The Model of the Virtual Air Carrier as a Concept for the Revival of Air Transport in the Slovak Republic

Abstract

The air transport market has been exposed to the biggest crisis in connection with the COVID-19 pandemic over the last two years. Many airlines have tried to stay in the market, but the impact of various factors was so strong that some airlines were forced to stop of the operation. In this way, the pandemic verified the fundamental pillars of airline business models and at the same time pointed out weaknesses in the entire air transport system. Flexibility has become one of the most important features for sustaining any business. The article is focused on the complex processing of the issue of the virtual airline and proposes the concept of a virtual air carrier, considering the current starting points of the market, on which it will have sufficient potential to establish itself, at the level of EU. At the same time, it proposes possibilities for the development of air transport in the Slovak Republic through the introduction of a virtual air carrier as a tool for revitalizing the air transport market in the Slovak Republic. Based on the results of the research, the article defines how and under what conditions a potential virtual carrier could operate, from ticket sales to possible cooperation with other airlines. The aim of the article is to demonstrate that the model of virtual air carrier is a solution for maintaining a stable level of air traffic in several countries in the EU that have lost their air carriers during the pandemic.

1. Introduction

The air transport market is constantly transforming due to various changes. The whole process was started by the deregulation of the air transport industry at the end of the 1970s in the United States of America. The market opened for the new players—airlines with different character traits [1]. Currently, it is possible to find broad-spectrum airlines with the applied traditional, low-cost, hybrid and virtual business model at the air transport market. These business models and basic pillars of these airlines were verified especially during the COVID-19 pandemic, when the number of airlines operating on the market was significantly reduced and only the strongest survived the period of uncertainty and unpredictable events, which were able to adapt to the conditions [2]. On one side it could seem that everything was bad, but the COVID-19 pandemic also brought a lot of new positive changes. It was a development of new technologies, time for innovations, changes and transformations, which were significantly reflected in the air transport market. The serious situation pointed to the need for digital transformation and the application of the technologies of the fourth industrial revolution [3]. Changes and transformations affected especially the business models of the airlines because there was no other way out, if they wanted to maintain their position in the market. Many airlines managed to stay on the market, but some of them went bankrupt [4]. In this way, a space for new airlines was created on the market, when the model of the virtual airline became the one of the used and preferred because of its simplicity and low cost. Paradoxically, this issue is still not sufficiently researched and there is only limited amount of information about it. Only a few experts deal with virtual business model itself in detail. For this reason, the article is focused on defining a virtual model airline. The main goal of the article is to create a virtual airline concept that could be applied on the air transport market in the Slovak Republic, but also in the EU. The theoretical part of the article consists of describing the virtual airline model and solve the virtual airline from the side of its position on the air transport market through several scientific studies. Legislative requirements are not omitted, and at the same time there is a part focused on analysis of the air transport market in the Slovak Republic for the purpose of identifying its situation. The following section describes the methods used in the basis of which the concept of a virtual airline was designed. The section “Results” is focused on the design of the concept, which consists of the six basic segments that have been established as basic pillars for this business model. The final section is dedicated to evaluating whether this model can be applied in practice and what is its benefit for the air transport market.

2. Literature Review

Doing business and operating an airline as such on the air transport market is not easy at all. At the same time creating a successful business model is a real challenge nowadays. Airlines have to face many problems represented by lack of capital, rising costs, often low returns. From this point of view managers have to always think about, how to adapt their business to the given conditions so that the airline can stay on the market. Most often, these are measures related to cost reduction, which results in the reduction of the workforce of personnel [5]. In addition, there are several other options or methods that can help to airlines. These are transformations in business models, for example the use of outsourcing of services or aircraft leasing. Many airlines have their business model based exclusively on this system and thus the virtual airline model has become a real possibility in the airline industry [6,7]. Virtual airline represents just such an airline that operates most often with leased aircraft, among other things, it contracts with other companies for its services, while leaving some area of basic management to itself. One of the goals of such company is to achieve a “lean and mean” state of business, the origin of which is to be found in the regulatory liberalization that brought increase competition between air carriers [8]. The model of virtual airline is also described in the book “Crisis management in Tourism” from 2006. The originality of this model is set up in the fact that such airline does not own any aircraft, does not employ pilots and cabin crew, does not have any technical equipment and does not even perform any ground handling services. These activities are provided by other contracted companies. It primarily uses the electronic ticketing system [9]. The virtual airline model is most often used by start-up airlines, it means that they are defined as virtual. This model is attractive for the entrepreneurs precisely because of reduced costs, but also less risk in the initial phase [10]. However reduced costs and low risk of failure many not always be a guarantee of success, according to a study Sun et al. (2022) it is easy to emergence a virtual airline, but it can easily fail and disappear from the air transport market [11]. A study By Arman Rezaee (2010) tried to design a virtual low-cost airline in order to remove all factors, that do not bring a value within the model. The concept is not based on the ownership of the aircraft or base airport. For this concept it was chosen as a key pillar to have an office at various airport or in other places, which are equipped with modern technologies, where web meetings are possible. The results of this study showed that total cost could be significantly reduced. The authors emphasize that in the current era of global recession, pressure to protect the environment, rising fuel and personnel costs and many other factors that threaten the existence of many airlines, it is crucial that more attention is paid to the threats. The virtual low-cost airline represents an innovative idea. Low-cost airlines adhere to the slogan of turning costs on revenues, virtual airline tries to turn the high costs to ICT equipment [12]. In addition to the technical equipment, it is important within the operational strategy of this type that the virtual airline can offer destinations to its customers. Access to the routes is based on code sharing agreements with other airlines. Code-sharing agreements have enabled airline virtualization, which can now be considered standard across almost all industries [13]. A 2014 study consider virtualization within the airline industry not entirely beneficial due to cost coordination. This model can only be successful if the destination offer is extensive and there exist cooperation with different carriers. On the other hand, virtualization presents an opportunity to simplify the company’s internal organizational structure, allowing it to focus on its resources and key elements of the business model [14]. According to a 2005 study, the virtual airline represents a new dimension of business. Outsourcing services ensures that costs are variable, and flexibility allows to demand to rise and fall [15].

