The relationship between different business model-based airline portfolios: A comparative study of American, European, and Asian airline companies

Abstract

Airline companies implement two key business models: Low-Cost Carriers (LCC) and Full-Service Carriers (FSC), based on their operational and financial structures. These models play a crucial role in fostering competition in the airline transport sector. This study explores the level of global integration in the airline industry by conducting a series of analyses, correlations, cointegration, causality, and variance decomposition in hypothetical investment portfolios categorized by geographical region and business model. The data set includes stock prices of 52 airlines across the American, European, and Asian regions from January 2019 to March 2024. The correlation and co-integration analyses indicate a high correlation and a long-term cointegration relationship between airline portfolios, suggesting significant global integration within the airline industry. These findings imply that investors in the airline portfolio may require investment instruments from other sectors to achieve effective diversification. The causality analysis reveals notable regional differences in short-term causal relationships between airline portfolios based on business models. Specifically, the data suggest that the American airline sector exerts considerable influence on the global airline industry. In contrast, the LCCs model has a more pronounced effect on FSCs business models. Furthermore, the variance decomposition analysis indicates that while the American airline market significantly impacts the European airline market, it does not have the same influence on the Asian airline market. Overall, the results demonstrate that the LCC model leads trends within the airline industry, while regionally, the American airline sector is the primary driver for the global industry. © 2025 Nova Science Publishers, Inc. All rights reserved.