansted-Amsterdam feeder route on behalf of KLM UK and KLM. For these flights, a separate ground and in-flight product was offered which more resembled the full-service product of KLM. Meals had to be served, frequent-flyer points to be awarded and uniforms and cabin styling to be changed. While also having directly addressed corporate customers by a key account management, Buzz stressed the affiliation with KLM UK and KLM. The organization of Buzz consisted of a separate team, working closely together with the overhead of KLM UK. It established its own corporate culture which, however, was influenced by the close relationship with KLM UK. Its autonomy towards KLM UK was restricted both in terms of investments and in production and network planning. Additionally, it has also been influenced by the ideas of KLM. In October 2002, Buzz announced to open a second base in Bournemouth and to establish another base in the UK as well as one on the European continent later on. At that time, it was also intended to merge the activities of Buzz with the low-fare brand Basiq Air of Transavia, another subsidiary of KLM, and to establish Buzz as an independent enterprise within the KLM group. However, the board of KLM stopped this idea only three months later. Instead, it sold the activities of Buzz for a total of €20.1million plus the protection of intangible assets, such as airport slots, to the low-cost carrier Ryanair, while the rest of the activities of KLM UK were integrated into KLM Cityhopper. In those days, Buzz was losing over €I million a week with its operations. Basiq Air (Transavia). Basiq Air is again not an own operator or corporate entity but just a product label with offerings following the low-cost carrier business model. In December 2000, its operations have grown out of Transavia, the subsidiary and charter carrier of KLM. Apart from selling both capacity to tour operators and seats directly to individual passengers, Transavia started with scheduled flights in connection with KLM services in the nineties. In the meanwhile, these services have been abolished and substituted by flights labeled with the Basiq Air brand and based on the low-cost carrier business model. However, aircraft are flying in the colors of Transavia. In these days, the double branding is changing to the solely use of the Transavia brand for all operations. Prior to this, the in-flight product of the charter flights has already been adapted to one common low-cost standard, also to get rid of complexity. Since then, onboard meals are available on all flights only against payment. Today 10 aircraft of a single type fleet is assigned to the activities of Basiq Air. The operational bases are the airports of Amsterdam and Rotterdam, only 60 km away from one another. Destinations are partly overlapping with the ones of KLM, though Basiq Air operates at least at one end of the route to another, secondary airport of the destination. In spite of the fact that it attracts also business travelers without approaching them directly by a key account management, the low-cost carrier targets primarily passengers traveling for leisure reasons. This scope is also reflected by the destinations and the product offered. Basiq Air can be rather rated as a budget low-cost carrier. Mostly, secondary airports are served with one daily flight only. However, it offers service features as a check-in via the Internet. The carrier is organized as a profit center with only 20 dedicated persons working for it in the functions of marketing, controlling, and finance. Services are sourced from Transavia as well as the aircraft operations which are provided and charged by the latter. The autonomy of Basiq Air and Transavia towards KLM is high, only restricted for investments and basic strategic decisions. Purchasing activities are shared with KLM. The corporate culture of Basiq Air is the one of Transavia, which is an organization addicted to traditional values but used to efficient operations and quick actions. After Buzz was sold, Basiq Air has become the one and only low-cost unit within the KLM group integrated into the activities of Transavia and by now branded as the latter. Germanwings. Germanwings began flying in October 2002 as a separate low-cost carrier entity but fully belonging to the Eurowings Group. In the latter firm, which also operates a regional carrier business model, Lufthansa participated with 24.9% of the shares, and recently increased its part to 49%. The foundation of Germanwings resulted from the transformation of the unprofitable charter business of Eurowings into a low-cost carrier. The property rights of the brand name, which already existed before in the late 1980s, have been granted by Lufthansa. Both the participation and the transfer of the branding rights give indications about the relationship of Germanwings with Lufthansa. Though Lufthansa publicly stresses that the relationship is settled only by the definition of the financial investment through its participation in Eurowings, Lufthansa supported the creation of Germanwings in the supervisory board of Eurowings. Prior to this, Lufthansa carried out several studies in examining the start of an own low-cost carrier, but it concluded that this could be realized only in a separate entity. At that time, Lufthansa also examined the possibility of making an investment in Ryanair. In conclusion, to some extent Germanwings can be considered as the low-cost carrier of Lufthansa. The interest is both financially