A virtual airline presents an airline that outsources as many operational and business functions as possible while maintaining effective control over its core business. Outsourcing can range from the rental of aircraft and crew to the marketing of the given company. The name virtual airline implies that the business model of such a company is slightly different from traditional airlines. The available literature compares a virtual airline to a travel agency that exclusively sells flight tickets while presenting itself as an airline. Flight ticket sales can take place in various forms, online reservations are used, respectively, online sales, which are carried out via the Internet. The Internet thus represents a necessary means to ensure the functioning of such a company [16]. A huge advantage of a virtual airline is that it does not need to hold an air operator’s certificate (AOC). Such a company operates and sells tickets based on virtual code-share agreements concluded with other air carriers that hold AOCs. In practice, this means that the virtual airline is responsible for selling tickets, while its flights are operated by the other airline. The aircraft that subsequently transports passengers may or may not have the appearance of a virtual airline.

2.1. Model of Virtual Airline

At the beginning of the entire scheme is a passenger who needs a ticket. For a virtual airline to be able to offer tickets for sale, it must have partnerships with other airlines (virtual code-sharing) and be a part of a global distribution system (GDS). The GDS can be thought of as one big database in which all the flight information of the contracting companies is represented. Individual airlines are then granted access to this system based on contracts with GDS. In this way, companies can offer the services of individual carriers and other entities cooperating with a given GDS. GDS systems are financed by travel service providers (mainly airlines) who pay for the display of their services offered and for the individual transactions in which their services were sold [17]. GDS is directly connected to the Internet interface of the virtual airline. The passenger can make a reservation directly on the website or via a mobile application. After entering all the necessary data and completing the order, the passenger already has a valid ticket to board the partner airline. The simplicity is original and virtual airline does not have to use traditional distribution systems, but the only model it relies on is the mobile one, which brings it profit and tries to make the most of it. Online sales bring an advantage in the form of saved costs. Mobile applications represent another platform, thanks to which it is possible to become closer to customers. The applications are set up in such a way that the user can be notified at any time about various promotions and cheaper tickets. This results in an increase of interest in booking a ticket, the user is motivated to view offers anytime and anywhere. The sale of flight tickets thus increases and brings profit. Another advantage of online bookings is that the virtual airline can obtain passenger data, which it will process and then use to segment and improve the services it offers. Online sales and sales via a mobile application also have the advantage that the customer’s attention can be redirected to various advertisements on the airline’s website, or to their own advertisement regarding additional services. Ancillary services may not be linked to a ticket but may represent additional services for passengers that are as important to the airline as the purchase of the ticket [18].

The management of this entire system and the sale itself is provided by the staff of the virtual airline company, which consists of a few people, depending on the size of the business. The advantage is that such a company does not hold an AOC, it is not burdened with assets, that means it does not have to buy aircraft, thanks to which it can save costs that would otherwise go to, for example, servicing and maintaining aircraft. Its business does not have to be tied to any base airport, but it necessarily needs to have good business relations with its partners, with whom it has concluded virtual code-share contracts and, of course, IT equipment, to be able to ensure the sale of products and services for passengers.

2.2. Virtual Airlines as a Part of the Air Transport Market

The model of virtual airline is very interesting and relatively attractive [19]. Based on this research, it was found that several virtual companies were and are operating in the air transport market. However, their number is far from the number of low-cost and traditional airlines. The representation of this business model is relatively weak (see Table 1). Virtual airlines include for example Alsie Express, Sky Alps, Vizion Air, Taos Air, Nice Air and others. As a part of our research for information about virtual airlines, we were primarily focused on whether they are holders an AOC. In addition, we were interested in when the companies were founded and dissolved, and what was the reason for the termination of their activity. Cooperation with other airlines and companies, the used fleet and the number of destinations offered were additional data, on basis of which we also examined the models of virtual airlines.

Based on the collected data, we found that most of these companies are not AOC holders, and all flights are operated on the basis of contractual cooperation with other air carriers (virtual code-sharing). It means that the mentioned virtual airlines do not participate in the operation of the flight, but they only mediate the marketing sale, hence their distinctive feature that they do not need to hold and AOC [20]. As for the destinations offered, virtual airlines offer the most frequent flights to the destinations of their partner airlines. If their offer their own destinations, they lease an aircraft with a crew as a wet lease, where the transport is provided by a partner carrier that holds an AOC and covers all the requirements set by legislation. The research also showed that many virtual airlines are subsidiaries of other companies, or sister companies, for example Sky Alps. In practice, it can be that the parent airlines have two subsidiaries, where one can be a low-cost airline and the other is the aforementioned virtual airline. The virtual airline ensures the sale of tickets on flights operated by its sister airline or a low-cost airline that must already be an AOC holder, which ultimately ensures profit (from the sale of the product to the realization) [21]. Table 1 shows selected virtual airline that operated on the air transport market. Some of those listed, such as Taos Air, Vizion Air and Nice Air are still in operation.

Table 1. Virtual airlines that operated in the air transport market [21,22,23,24,25,26,27,28,29,30,31].

