ABSTRACT
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.