and strategically given, but the influence on the decisions of Germanwings is rather limited. It is also important to note that, due to the minority participation of Lufthansa in Eurowings and Germanwings, the latter is not obliged to consider the collective labor agreements of Lufthansa. At the time of writing, Germanwings has home bases in Cologne and Stuttgart and deploys a standardized fleet of 14 aircraft, which fly to destinations both attractive for leisure and business travelers. The routes overlap in part with the ones of Lufthansa. Recently, the carrier also added destinations important for tour operators, with whom it cooperates in offering flights included in packaged tours. Germanwings also established a key account management to address corporate customers. This fits with its product strategy; the carrier can be rated as a premium low-cost carrier, flying mostly to primary airports and deploying airplanes which are equipped with leather seats and in-flight entertainment devices. The organization of Germanwings is located in Cologne, separated from the headquarter of Eurowings in Dortmund. Partly, the staff and certain departments, like the production and network planning and marketing and sales, have been transferred form Eurowings, since these functions have become unnecessary at Eurowings. Other functions, such as financing, controlling, revenue accounting, and IT, are sourced from Eurowings. The autonomy of Germanwings is moderate to high, only restricted in terms of investments and basic strategic decisions towards Eurowings and Lufthansa. Swiss in Europe. Swiss in Europe is neither its own entity nor a product label per se but, since September 2003, an internal title used by Swiss International Air Lines (Swiss) for the transformation of its European Economy Class product. Though all fares and flights are promoted with the mainline brand of the network carrier, certain characteristics of the Economy Class product within Europe match the definitions of the low-cost carrier business model. First, it makes use of a half-return pricing on the Internet which shows only one price for a flight at a time and thus influences customers’ mindsets by suggesting single fares. Secondly, it heavily promotes direct sales of point-to-point relations through the Internet with a more transparent pricing structure and fares starting at levels of the low-cost competitors. Thirdly, food and beverages offered in the economy class within Europe are available only against payment. The whole process of onboard catering, including the commercial risk, has been outsourced. Towards its customers it promotes a best price and value for money equation. If customers are asked about their perception of the Swiss economy class in Europe, many do not note a difference to the product of a low-cost carrier. After all, it is important how the customer perceives a product. Due to the fact that no organization is dedicated to this unit, and all activities are integrated in the existing organization of Swiss, it becomes clear that the autonomy of this low-cost unit is limited. While operating inevitably with the same means of production and brand to the same markets as the mainline carrier, and being staffed with the same organization and people, it can thus be stated that Swiss in Europe equals the business model of the low-cost carrier. In this respect, it can be affirmed that apart from its premium network carrier business model serving primarily long haul markets and business travelers, Swiss operates a low-cost carrier simultaneously. Only the configuration of this low-cost carrier differs significantly from the other cases described above. Due to these major differences in configuration, the case has been chosen for investigation and discussion. 4.2. Comparison of the analyzed cases When comparing the examined cases in this paper, it becomes apparent that the incumbent airlines have taken different approaches first in configuring the dimensions of the business model of the low-cost carrier (see Table 2). Secondly, the implementation differs in the way the business models have been positioned and linked in the grouping. In particular, the author's attention is drawn on the dimensions of the product and service concept, the communication concept, the revenue concept, the competence configuration, and the organizational form. In these dimensions, the airlines have set up different configurations with regard to the destinations served, the customer segments addressed, the branding and pricing systems chosen, the means of productions (aircraft) allocated, the emphasis on the distribution channels (go-to-market mechanism), the organization and staff assigned, the corporate context settled, and the competences conceded. The elements are either identical, related or separated for the business models of the network and low-cost carrier. Fig. 1 compares the configuration of the analyzed cases. Overall, it can be noted that the incumbent airlines have each time attributed a different level of independence and autonomy to the low-cost unit. While Germanwings can be identified as the example with the highest independence towards the incumbent Lufthansa, Swiss in Europe is marked as the example with the lowest level. In between, Go, Basiq Air, and Buzz constitute the order in the level of independence from high to low. Only Germanwings and Go can be named as true subsidiaries while Basiq Air, buzz, and “Swiss in Europe” are within-low-cost carrier business models. The different levels of granted independence will also influence the number and extent of the negative impacts within the grouping. 