Virtual Airline	Founded	Cooperation	Reason of the Dissolution	Fleet	Destinations	AOC
Air Croatia VA	2013–2015	Denim Air (charter) Hahn Air (charter business)	Financial dispute with partner company, inability to pay lease payments	ATR42-300	5	No
Air Leap	2018–2022	Danish Air Transport (charter) NyxAir (charter) AIS Airlines (charter)	Financial problems due to lack of government support during the COVID-19 pandemic	ATR72-500 Saab 430B	13	Yes
Air Norway AS	2003–2017	North Flying (Parent company)	Not listed	Fairchild Swearingen Metroliner	3	No
Alsie Express	2013–2021	Air Alsie (charter) (Sister carrier)	Cancellation of flights due to the pandemic	ATR 72-500	9	No
Green Airlines	2020–2022	Chalair Avaiation (regional, charter) ALK Airlines (charter) Just Us Air (charter)	Accusation of greenwashing, resignation of contractual partners	ATR-42 ATR-72	6	No
Vildanden AS	2005–2021	Danish Air Transport (charter) Helitrans Coast Air (regional) Air Aurora Avitrans	Cancellation of flights due to the pandemic	Jetstream 32 ATR-42 Saab 340	3	No
Teddy Air AS	1999–2004	Golden Air	Financial problems	Saab 340	2	No
Niceair	2022-	Hi Fly Malta (charter)	-	Airbus A319-100	3	No
Vizion Air	2013-	Sprintair (charter)	-	Saab 340 Fokker 50 Dornier 328 JET	-	-
Taos Air	2018-	Ultimate Air Shuttle (charter) Advanced Air (private charter)	-	Fairchild Dornier 328 JET	5	No

Table 1. Virtual airlines that operated in the air transport market [21,22,23,24,25,26,27,28,29,30,31].

Virtual Airline	Founded	Cooperation	Reason of the Dissolution	Fleet	Destinations	AOC
Air Croatia VA	2013–2015	Denim Air (charter) Hahn Air (charter business)	Financial dispute with partner company, inability to pay lease payments	ATR42-300	5	No
Air Leap	2018–2022	Danish Air Transport (charter) NyxAir (charter) AIS Airlines (charter)	Financial problems due to lack of government support during the COVID-19 pandemic	ATR72-500 Saab 430B	13	Yes
Air Norway AS	2003–2017	North Flying (Parent company)	Not listed	Fairchild Swearingen Metroliner	3	No
Alsie Express	2013–2021	Air Alsie (charter) (Sister carrier)	Cancellation of flights due to the pandemic	ATR 72-500	9	No
Green Airlines	2020–2022	Chalair Avaiation (regional, charter) ALK Airlines (charter) Just Us Air (charter)	Accusation of greenwashing, resignation of contractual partners	ATR-42 ATR-72	6	No
Vildanden AS	2005–2021	Danish Air Transport (charter) Helitrans Coast Air (regional) Air Aurora Avitrans	Cancellation of flights due to the pandemic	Jetstream 32 ATR-42 Saab 340	3	No
Teddy Air AS	1999–2004	Golden Air	Financial problems	Saab 340	2	No
Niceair	2022-	Hi Fly Malta (charter)	-	Airbus A319-100	3	No
Vizion Air	2013-	Sprintair (charter)	-	Saab 340 Fokker 50 Dornier 328 JET	-	-
Taos Air	2018-	Ultimate Air Shuttle (charter) Advanced Air (private charter)	-	Fairchild Dornier 328 JET	5	No

Most of the virtual airlines were able to establish themselves in the market and be operated for several years. On the other hand, some of them succeed very quickly, but disappeared just as quickly. Financial problems, the COVID-19 pandemic, but also disputes with contractual partners were included among the main reasons for the termination of the activity. As already mentioned, it is important for a virtual airline to have contracts with other airlines, in this case cooperation was most often established with charter airlines. Many of them are of a smaller regional character. A surprising finding is that some virtual airlines also cooperate with private airlines, in addition, among the partners of such companies are also other business companies that provide other activities. As for leased aircraft, Saab 340 and ATR type aircraft were most frequently used, in addition to other types. In the case of the airline company Nice Air, it was encountered the type of aircraft Airbus A319-100. The number of destinations offered varies, ranging from 2 to 13. The airline company Air Leap offers the most, where the number is 13. The interesting thing is that this airline started as a virtual one, but over time it managed to acquire an AOC. Currently, the fate of this virtual airline is questionable, precisely because of the financial problems that arose as a result of the COVID-19 pandemic [23]. The fewest destinations were offered by the airline Teddy Air AS, which disappeared in 2004. It is interesting in the case of this company that it started as an airline with an AOC, while over time it was transformed into a virtual airline without an AOC [28]. Other airlines were not, or they do not hold an AOC.

As for the legislative requirements, establishing such a company is not difficult, because such a company functions as a trading company or a firm that does not need any licenses or extra permits for its business. Such a company is focused purely on the marketing of ticket sales to the customer, which does not always bring its benefits, because the demand is not always sufficient. Many virtual airlines were also forced to close their operations for this reason, when they faced financial problems, but also various other problems. One such airline was, for example, the Norwegian virtual airline Air Leap [23]. Another virtual airline that stopped operations in April 2022 was the German Green Airlines. This company was founded in October 2020, while it had partnerships with airlines such as Alk Airlines, Just As Air also German Airways. The first suspension of flights due to the pandemic occurred in July 2021. A month later, this company faced accusations of greenwashing [26].

2.3. Determination of the Potential for the Establishment of a Virtual Airline in the Conditions of the Slovak Republic, as One of the Concepts for the Revival of Air Transport in the Slovak Republic

Market analysis is a key aspect that determines the potential of any air carrier to establish itself on the market and its ability to eliminate the risk of competition. The situation on the air transport market in the Slovak Republic, as well as in the entire EU and in the world, is currently fundamentally more complex than in the past regarding the COVID-19 pandemic. Currently, it is no longer sufficient to establish only the concept of the development of air transport for the next period, but on the contrary to propose restructuring changes that were caused by changes in the market, which will lead to the creation of a possible concept for the revival of air transport in the Slovak Republic. The air transport market in Slovakia is quite unique and there are only a small number of professional publications that comprehensively take it into account. The University of Poznań prepared a document devoted to the air transport market in Central and Eastern Europe, in which it looks for connections and distinctive elements of the market for individual countries, including Slovakia. It was found that the rapid development of civil aviation in the Baltic countries, the V4 and Slovenia, copied the development model of deregulated Western markets, and low-cost airlines became the driving force of change, gradually displacing traditional air carriers. The size of the population, economic development and economic performance of the country affect the volume of air traffic in individual countries. External factors include the openness of the economy and its ability to attract investment and tourism. The lowest value of air traffic operations in relation to the total number of inhabitants and untapped market potential was observed within the Slovak Republic. A negative factor presents relatively easy access to other major international airports such as Vienna, Prague, Krakow, and Budapest, which partially absorb the Slovak market. When comparing the data in this study, the expected increased reaction of the Slovak market was con-firmed. While the average traffic growth in the mentioned countries recorded the highest values in 2004 and 2005, in Slovakia the increased activity of the SkyEurope airline contributed to the increase of air transport a year earlier. According to this study, the general economic condition of the country has the greatest impact on air transport [32].

