The purpose of this paper is to examine how the traditional airlines' strategies are affected by the low-cost carriers emergence and their business model and in wich ways they can achieve profitability. Furthermore we also want to examine the factors that affect the airlines' efficiency and competitiveness. The results of this study shows that the growth of the low-cost carriers have affected the network airlines' strategies as they, among other things, had to also lower their fares. This has forced them to revise their cost and efficiency in their entire operation. The result has also shown that the network companies can not come down to the same level of low costs as the low-cost carriers, and must therefore examine their ability to increase revenues instead.

Authors: Ludvig Klingsäter and Samuel Elm Supervisor: Professor Hans Sjögren Background: The aviation industry was for a long time a heavily regulated market with characteristics of duopoly where states owned and managed the airlines traffic. After the 1990´s deregulation and liberalization of the aviation industry, new airlines emerged with new strategies. These new airlines would be called low-cost airlines and came to push the market into higher competition. The effect of this was higher supply of flights for customers and an increased price pressure between European airlines.  Purpose: The purpose of this study is to examine and analyze the performance of the European aviation industry after deregulation and the low-cost airline establishment during the 1990´s. Furthermore, we examine if there exists conditions for the legacy airlines to survive the highly increase in competition.  Method: We have used a quantitative approach in order to compile data to find answers to our issues. We examine and analyze how the market has developed between the years 1992 and 2019. With the help of annual reports from four legacy airlines and four low-cost airlines we have collected key data, such as revenues and costs, in order to analyze the market's development and performance over the years. We have also supplemented our quantitative data with previous research through a qualitative approach that helps us analyze our numerical results.  Conclusion: The results and analysis show that the market has become more efficient in terms of its resource use. This has been demonstrated by, among other things, reduced costs and lower revenues in relation to available seat kilometers, which has significantly increased the number of passengers. This leads to the conclusion that the performance of the European aviation market has improved and consumer welfare has increased. In addition, since the legacy airlines have managed to maintain their strategy while at the same time increasing their profit margins, we conclude that there are conditions for the legacy strategy to survive. Keywords: Legacy airlines, low-cost airlines, competition, net profit-margin, efficiency,  welfare.