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A low-cost carrier ( LCC) or low-cost airline, also called a budget or discount carrier or airline, is an airline that is operated with an emphasis on minimizing operating costs. It sacrifices certain traditional airline luxuries for cheaper fares. To make up for revenue lost in decreased ticket prices, the airline may charge extra fees, such as for carry-on baggage.
The term originated within the airline industry referring to airlines with a lower operating cost structure than their competitors. The term is often applied to any carrier with low ticket prices and limited services regardless of their operating models. Low-cost carriers should not be confused with that operate Flight length without service, or with full-service airlines offering some reduced fares.
Some airlines advertise themselves as low-cost while maintaining products usually associated with traditional mainline carriers' services. These products include preferred or assigned seating, catering, differentiated Travel class, satellite or ground-based Wi-Fi internet, and in-flight audio and video entertainment. The term ultra low-cost carrier ( ULCC) has been used, particularly in North America and Europe, to refer to carriers that do not provide these services and amenities.
Traditional airlines have also reduced their cost using several of these practices.
In 2013, ch-aviation published a study about the fleet strategy of low-cost carriers. They stated that major LCCs that order aircraft in large numbers get large discounts for doing so, and due to this they can sell their aircraft just a few years after delivery at a price high enough to keep their operating costs relatively low. ch-aviation: Low-cost carriers eliminate rivals with unique fleet strategy, July 20, 2013.
Aircraft often operate with a minimum set of equipment, further reducing costs of acquisition and maintenance, as well as keeping the weight of the aircraft lower and thus saving fuel. Depending on the low-cost airline, seats do not recline and do not have rear pockets, to reduce cleaning and maintenance costs. Some low-cost carriers operate no-frills cabins without traditional amenities like reclining seats and blinds. Often, no in-flight entertainment systems are made available, though many US low-cost carriers do offer satellite television or radio in-flight. It is also becoming a popular approach to install LCD monitors onto the aircraft and broadcast advertisements on them, coupled with the traditional route–altitude–speed information. Some allow priority boarding for an extra fee instead of reserved seating, and some allow reserving a seat in an emergency exit row (for longer leg room) at an extra cost.
Often, low-cost carriers fly to smaller, less congested secondary airports and/or fly to airports during off-peak hours to avoid air traffic delays and take advantage of lower . This is why Ryanair flies to Gatwick Airport, Luton Airport, and Stansted Airport in the London area and how easyJet can fly to Paris-Charles de Gaulle, and Amsterdam Airport Schiphol. In London's case however, low-cost carriers would not be able to use Heathrow as the airport is running at near capacity, so there is no room to build a base. The airlines tend to offload, service and re-load the aircraft (turnaround) in shorter time periods and do not wait for late passengers, allowing maximum utilization of aircraft.
Online check-in is becoming common, again in the interest of avoiding personnel costs.
Where permissible, some airlines have a disinclination to handle Special Service passengers, for instance by placing a higher age limit on unaccompanied minors than full-service carriers. Often these airlines do not offer connecting tickets, since the airline will have to pay for ground crew to transfer luggage. A customer may create a connection manually by purchasing two separate tickets, but these are considered separate contracts, and the passenger bears the risk if a delayed inbound flight causes a missed connection.See e.g. connecting flight policy of easyJet and Wizz Air
After deregulation, which led to lower fares, many airlines remained bound to these salary agreements and pensions, whereas new low-cost carriers employed new staff with lower salaries, especially for cabin crew, keeping personnel costs low and allowing for competitive fares. In some cases airlines have gone bankrupt (e.g., Alitalia, Sabena, and Swissair), and new airlines replaced them.
Traditional carriers followed the low-cost carriers by enabling web check-in, encouraging machine check-in at the airport, and generally reducing ground personnel cost.
The number of Flight attendant follow international conventions that require one flight attendant per 50 passenger seats and two pilots. However, carriers can save money by reducing the amount of ground crew.
Carriers hire pilots through third-party agencies based in low-tax countries without benefits for sick pay, pensions or health insurance. Traditional carriers have also started to try this, including starting their own low-tax agencies. Why Scandinavia's SAS Is Creating a New Airline With the Same Name in Ireland These agencies can easily find less experienced co-pilots and cabin crew, as the profession is popular, but there are problems for low-cost carriers to recruit and keep captains who have to be experienced.
While low-cost airlines differ in service offerings, by definition they feature most of the following:
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. In Europe, the emphasis has remained on reducing costs and no-frills service.
In the US market, Allegiant Air, Avelo Airlines, Frontier Airlines, Spirit Airlines, and Sun Country Airlines are considered to be ULCCs.
In Europe, Ryanair and Wizz Air are the most prominent ULCCs.
In Asia, Cebu Pacific and Super Air Jet are the most prominent ULCCs.
Most airlines charge additional taxes and fees on their tickets. Some low-cost airlines have been known to charge fees for the seemingly ridiculous, such as levying a credit card charge if credit card is the only payment method accepted.
The first airline to offer cheaper transatlantic fares was Icelandic airline Loftleidir in 1964, often referred to as "the Hippie Airline". Many young Americans travelled to Europe after graduation, to experience the "old-world culture", and they were more concerned with getting there cheaply than comfortably or even exactly on time. Loftleiðir was not famous for speed or punctuality, but flying with the company became a sort of rite of passage for those young "hippies", one of whom was Bill Clinton, later US President.