The Slovak air transport market was also analysed in 2018. From Slovak Airports are direct flights to certain cities, but the biggest problems arise with the most requested flights. The trend in this area shows that airlines are not interested in engaging in heated price competition with already existing air carriers or lines. Therefore, they try to use alternative flights, which do not compete with airlines, e.g., from Vienna, Budapest, or other nearby airports. Slovak airlines that tried to stay at market, but their activity gradually decreased, were for example: SkyEurope Airlines (2001–2009), Slovak Airlines (1995–2007), Air Slovakia (1993–2010), Danube Wings (2008–2013), Tatra Air (1991–1999), Seagle Air (1995–2009), Samair (2010–2014) and Quick Duck (2014–2015) [33]. The reason why these airlines were unable to stay on the market stems from the investment and cost-intensiveness with which the entire air transport industry is associated. Rising prices, increasing competition and high costs also contributed to the crash. In addition to these factors, the demise of Slovak airlines was also influenced by several other factors, such as the geographical location of the country, or even the location of the main airports, which are located near other available foreign airports, which weakens the potential of Slovak carriers. As for the occupation of flights, in some cases it was an oligopolistic market structure with a cooperative tendency. In practice, this means that if several airlines operate the route, instead of competing, they tend to cooperate, even regardless of their affiliation to an airline alliance. In this case, the competitive environment is extremely strong, not only between Bratislava and Vienna airports, but also at Košice airport with majority owner—Vienna airport. At the same time, the study also adds the fact that Slovakia is not one of the sought-after tourist destinations. This means that in the case of the creation of the concept of any air carrier in Slovakia, the country would have to spend a large amount of funds to make Slovakia more attractive as a tourist destination [34].

Another study from the 2020 also dealt with the situation at Slovak air transport market and the possible concept of a new air carrier, which considered the starting points arising from the current state of the civil air transport industry in the Slovak Republic. The proposal of the very concept of the carrier was preceded by a macroeconomic analysis of the air transport market in the Slovak Republic, which provided the primary key to determining the potential of the air carrier and its economic importance. As part of the methodology, the author worked with several data, such as the regional GDP per inhabitant expressed in purchasing power parity, the unemployment rate, and the real wage in the Slovak regions. The results showed that air transport in the Slovak Republic is closely linked to the economic prosperity of individual regions. Statistically, it was confirmed that the regions of western Slovakia belonging to the catchment area of Bratislava airport had the greatest market potential. Within this region, the largest outflow of passengers to foreign airports was observed, especially to Vienna airport. The problem of the outflow of passengers also manifested itself at other airports in the regions of northern and eastern Slovakia. The behaviour of passengers, thus, indicates an unsatisfactory offer from air carriers and the necessity of looking for alternative transport solutions. The character of the air carriers is essentially low-cost, despite their successful establishment on the market, demand was also observed for traditional carriers. Several traditional carriers operate at the Košice airport, and the demand for their services has also been confirmed, even though eastern Slovakia is according to the results economically the weakest. Compared to other countries, air transport in the Slovak Republic is significantly undersized, and its unavailability also affects consumer behaviour. Passengers with a final or starting destination in Slovakia are forced to look for alternative means of transport, or even competing airports, which has significantly increased their time tolerance for transport. The Slovak market is relatively small, which, however, does not represent an obstacle that an air carrier could not be established in such a market. According to the study, there is a potential for the creation of a new air carrier in Slovakia, as well as a sufficient market for its scope. The only threat could be competition from other air carriers. The entry of a new air carrier with the right business model could bring air transport services and raise the overall level of air transport in Slovakia [35].

2.4. Legislative Requirements for the Establishment of a Virtual Airline in the Conditions of Slovak Republic

The establishment of any company is a serious decision, but on the other hand, starting a business and its sustainability it can be even more challenging. It is necessary taking into account the initial investment, but also the fact that economic competition is uncompromising and tough. Weak players may not be able to stay at market and in this way, they can quickly finish their operation and business. Therefore, it is important to constantly learn, monitor market changes, changes in the legal system, but the ability to adapt to conditions under any circumstances is also important. Later the business model is as successful as is it possible.

If we are talking about the establishment of a virtual airline in the conditions of the Slovak Republic, we are based on the provisions of Act no. 513/1991 Coll. the Commercial Code, which regulates the status of entrepreneurs, business obligations, as well as some other relationships related to business [36]. A virtual airline company can legally take the form of a joint-stock company or a limited liability company. If we are talking about the establishment of a limited liability company, in addition to determining the basic data such as the business name and registered office of the company, it is important to determine the objects of the business. In the case of a virtual airline, the subject of business can be, for example:

• brokering the sale of air transport services,
• business activity and mediation of business through the Internet and mobile telecommunications network,
• advertising and promotional activity,
• intermediary activity in the field of trade, production, and services,
• consultancy in the field of purchase and sale of goods [37].

There can be several subjects of business. However, if we want to manage business in the Slovak Republic, it is necessary to have a registered trade, which can be free or bound. If we connect this fact with the establishment of a virtual airline, then it is a type of self-employment, when it must be met the general conditions of a trade business, and it is not necessary to demonstrate professional competence. This means that no certificates or professional qualifications are required for this type of business.

