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Encyclopedia > Low cost airline
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Boeing 737-200 of low-cost Irish airline Ryanair

A low-cost carrier (also known as a no-frills or discount carrier) is an airline that offers low fares but eliminates most traditional passenger services. Typical low-cost carrier business model practices include:

  • a single passenger class
  • a single type of airplane, commonly the Boeing 737 (reducing training and servicing costs)
  • a simple fare scheme (typically fares increase as the plane fills up, which rewards early reservations, known as "yield management")
  • unreserved seating (encouraging passengers to board early and quickly)
  • flying to cheaper, less congested secondary airports (avoiding air traffic delays and taking advantage of lower landing fees)
  • short flights and fast turnaround times (allowing maximum utilization of planes)
  • simplified routes, emphasizing point-to-point transit instead of transfers at hubs (again enhancing aircraft utilization)
  • emphasis on direct sales of tickets, especially over the Internet (avoiding fees and commissions paid to travel agents and corporate booking systems)
  • employees working in multiple roles, for instance flight attendants also cleaning the aircraft or working as gate agents (limiting personnel costs)
  • "Free" in-flight catering and other "complimentary" services are eliminated, and replaced by optional paid-for in-flight food and drink.

History

The first successful low-cost carrier was Pacific Southwest Airlines in the United States, which pioneered the concept when their first flight took place on May 6, 1949. Often, this credit has been incorrectly given to Southwest Airlines which began service in 1971 and has been profitable every year since 1973. With the advent of aviation deregulation the model spread to Europe as well, the most notable successes being Ireland's Ryanair, which began low-fares operations in 1991, and easyJet, formed in 1995. As of 2004, low cost carriers are now edging into Australasia, led by operators such as Malaysia's Air Asia, and Australia's Virgin Blue.


Low-cost carriers pose a serious threat to traditional "full service" airlines, since the high cost structure of full-service carriers prevents them from competing effectively on price-- the most important factor among most consumers when selecting a carrier. From 2001 to 2003, when the aviation industry was rocked by terrorism, war and SARS, the large majority of traditional airlines suffered heavy losses while low-cost carriers generally stayed profitable.


Many carriers have opted to launch their own no-frills airlines, such as KLM's Buzz, British Airways' Go Fly, and United's Ted, but have found it difficult to avoid cannibalizing their core business. One exception to this has been British Midland's bmibaby, which successfully operates alongside its full-service counterpart.


In Canada, Air Canada has found it difficult to compete with new low-cost rivals such as Westjet and Canjet despite its previously dominant position in the market: Air Canada declared bankruptcy in 2003. In Finland the competition went in a different direction, as the national carrier Finnair lowered prices so that the low-cost competitor Flying Finn was forced to cease its operations.


Australia's Qantas airline has recently launched two low cost carriers: JetStar services the Australian domestic market in competition with Virgin Blue, while Australian Airlines operates internationally to Asian destinations.


In New Zealand, Air New Zealand chose to buy their low-fare competitor, Freedom Air, instead of competing against them.


On 5 May 2004, Singapore's first low-cost carrier, Valuair was launched, prompting dominant carrier Singapore Airlines to invest in a new low-cost startup, Tiger Airways, to beat the competition. Not to be outdone, Singapore Changi Airport's second most dominant carrier, Qantas Airways, also started its Asian offshoot, Jetstar Asia Airways based in Singapore and commencing operations on 13 December 2004. Malaysia's Air Asia made repeated attempts to setup a Singaporean operation, but its insistence in using Seletar Airport, in addition to other demands to cut airport usage charges, delayed its abilities in gaining the relevant permits from the authorities in Singapore. This set-back may squish Air Asia's Singapore expansion ambitions.


As the number of low-cost carriers has grown, these airlines have begun to compete with one another in addition to the traditional carriers. In the US, airlines have responded by introducing variations to the model. America West Airlines offers a first class product, for example, while JetBlue Airways advertises satellite television. In Europe, the emphasis has remained on reducing costs and no-frills service. In 2004, Ryanair announced proposals to eliminate reclining seats, window blinds, seat headrest covers, and seat pockets from its aircraft.


No-frills transatlantic flight

In 2004 the Irish company Aer Lingus lowered its prices to compete with companies such as Ryanair and also started offering no-frills transatlantic flights for just above €100. Late in 2004 the Canadian airline Zoom airlines also started selling transatlantic flights between Manchester, UK and Canada for 89. The American no-frills airline ATA Airlines plans no-frills transatlantic flights by mid-2005.


See also: List of airlines, List of low-cost airlines


External Link

  • European Low-Cost Market (http://www.airsider.net/files/2002/0902/001/eurolow.htm)
  • cheap0.com - budget airlines in Europe (http://cheap0.com)
  • Comparison engine and who flies where information (http://www.skyscanner.com/)
  • Wikitravel:Travel topics (http://wikitravel.org/en/article/Travel_topics) - Advice on discount airlines and cheap air travel

  Results from FactBites:
 
Low Cost Airline Business (202 words)
The low cost airline business has experienced extraordinary growth in recent years in terms of passengers carried, airlines launched, aircraft ordered and distribution worldwide.
Low Cost Airline Business, launched in April 2006, is the first quarterly magazine to offer serious analysis of all aspects of this growth industry.
In keeping with its aim of reaching senior management, Low Cost Airline Business is produced as a professional and attractive publication.
Vijay Mallya to launch low-cost airline (548 words)
Interestingly, there is already a non-scheduled airline called UB Air in Mallya's stable, which operates one aircraft.
The airline, to be based in Bangalore, will cover all the major metro and non-metro routes.
This will be the second low-cost domestic airline in the country, the first being the Bangalore-based Deccan Aviation, which started operations a year ago.
  More results at FactBites »

 
 

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