Airlines as an investment - Business model in mind

Abstract

The thesis focuses on comparing two different airline business models (Low Cost Carriers and Full Service Network Carriers) against each other and how they have performed before and after the COVID pandemic from the year 2019 till 2024. Four airlines in Europe were chosen for this and in addition to their business model consideration, there were consideration for differences between each other. The thesis looks to answer if investing to airlines is worth it and how it can be worth it by comparing investing to airline business models and how investments would have grown during the observation period. There was also comparison to two general indexes to see, if they would have been better options to invest to (S&P500 & Stoxx 600).

The previous research and theoretical bases in the thesis discussed, what different research there has been regarding the different airline business models and what investors are looking when investing. The thesis also opened important terms regarding investing (such as equity) and what potential investors are looking for. From the research, it was found that FSNCs and LCCs have different success rates after a major event (like the pandemic) and that putting airlines to certain business models is difficult as airlines are more flexible than before. Therefore, instead of only having two models, there are also hybrid models where the airlines can also be put.

The data for the thesis was collected from the airline’s financial statements from the observation period from which a time and regression analysis was done. First the airlines were given a model (mostly FSNC-hydrid to hybrid-LCC) and individual airline groups financial numbers were ana-lysed. After collecting the data and focusing on each airline themselves a more comprehensive analysis was done comparing them to each other as well as to the indexes mentioned before that investors might invest to. From these results, it was found that the LCC (Ryanair Holdings plc) succeeded the most during this period and another LCC-hybrid carrier (Norwegian Air Shuttle) suffered the most while both FSNC-hybrids had negligible success but no total failure on their business models (Finnair Oyj and Lufthansa Group). But the best investments that the investor could’ve done was to invest in either of the general indexes shown in the thesis. It needs to be stated that all the analysis is based on historical data and future in impossible to predict.