In the case of establishing a traditional or low-cost airline, the procedure is fundamentally different, because in addition to the above-mentioned prerequisites, the key legal regulation is that it regulates the provision of commercial air transport for a fee in accordance with Act no. 143/1998 Coll. on Civil Aviation. According to this act, an air carrier may perform air transport for a fee only on the basis of an operating license granted by the Ministry of Transport and Construction of the Slovak Republic in accordance with the Regulation of the European Parliament and the Council (EC) no. 1008/2008 of 24 September 2008, on common rules for the operation of air transport services in the Community [38,39]. According to this regulation, the granting of a license is conditional on the ownership or agreement on the lease of one or more aircraft. The main object of business should be the operation of air transport services or a combination with any other aircraft business or aircraft repair and maintenance. The next conditions are financial coverage of the operation for the fulfilment of business obligations based on realistic assumptions within a period of 24 months from the beginning of operation, to submit a business plan and meet the requirements for insurance and liability of the air carrier in relation to passengers, baggage, cargo and third parties while carrying out the business activity in question. It is also crucial, if it is a natural person, that he has the citizenship of the Slovak Republic or in another member state and permanent residence in the Slovak Republic. If it is a legal person, it must have its registered office or organizational unit in the Slovak Republic and the place of entry in the commercial register in the Slovak Republic, or the majority of the property rights are owned by natural persons who have the citizenship of the Slovak Republic or a EU member state, or legal entities with domiciled in the Slovak Republic, the majority of whose property rights are owned by natural persons who have the citizenship of the Slovak Republic or a EU member state or are under the effective control of the persons according from Slovak republic or EU. It is also necessary to prove that it has not been subject to bankruptcy proceedings, has not been in bankruptcy, is not undergoing restructuring, has not had a bankruptcy petition against it rejected due to lack of assets, or was not in liquidation in the last five years [36].

3. Materials and Methods

The main goal of this article is to propose a concept of a virtual airline in the conditions of the air transport market in the Slovak Republic, which is specific. The first phase of the research consisted in the analysis of the obtained theoretical knowledge and data, which demonstrated that the available scientific literature is only partially devoted to the issue of virtual airlines as is demonstrated in the introduction, literature review and Section 2.1 and Section 2.2 of this article. The second phase of the research was aimed at obtaining information about the air transport market in the Slovak Republic, focusing on three existing studies that examined the air transport market in the Slovak Republic as is in the Section 2.3. All the identified sources from the first phase were subsequently processed in the third phase—Section 2.4 and supplemented with the legislative framework and requirements for establishment such a company in the conditions of the Slovak Republic. We also consider it crucial to identify the basic features that distinguish such a company from a classic air carrier. The last, fourth phase defines the concept of a virtual airline in the conditions of the Slovak Republic. The virtual airline business model is designed based on six segments that it has chosen as key for this concept. This model considers passenger segment, services offered, pricing strategy, cooperation, route network and ownership and corporate structure.

During the preparation of the article, analysis, synthesis, deduction and comparison of the obtained information and data were used, as well as the method of critical evaluation from the point of view of the specific conditions and needs of the Slovak Republic. Subsequently, with the help of the above-mentioned methods, a generic concept of a virtual airline was created as a possibility to revive air transport in the Slovak Republic.

4. Results

Choice, or deciding on a business model is a key issue for the establishment of a newly created air carrier at the market [40]. The pricing strategy for the provided air services represents the basic key of our orientation in the design of the business model, but among other things, we consider several complex elements that influence it. The designed concept of virtual airline model based on six segments enables to be a real possibility in the airline industry. In our case, it is necessary for the virtual air carrier to be able to compete with low-cost companies on the market. The reduction of the costs and flexibility via outsourcing, which confirms the statement in [6,7] and exclusive relationships with partners are important factors. If our air carrier offered higher prices, its potential would logically be threatened by current air carriers operating in Slovakia. The primary effort is to eliminate the threat resulting from their competition to a minimum and to provide such services that these air carriers do not focus on. Based on Paprocki’s conclusions [41], another innovative attribute of the virtual carrier’s business model could be the setting of an offer for passengers not only from “airport to airport”, but from “door to door”. The concept of new business model could also be attractive for the carriers should its application allow them to achieve satisfactory commercial results. This condition would be met if the virtual air carriers become convinced that their participation in creating a comprehensive offer in the “door to door” relation builds their better ability to compete on the market traditional air carriers limiting the offer to provide the service only in the “airport to airport” relation. The air carrier’s focus on an exclusively traditional business model also weakens its potential, as confirmed by the departure from the market of, for example, Aeroflot, Lufthansa or ČSA. It is the virtualization of the airline that brings several advantages in terms of lower operating costs, there is no need to own aircraft, which means that the virtual air carrier does not need an AOC. For better variability and flexibility is for the concept of virtual air carrier business model also the implementation of new IT technologies and mobile applications very important [12]. In the Slovak Republic, there were low-cost and traditional airlines that had trouble staying on the market, so the concept of virtual air carrier business model represents a new dimension that could be successful and the description of six most important key segments is below.

4.1. Passenger Segment

To correctly determine the business model setting of a virtual airline, it is necessary to take into account the behavior of the consumer—the passenger [42]. Establishing partnerships with airlines (virtual codeshare) plays a role in targeting a specific segment of customers. In the case of cooperation with low-cost or charter airlines, it is mostly aimed at leisure travelers. In the case that the virtual carrier establishes cooperation with traditional airlines, it focuses more on leisure and business travelers. Therefore, it is very difficult to say who is the primary customer of such a virtual airline, which is the most important question when starting one. According to study from 2020, it is important to cover a wide range of passengers and satisfy the demand for the services required by them [35]. In 2014, at the initiative of the Ministry of Transport, Construction and Regional Development of the Slovak Republic, a survey of air passenger transport at Bratislava, Košice and Poprad airports was prepared. The survey was conducted through questionnaires and focused on the behavior of passengers using the largest Slovak airports. Travelers for work were represented in this survey by almost 40%, which indicates a relatively high rate of labor migration [43]. In practice, the proposed virtual carrier could impress at destinations, typical for this segment, with a specified service package containing a ticket, one checked baggage (alternatively of a higher permitted weight) and standard cabin baggage. The price for a comprehensive transport service should be competitive compared to the total price for a ticket and additional services with low-cost carriers. The segment of business travelers is fundamentally different from leisure travelers. Its price elasticity is significantly lower and the demand for flight frequencies is higher. Statistically, the biggest potential for a virtual carrier in Slovakia is represented by the tourism segment [44]. In this case, it is possible to attract travelers to holiday destinations, when flights are more or less seasonal, and demand is relatively high. A worse situation can occur in the winter months, in this case the offer of destinations should mainly include destinations where people go skiing, for example.