4.3. Motives for the move The main objective for setting up a low-cost carrier while operating as a network carrier is to increase corporate value. This can be achieved either by raising the profitability, or by enforcing growth. In the first case, the volume of the production remains unchanged, while the profitability is increased by reducing unit costs or by raising margins. In the second case, costs and margins stay at their previous levels, while an increase in volume results in higher returns. All measures are imposed to continuously defend and improve the competitive position of the grouping on the market place, and thus to increase its value. To make use of these leverages, the incumbent airlines have four possibilities: exploiting economies of scale and scope, taking advantage of growth opportunities, and considering market and organizational dynamics. The identified motives in this research for establishing a low-cost unit can be assigned to these terms. All arguments are displayed in Table 4. It is vital to note that they are differently important for the analyzed cases. The particular importance of certain motives has also influenced the configuration of the low-cost units. For reasons of confidentially, the table shows only the number of incidents in the five cases on hand, but it does not refer to the importance of the argument for each case. However, the author points to the fact that the most important arguments for the incumbent airlines are the ones with the highest number of incidents. 4.4. Incompatibilities of the move Incompatibilities in operating the two business models of the network and low-cost carrier simultaneously appear for two reasons. First, they arise due to contrary and conflicting configurations. On the one side, these are determined by the definitions and requirements of the business models themselves, and thus can hardly be influenced by management (indicated as Ia in Fig. 2). On the other side, they are a consequence of the approach taken by the management in positioning and linking the two business models in the airline grouping (Ib in Fig. 2). Secondly, incompatibilities occur due to inconsistencies in the way the business model of a low-cost carrier has been applied to the new unit. Repeatedly, the incumbent airlines differ from the ideal configuration of how to set up a low-cost carrier described in Table 2 (II in Fig. 2). All types of incompatibilities are illustrated in Fig. 2. Both reasons for the appearance of incompatibilities can be illustrated by making use of the concept of business modeling. Again, the author refers to the operational approach in defining a business model, developed by Bieger et al. (2002). The contrary and conflicting configurations of the two business models become apparent by gradually comparing the eight dimensions of the two business models in Table 2. It stands out that most definitions and requirements of the two business models are incompatible. Furthermore, the number and extent of negative impacts also depend on the approach taken by management, whether it has been decided to integrate or separate the branding and communication concept, the markets and segments served, and the means of production and organization deployed (Fig. 1). Table 5 contains a list of the findings for the incompatibilities in the analyzed cases. Each time they are assigned to the relevant dimensions of the business models. They either limit the efficiency of the organization or the effectiveness of the marketing and the market offerings. Moreover, the underlying reasons and the number of incidents in the five cases on hand are mentioned in Table 5. These numbers give an indication about the spread and the perceived risk of the negative impacts quoted by management. Overall, they affect customers, employees, alliance partners and suppliers, management, and the shareholders of the grouping.4 According to the answers given by the experts, management and employees are affected most seriously. As seen, the incompatibilities in setting up a parallel low-cost carrier also occur due to an inconsistent application of the business model definitions. The configuration of the low-cost unit has to take into account the main strategic success factors shown in the competence configuration of the low-cost carrier business model (Table 2). These are market presence and process and cost management. In the cases on hand, the author has noted several trade-offs that have not been made in regard to these stipulations. A low-cost carrier implementing service amenities, such as differentiated products, baggage transfer, connections to other flights, free meals, booking via travel agencies, or the operation to primary airports will not be as cost efficient as required. Consequently, the complexity in the system is increased, and the productivity of the aircraft and staff is decreased. Thus, the product and service concept is not compatible anymore with the competence configuration and the organizational form. In addition, with offering more service amenities customers will less associate the carrier with low fares. In this respect, the communication concept and revenue concept are not compatible with the competence configuration. The same incompatibilities arise, if the low-cost unit decides to address various customer segments or to set up intensive