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When One Business Model Isn't Enough: LAN Airlines
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When One Business Model Isn't Enough: LAN Airlines

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When One Business Model Isn't Enough: LAN Airlines

When One Business Model Isn't Enough: LAN Airlines

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  • 1.  Introduction  How LAN’s Three Models Interrelate  The Challenge of Managing Multiple Models  Distinguishing Complements From Substitutes
  • 2. Trying to operate more than one business model at a time • To expand new market • To make more efficient use of fixed asset and resources • To Develop new income Direct-Sell 2 Business model - DVD by mail - Streaming video services Flourishes by running 3 distinctly different operation at the same time
  • 3. Latin American Network Airlines
  • 4. Latin American Network Airlines
  • 5. Full service international passenger-airline business model Cargo-Business Model No-frills passenger model
  • 6. • Full service international passenger-airline Two classes • Coach Class  Hot meals & beverages  Multilingual personal-entertainment • Business Class  Fully flat beds Boeing 787 Dreamliner
  • 7. • Cargo business model Premium Service • Transports high-value products  Salmon from Chile  Asparagus from Peru  Computer, Mobile phones from U.S. • Revenue 2011 Q2: 31% of total revenue
  • 8. • No-frills passenger model Set out in 2007 Lower-cost Lower-overhead No Kitchen No meal & beverage E-Ticket
  • 9. • Maximal use of physical assets  Increased utilization of as costly as asset as aircraft  Change from parking to delivery time • Reduction of the break-even load factor(BELF)  Combining cargo and passenger operation • Diversification of revenues and profits  Minimize risks • Reduce threat of entry by other airlines  Increased the number of routes • One-stop shop for cargo in Latin America
  • 10. “Why doesn’t every airline do what LAN does ?” History of LAN : • 1994 Chilean privatized LAN -> Cueto Family • Begun Cargo business with Fast air since 1970’s • Combine Cargo and Passenger service Profit potential of LAN international’s route • Wide body air craft • Reputation and reliability
  • 11. • Additional complexity • Complex logistic system that coordinate with cargo and passengers. • Additional criterion to passenger fares. • Gives priority to carrying passengers. • Broader organizational skills • Require different sale, marketing, technical skills. • Extensively training its flight and maintenance crew
  • 12. • Greater flexibility employee • Pilot fly even on two hours notice, more fly. • Instituting a performance-related pay and bonus. • Additional investments • Invest in warehouse for each country. • Regulatory constraint prevent non-national company. • Create series of separate company : LAN Peru, Ecuador, Colombia, Argentina. • Alliance in Mexico and several country.
  • 13. Advantages using more than one business model • Decreasing the break-even load factor • Combining cargo and passengers • Flying to more places • Better services to passengers and increase customers • Using grow revenue provided by cargo operation • Increase barriers to entry • Flying to more places make other airline harder to enter and grow
  • 14. Advantages using more than one business model • Increases barriers to imitation • Optimizing the use of aircraft and network of route • Increases switching costs • Leading passenger airline connecting from Latin America • One-stop shop for cargo in the region
  • 15. THANK YOU