Virtual airline (economics)

In economics, a virtual airline is an airline that has outsourced as many possible operational and business functions as it can, but still maintains effective control of its core business.^[1] Such an airline focuses on operating a network of air services, and outsourcing non-core activities to other organizations.^[2] Contracting out services within the aviation industry has reportedly become so common that many carriers could be classed as having features of a virtual airline, although it is arguable whether any current carriers meet a strict definition of the term.^[3]^[4]

The term is often used to describe travel companies and ticket agencies that market themselves as airlines, but do not possess an air operator's certificate and contract with one or more certificated operators to fly and maintain aircraft, often under an air charter or wet lease arrangement. Although operated by others from a regulatory standpoint, the aircraft may display the virtual airline's livery, and may be owned or leased by that company.

Origins

Virtual airlines originated in the United States following the drastic changes brought about by the Airline Deregulation Act of 1978. During the hyper-competitive years immediately following deregulation, major airlines found it increasingly unprofitable to compete against start-up carriers on many routes they currently served. Instead of forfeiting the routes entirely, the larger carriers often made marketing arrangements with smaller airlines to fly under the "banner", or livery, of the larger airline. These regional airlines, mimicking the well known major airlines in adverts and purporting to make connections as seamless as possible, soon abandoned their own local service routes. In most cases, the regional airlines found it more profitable to serve the mainline hubs as a feeder operation rather than operate on their own.^{[citation needed]}