cooperations with other carriers in the airline grouping. In these cases, complexity and cost levels also built up. 4.5. Propositions of how to control the incompatibilities The previous passages already indicated that certain negative impacts of establishing a low-cost unit are controllable and others are not. In the latter case, incompatibilities arise, as the definitions and requirements of the business models lead to contrary and conflicting configurations. Thus, the management has no influence on these issues. However, leverages are given, if the incompatibilities result from the approach taken by management in positioning and linking the business models in the grouping. Additionally, the number and extent of the negative impacts depend on the consistent application of the low-cost carrier business model to the new unit. By keeping this aspect in mind, and by analyzing the issues exhibited in Table 5, the author developed a set of propositions of how to potentially control the incompatibilities. The first eight propositions refer to the configurations of the two business models and how these should be configured and linked within the grouping. On the other hand, the last two propositions point to the characteristics of the market. These cannot be influenced by management but give an indication under which market conditions the strategy of establishing a low-cost unit will be more effective or actually make sense. • Consistency in the application of the business models. The more consistent management follows the application of the business models, propagated in Table 2, the less incompatibilities will result between the dimensions of the business models themselves. After all, strategy, structure, people, and culture must be aligned within each business model (Chandler, 1962). Moreover, a low-cost carrier cannot have low costs, if it offers service amenities, and creates complexity in its operations. • Differentiation in the product and market approach. The incumbent airlines will be much more successful in achieving their objectives, if the product offerings of the business models are clearly separated and differentiated. This assertion is also drafted concerning the customer segments and geographical markets served. Conflicts will be minimized, if the markets are clearly divided by segments and regions (Hill, 1988). The author claims that this stipulation is crucial to achieve in any service industry, and especially in the airline industry. • Extensive and clear communication of the products. Communication plays a vital role in informing customers and employees, and in explaining the differences of the products. If the attributes of the product and service concepts and the revenue concepts are properly communicated, transparency into the product offerings and requirements is increased. This will secure expectations, and consequently avoid disappointments and confusion among customers and employees. • Separation of branding and resources but sharing of back-office activities. The number and extent of the negative impacts will be significantly reduced, if the boundaries of the business units are also clearly set in terms of branding and resources. Though the investment into market awareness and reputation will be much higher, the risk of diluting the main brand is minimized when separating the communication concept. Moreover, the unambiguous allocation of staff, capital, and means of production (e.g. aircraft) to each business model helps in avoiding incompatibilities and complexity (Christensen, 1997). To make use of economies of scope, the author suggests sharing back-office activities (e.g. revenue accounting, purchasing, training facilities, financial controlling, or even revenue management). • Autonomy of the low-cost unit but affiliations with the grouping. The low-cost unit will be more successful the higher its autonomy is to act on the market place (Charitou and Markides, 2003). Autonomy in decision-making shall be given anyway concerning operational issues. However, the independence should be limited with regard to strategic decisions (e.g. about the markets regions served, and growth path pursued). This avoids fierce competition between the business models, and supports a clear corporate strategy. Furthermore, corporate management has to internally promote and strengthen the team spirit within the grouping. Information sharing and joint events will cut back manifestations of rivalry (Birkinshaw, 2001). • Better start from the “scratch” or following a participation strategy. It is far better to start from scratch with the low-cost carrier than to try to squeeze significant savings from an existing airline operation (Christensen, 1997). Unless the low-cost unit is positioned close to the boundaries of the other business models, costs leech across. The functional organizations within a parent company are powerful enough to capture and reduce the cost advantage of the internal low-cost unit. Any participation into an airline already operating at low costs will also be appropriate. • Size of the low-cost unit and motives for the establishment. The number and extent of the negative impacts grow with the size of the low-cost carrier. When the unit remains small, certain issues do not appear, as fewer individuals are concerned about it (Birkinshaw, 2001). In this case, however, the low-cost carrier cannot improve its competitive position both on the seller and on the buyer market (e.g. market power, economies of scale). In