In general, the potential of the virtual carrier is very strong, because it develops activities in the field of cooperation with other air carriers and thus can have a wide range of destinations. Based on well-agreed conditions in the contract with partners, it can also provide passengers with connecting flights. This segment is characterized by diverse price elasticity. Flight frequencies should offer sufficient time variations so that passengers can choose an individual period of stay, without having to adapt significantly. The optimal number of flights to the destination should be 2–3 flights per week.

4.2. Services Offered

In the case of services offered by a virtual airline, we are talking about services during the flight and at the airport. Passengers should have online check-in and also kiosk check-in at the airport included in the basic travel tariff, if at the airport is kiosk for check-in. The passenger could also use the assistance services of the air carrier without additional fees. While assistance services to passengers, in the case of low-cost carriers, are charged with increased tariffs, in the proposed concept of the business model, these costs could be provided free of charge.

As for the air tickets offered, they should be at relatively low and affordable prices for every customer. The offer of destinations should be extensive, especially from the point of view of targeting a specific segment of customers, whether business travelers or leisure travelers. However, everything depends on established partnerships with airlines. In the case of marketing itself, i.e., ticket sales, it is very important that the virtual airline not only has a website that ensures contact with the customer, but also a mobile application that is easy to use and ensures an even more direct connection with potential passengers [45]. Similar to a website, a mobile app should provide easy and quick ticket booking in a few steps to save time. The services offered should also include additional services, which would include, for example, meals during the flight or car rental. It is important for a virtual airline to offer faultless service, however, problems may arise and so it should seek immediate correction and resolution, while it is important to maintain a good relationship with its passengers as well as business partners [46].

4.3. Pricing Strategy

By applying the right pricing strategy and revenue management tools, it is possible to achieve effective pricing [47] for our segment. The packages of offered services and their prices should be the most advantageous alternative for our chosen segment of passengers. Based on the finding that the air transport market in Slovakia is dominated by low-cost carriers, we propose travel tariffs with a lower average rate. However, ticket prices should take into account domestic and nearby foreign competition, which affects the outflow of passengers. Flight ticket price sessions should be at a lower level, while it must be ensured that the business is profitable. This means that the revenues should cover all costs, for example for employees, advertising, marketing, electronic system, reservation system, IT equipment, insurances, but also for unforeseen costs.

The pricing strategy, characterized by a very low average fare, supports the filling of the offered capacities, and increases the air carrier’s potential on the market. Low-cost carriers, which represent the biggest threat to our proposed concept, are primarily characterized by this strategy. For this reason, it is necessary to set the price policy of the air carrier at a level that will be attractive to all segments of passengers. This means that the passenger needs to be convinced of the usefulness of the services offered by us. The level of our services and the character of the destinations must reflect the final price for which the air carrier will sell, and the task of marketing tools is to correctly interpret this policy of the air carrier to passengers. It is important to take into account operating costs, fees and taxes and other cost items, so it is not possible to offer tickets below the average value of the unit cost per passenger [35]. The loyalty program also plays an important role in airline pricing in the context of business model [48]. As we do not consider our virtual airline to be a traditional one, we do not apply frequent flyer program elements. Therefore, as one of the solutions, we suggest that our system use an action of the type of number of tickets purchased + 1 free. This means that when the selected number of tickets is purchased, the passenger will receive a free ticket for the next purchase. At the same time, if we had sufficient data about the traveler, we could increase the attractiveness of the services we offer, through an individual price for his favorite destinations and service packages. In this way, the virtual airline can maintain a relationship with the customer, as it can stimulate his purchase intention and at the same time would motivate the passenger to continue using the carrier. For marketing purposes, the company can also announce various competitions for flight tickets.

4.4. Cooperation

A code-sharing agreement allows a flight operated by one carrier to be sold to another air carrier under its own code name at the same time. The essence of code-sharing is the shared use of aircraft capacity by several air carriers, regardless of whether the flight is operated or only sold [49].

The business model of our virtual carrier is primarily based on cooperation with other air carriers. Such cooperation is called “virtual code-share”, when the virtual carrier has signed contracts with other air carriers, both low-cost and traditional [50]. The advantage of this cooperation is that the virtual carrier can offer different destinations offered by its partners and at the same time it can reach different segments. The advantage is that if several such virtual code-share contracts are signed, the offer of destinations is higher, and thus it is possible to target different segments of passengers. The disadvantage may be precisely the range of services offered, which are based on the conditions of the signed contract. In practice, this means that the virtual carrier can only offer services that can be provided by its partner who operates the flight. Such a virtual codeshare can be established in the environment of the Slovak Republic with the companies as Air Explore, Go2Sky, Austrian Airlines, LOT Polish Airlines, Smartwings, or with low-cost airlines operating on the Slovak market as Ryanair and Wizzair. It should be noted here that, in practice, low-cost airlines usually do not enter into codeshare contracts [51]. In this case, however, cooperation with low-cost airlines could be beneficial, as well as cooperation with charter airlines. In this way, the virtual airline proposed by us can fill up the free capacity on partner flights, which ensures profit as well as the utilization of the aircraft.

