The Factors Determining the Profitability of Low Cost Airlines

Abstract

Airline have developed a set of business models to increase their market share and gain competitive advantage against each other. One of the business models that have recently captured attention is the low-cost business model. The purpose of this study is to identify financial variables that affect profitability of airlines with a low-cost business model. For this purpose, 16 airlines with a continuing financial performance for the period 2004-2017 have been examined empirically. Panel data analysis was used as a method in the study. Within the scope of the study two different models were created. In the first model, return on assets (ROA) and in the second model, return on equity (ROE) is used as a dependent variable. The findings of the study indicate that in the first model, growth opportunities and asset structure have an effect on profitability. In the second model, growth opportunities, asset structure and leverage level have an impact on profitability.