addition, management should have a long-term view which growth path for the carrier is pursued. After all, the rationale for founding the low-cost unit also matters (Markides, 1999). The unit has a different scope and set up, if it has the order to enable either corporate growth or just the protection of the market (offensive Versus defensive response to market changes). • Leadership characteristics and flexibility of the grouping. The establishment of an additional business model raises complexity in the grouping, as the firm gets more diversified. The management has difficulty in properly allocating resources, and in controlling the organization and the interest groups affected. Thus, the success of the hybrid approach heavily depends on the management skills of the people in charge, and the incentive systems applied. In addition, the effectiveness of the strategy will be higher, if the flexibility of the grouping allows quick reactions and changes. The relationship of the management towards the unions is crucial in this manner. • Importance of network effects. The more important cooperations and the resulting networks effects are for the value proposition of the case under consideration, the higher are the number of potential incompatibilities with partners. Any incumbent airline strongly integrated into cooperations will be more exposed to the incompatibilities with partners, when a low-cost unit is around. This proposition leads to the question, whether it makes sense to follow such a strategy in network industries, in which market-based networks play an important role (e.g. in transport, power supplying, and telecommunication). • Market characteristics, such as maturity, size, extensibility, and structure. The number and extent of the negative impacts also depend on the maturity of the airline market, the size, and extensibility of the customer segments, and the structure of the demand (concentrated versus. scattered demand, e.g. UK against Germany). The more mature the market, the smaller the segments, and the more concentrated the demand is, the higher is the challenge for the management in coping with the negative impacts. Moreover, the ability to actually differentiate the products has an important leverage (Hill, 1988). Industries characterized by homogenous offerings (e.g. service industries, and in particular the airline industry) are more exposed to incompatibilities than others. 4.6. Evaluation of the move These ideas presumably will help the management of the incumbent airlines to be more efficient in establishing a parallel low-cost unit. The author discussed how the business models of the network and the low-cost carrier could be run simultaneously, so that the overall benefits are higher than the costs. In this respect, one of the key stipulations seems to be the separation of the low-cost unit concerning most of the eight dimensions of the business modeling concept (compare Table 2 and Fig. 2) from other business models in the airline grouping. It has been found that the operation of different business models in separate entities or organizations—while maintaining a certain level of control—is apparently an efficient strategy (Birkinshaw, 2001). Furthermore, the analysis has shown that it is important to keep markets apart. Transferring decentralized traffic flows to the low-cost unit and deploying the aircraft of the network carrier merely to hub operations could be an efficient work-sharing and positioning strategy for the business units (e.g. in the case of Germanwings and Lufthansa). However, separating the unit in various dimensions will not guarantee long-term success unless established firms also employ the appropriate managerial policies that will support the simultaneous coexistence of both business models (Charitou and Markides, 2003). After all, negative impacts may arise inevitably, because several incompatibilities of the two business models exist. The key question is how well the company is able to manage the incompatibilities and limit the negative impacts. Moreover, a detailed cost—benefit analysis should be conducted before starting such a venture (Markides, 1999). If the contingencies proposed in this section do not apply (non-controllable issues) or cannot be handled (controllable issues) for the respective case under consideration, incumbent airlines should rather focus on other strategic response options. One of these options could be embracing the disruptive strategic innovation of the low-cost carrier business model by adapting or even transforming the network carrier business model. Aer Lingus can be cited as an example where the original dimensions of the network carrier business model have been changed to the ones of the low-cost carrier. Though it seems to be difficult to efficiently operate a parallel low-cost unit, the question remains whether this strategy could function as an intermediate competitive response. A major drivers behind the simultaneous operation of a low-cost carrier business model for a limited period of time are the protection of existing markets, the acceleration of changes in the existing organization, and the profiting from the final sale of the low-cost unit. Actually, British Airways was successful in creating value on the stock market for its subsidiary Go, but it could not hamper the growth of the low-cost carriers Ryanair and EasyJet. After it sold its low-cost unit for a considerable price, it enforced the transformation of its original business model.