4.5. The Network Effect

The flight network of the proposed carrier should be based on the demand for destinations and the number of necessary connections, which will be attractive on the market and economically advantageous, respectively, sustainable. In this case, the flight network is dependent on cooperation with partner airlines [51]. If our proposed carrier cooperates with low-cost companies, it is possible to expect a focus on secondary airports, no extra services offered, seasonality of flights and point-to-point connections. In the case of cooperation with traditional airlines, it will be a focus on primary airports, a better offer of services, a better frequency of flights and a hub-and-spoke connections.

The advantage is that the virtual airline can design its own network of routes and destinations, when it will lease an aircraft with a crew, when another partner will pro-vide the entire operation of the flight. This means that if the virtual airline finds a route that is attractive and reaches enough customers, it can make a profit, but it bears the costs of operating the flight and paying for the charter of the aircraft with the crew. If there are more such lines, it will be able to compete quite well with other air carriers. The proposed concept of a virtual carrier operating in the Slovak Republic does not own aircraft, which in the case of its own flight offer means that it must lease the aircraft from its partner, considering the length and character of the flights. It can be an aircraft of any type, so the virtual carrier is not tied to one type of aircraft. If it sells fewer tickets on its flights, it will logically choose a smaller type of aircraft. As for the operation of international flights, they could be operated from Bratislava airport, but also from Košice airport, Poprad airport or Žilina airport.

The proposal for the number of frequencies is based on the basic requirements of the passenger segments that are the object of interest of the proposed carrier. As we have already mentioned, the frequency of flights also depends on the conditions established in the partnership. In the case of its own network, the virtual carrier sets its flight frequencies based on the segment of passengers it addresses. However, the existence of an air connection with the destination is not enough. If the carrier intended to operate flights with one frequency per week, it would thus capture only the segment of passengers who are comfortable with this frequency. Passengers who use air transport for the purposes of a shorter or longer stay in a destination would use competing air connections. Therefore, it is important to set the frequencies so that the air carrier can target a wide range of passengers.

Germany, Poland, the Czech Republic, Italy, and Spain were selected as markets of interest in the field of tourism. Slovakia has positive diplomatic relations with these countries. For this reason, it is possible to assume a possible interest in flight connections not only of leisure travelers, but also of business clients. To begin with, we suggest connections such as Bratislava-Prague, Bratislava-Brussels, Bratislava-Frankfurt, Bratislava-Rome, Bratislava-Milan, Bratislava-Barcelona, Bratislava-London.

The carrier’s network is mainly influenced by commercial and operational factors that need to be considered. On the one hand, the air carrier should try to meet the needs of passengers, especially in terms of destinations, times, and frequencies. On the other hand, it is necessary to adapt to the conditions based on concluded contractual collaborations, which partially limit our proposed model. Nevertheless, there is a possibility of free choice when the air carrier proposed by us can only purely lease aircraft with crew and will have its own network of routes [52,53].

4.6. Ownership and Corporate Structure

As for the ownership and corporate structure, it is possible to say that the investor could be a private investor, in which case it would be a limited liability company or a joint-stock company. The establishment of this type of company based on the legal framework of the Slovak Republic is relatively simple. On the other hand, it must be said that the market of the Slovak Republic is relatively small, which is reflected in the fact that many neighboring countries absorb the majority potential of this air transport market. From this point of view, this market represents a big risk for the private investor. Many private airlines went bankrupt because of this [34]. However, the difference is that the virtual carrier does not own aircraft and for its business is enough “one” room—an office, IT equipment and a staff that represents a few employees. The operating costs of the virtual carrier proposed by us are much lower than the operating costs of a classic airline. In case of inability to pay its claims and fulfill obligations of the proposed virtual airline model, the way to terminate its business activity is significantly simpler compared to a classic airline that has assets (fleet) and a larger number of employees.

Another possible alternative is that the owner of such a virtual airline could be the state as supervisor, but the operator of the virtual airline would be a private company. However, we do not favor this alternative, the cooperation of a private investor with the state could be relatively favorable, which could be a partial shareholder and, in a certain way, also a guarantee when concluding contractual relationships with partners. When designing the concept of a virtual airline business model is also possible alternative, when this company would be a subsidiary of another partner airline. In the case of this alternative, the virtual airline would ensure the sale of tickets on the flights of its parent airline, when this cooperation should be beneficial for both parties.

5. Discussion

The proposal of the concept of a virtual airline in the conditions of the Slovak Republic is based on the findings of articles and case studies analyzed and described in this article, which were focused on the analysis of the environment of the air transport market [2,10,32,33,34,35] and theory of virtual air carrier [4,8,12,43,47]. The result of our research is a possibility for creation the new concept of virtual air carrier business model, which could be established in Slovak republic and revives the Slovak air transport market after COVID-19 pandemic crisis. A lot of airlines especially after the COVID-19 crisis do not have a rationalized structure of inputs to results and strive to dominate the market as Szaruga and Załoga declared for the airports [54]. We can not prepare strategic decision without rationalization and definition of the priorities. Doing business in this area is risky, but a properly set business model could eliminate this risk. The virtual airline represents something new, original and, tailor-made for the air transport market in Slovakia. We agree with the statement of [8,12,15,41,46], which focused on the reducing of the cost via outsourcing and implementation of the IT technologies. We understood the importance of the electronic boarding pass during the COVID-19 pandemic and the possibility to buy a flight ticket via mobile application is preferred mainly by younger generation. Low entry costs, less staff and a marketing sales model without aircraft ownership is an innovative solution. On the other hand, even this business model can be threatened, because there are a number of internal and external factors that affect the carrier’s potential. First of all, it is the threat of competition from other air carriers, which can be understood as a self-evident market phenomenon. The potential of the proposed concept depends on the quality level of the market analysis, knowledge about the passengers as customers and strategic decisions of the management. However, it is impossible to predict with certainty what the reaction of competing carriers would be to the establishment of our proposed carrier. Underestimating the competition refers to the risk associated with the carrier’s weak entry into the market, which the carrier can influence, and the threat of competing carriers, which the carrier cannot influence. The only purposeful tool that will reduce the level of threat is effective and reactive management of the carrier.

In addition to the threat of competition, there is a relatively large threat posed by the Slovak state’s passive policy towards air transport as an industry. The passivity towards aviation results from the overall under-dimensioning of the transport infrastructure of all modes of transport in Slovakia. From the point of view of the importance of all forms of transport, aviation is at the imaginary end of the interest scale. The approach to aviation changed partly depending on the preferences of the ruling political subjects, but there were no fundamental changes. Air transport is a complex industry that requires a clear and long-term direction vision. Therefore, it is necessary to describe the market specifications of the air transport industry and the susceptibility to surrounding internal and external factors in strategic documents, but till these days the Ministry of Transport and Construction of Slovak republic didn’t create the strategic document, which describe the concept of development of civil aviation in the Slovak republic. If this situation in the Slovak Republic does not change in the foreseeable future, a situation will arise when the implementation of any similar project will not be possible due to extremely strong competition in the surrounding area. At the same time, the influence of other threats and risks affecting the carrier will be strengthened.

Another threat is not only COVID-19 pandemic crisis, but currently also the economic crisis. An economic crisis is an external form of threat that the carrier cannot influence in any way. The basic predisposition to bridge this period is sufficiently healthy management of the carrier in the time before the crisis and a sufficient financial reserve designed to bridge unexpected events. At the same time, it is important to appropriately adapt the key decisions of the company depending on the market situation. Therefore, a virtual airline should constantly analyze the market situation and monitor all changes that could potentially threaten it. It is also important to conduct a market analysis even before a virtual carrier enters the market. The offered services, the destination network and the business model must be based on the identified demand and requirements of the passenger segments of interest. Likewise, the model must take into account existing threats and the identified risks. Entering the market also requires the right timing, which takes into account the seasonality of demand and the current cycle of the air transport industry. The risk resulting from the bad timing of entering the market fundamentally affects the starting position of the proposed concept. The reason for bad timing can be unexpected complications arising from the planning of the virtual air carrier itself and the preparation of its entry into the market, or incorrect estimation of the time intervals of the individual phases of establishment. The timing of project implementation must be based on the long-term strategic plan and clearly defined objectives of the carrier. This must be preceded by rigorous market analysis and identification of short-term and long-term trends in the air transport industry on the domestic and foreign markets. The carrier must translate the findings of the analyzes into an effective time plan for the establishment phases, which also takes into account possible complications and dynamic trends on the market. The output of the planning should be the most suitable time for the carrier to enter the market, which will be able to provide full-value services to passengers from the first moment. The fluency, reliability, professionalism and objectivity of the services provided fundamentally support the creation of a good name for the air carrier.

One of the last risks is represented by ineffective marketing. Potential customers of the virtual airline company need to be approached and sufficiently familiarized with the carrier’s offer. Underestimation of marketing tools can fundamentally affect the carrier’s potential and its ability to gain a foothold in the market. Just as the price and business strategy of the carrier is designed in a targeted manner, the communication channel with consumers must also be targeted. The passenger must understand from the marketing strategy of the carrier, what benefits accrue to him—as a consumer, and why he should decide in favor of a virtual air carrier.

6. Conclusions

The air transport market in the Slovak Republic is relatively small, and many airlines that tried to operate at this market failed in the final phase, despite all efforts. Due to that fact, several business models of airlines have already failed so many times [33], we consider the presented virtual airline model to be ideal solution for the air transport market in Slovakia. This model represents an innovative dimension of business, which is very attractive and successful, based on virtual code-share contracts and the sale of tickets only online by mobile application. The establishment of such a company does not require a lot of funds, and from the legal point of view the establishment is much easier than in the case of a classic airline company as was describe in the Section 2.4 of this article. The advantage of such a company is that it does not need to be an AOC holder [20], does not need a base airport, does not own aircraft, and does not even employ pilots or flight attendants [13]. Thanks to this, the business model of such a virtual airline is completely free, operating costs are relatively low, the only limiting factor is adaptation to the services provided at the airport and on the aircraft by the airlines with which the virtual airline cooperates. This can be eliminated over time by the fact that the virtual airline finds the segment of passengers, to whom is attractive, based on which it creates its own network of routes and leases an aircraft with a crew that will perfectly suit its needs, as well as the needs of the passengers. In this way, it will create its product or will offer tailor-made services for its passenger segment. The establishment and prosperity of such an airline is also supported by the fact that nowadays more people use digital technologies, especially the Internet and mobile devices. The virtual airline is focused exclusively on internet sales and offers not only airline tickets but also various additional services beyond the fare with the help of its website. This model can also be applied not only in SR, but also in EU countries. This concept of virtual air carrier business model can be implemented not only in Slovakia, but in the other states, which have similar small air transport market and classic low-cost carrier and traditional air carrier were not established there successful. The possibility of existing of this kind of business model concept can contribute to increasing the offer of flights for passengers, which are from the countries where “big” air carriers in not in operation. In the case of establishing a virtual airline, it is necessary to take into account some threats and risks, which should be identified in the strategic business plan of virtual airline. The threat of competition in the market is fundamentally higher. Passivity on the part of the individual states to sector of air transport, weak entry into the market, the economic crisis and constantly changing market conditions make the position of any air carrier on the market difficult. Another disadvantage is that traditional and low-cost airlines inspire a higher degree of trust in potential customers, so the implementation of the virtual model is not easy in highly competitive markets. Considering the characteristics of the air transport market in Slovakia and its history, our proposed model represents an interesting alternative.

In the future, it can be expected that the air transport market will be filled with virtual airlines, because many airlines do not have enough funds to procure their own fleet, or they are interested in a simpler and freer way of doing business, which can attract young entrepreneurs. Within this issue, it is possible to continue with future research that would address the interest of air carriers operating on the aviation market in Slovakia to cooperate with the proposed virtual air carrier model, as well as expectations from such cooperation.