The first airline offering no-frills transatlantic service was Freddie Laker's Laker Airways, which operated its famous "Skytrain" service between London and New York City during the late 1970s. The service was suspended after Laker's competitors, British Airways and Pan Am, were able to price Skytrain out of the market.
In the United States, airline carriers such as Midway Airlines and America West Airlines, which commenced operations after 1978, soon realized a cost of available seat mile (CASM) advantage in relation to the traditional and established, Legacy carrier such as Trans World Airlines and American Airlines. Often this CASM advantage has been attributed solely to the lower labor costs of the newly hired and lower pay grade workers of new start-up carriers, such as ValuJet, Midway Airlines, and their like. However, these lower costs can also be attributed to the less complex aircraft fleets and route networks with which these new carriers began operations, in addition to their reduced labor costs.
Taking a page from the mainline, major, or legacy carriers' desire to reduce costs in all ways possible in regards regional route networks by outsourcing regional operations to the lowest expense airline bidder capable of operating regional aircraft, a new generation of low-cost airlines (in name only) soon evolved in the US with varying levels of success. Among these varieties of low-cost and discount operators were noteworthy starts-ups that managed to get off the ground by using the larger aircraft services of established charter airlines. Among this group were the virtual airlines; Direct Air, PeoplExpress, Western, and those that never began service such as JetAmerica.
In Japan, low-cost airlines made major inroads into the market in 2012 when Peach, Jetstar Japan and AirAsia Japan began operations, each with financial sponsorship by a domestic legacy airline and one or more foreign investors. By mid-2013, these new LCCs were operating at a unit cost of around 8 yen per seat-kilometer, compared to 10–11 yen per seat-kilometer for domestic legacy airlines. However, their unit cost was still much higher than the 3 yen per seat-kilometer for AirAsia in Malaysia, due to the higher cost of landing fees and personnel in Japan.
In 2010s and 2020s, the low-cost airline sector, once a relatively minor segment of the aviation industry, has expanded significantly and is projected to continue growing. The market is expected to increase from an estimated value of USD 221.3 billion to USD 430.5 billion by 2033.
For the European Commission, the LCCs market share (44.8%) exceeded legacy carriers (42.4%) in 2012: between 2002 and 2017, LCC market share of international seat capacity rose from 23% to 57% in the UK, from 10% to 55% in Italy and from 9% to 56% in Spain but have still room for growth in domestic flight seat-capacity In France with 19% and in Germany with 25% in 2017, compared with 66% in the UK, 48% in Spain and 47% in Italy.
By early 2019, there were more than 100 LCCs operating 6,000 aircraft, doubled from 2,900 aircraft at the end of 2009, while seat capacity reached nearly 1.7 billion in 2018.LCCs accounted for 33% of intra-regional seat capacity in 2018 with 1.564 billion, up from 25% in 2008 with 753 million, and 13% of seat capacity between regions with 101 million, up from 6% in 2009 with 26 million.In 2018, penetration rate was 41% of seats within Europe, 36% within Latin America, 32% within North America, 29% within Asia Pacific, 17% within the Middle East and 12% within Africa.
In 2005, Emirates' Tim Clark viewed long-haul low-cost as inevitable, flights could be operated on 760 seats all-economy Airbus A380s, or 870 for an hypothetical A380 stretch. Since 2005, Australia's Jetstar Airways operates international flights, starting with Christchurch, New Zealand. In late 2006, others followed from Sydney, Melbourne and Brisbane, to popular tourist destinations within 10 hours like Honolulu, Japan, Vietnam, Thailand and Malaysia. With new aircraft deliveries, it hopes to fly to the continental US and Europe.
In April 2006, the industry magazine Airline Business analysed the potential for low-cost long-haul service and concluded that a number of Asian carriers, including AirAsia, were closest to making such a model work. On 26 October 2006, Oasis Hong Kong Airlines started flying from Hong Kong Airport to London-Gatwick. The lowest prices for flights between Hong Kong to London could be as low at £75 (approximately US$150) per leg (not including taxes and other charges) for economy class and £470 (approximately US$940) per leg for business class for the same route. From 28 June 2007, a second long-haul route to Vancouver, British Columbia, was started. The company ceased operations on 9 April 2008, after over a billion Hong Kong dollars in losses.
On 2 November 2007, AirAsia X, a subsidiary of AirAsia and Virgin Group flew its inaugural flight from Kuala Lumpur, Malaysia, to Gold Coast, Australia. AirAsia X claims that it is the first true low-cost long-haul carrier since the end of Skytrain. In late 2007, Cebu Pacific, the Philippines' largest low-cost carrier, announced non-stop flights from the Philippines to the United States West Coast and other US cities from mid-2009. The airline also intends to launch low-cost service to Middle East, where around a million Filipinos are based, and in Europe. Flights to Dubai — its first long-haul destination — started in 2013. As of September 2024, it operates flights to Dubai daily, to Sydney four times a week, and Melbourne thrice weekly.
On 11 March 2009, AirAsia X started its first low-cost long-haul service into Europe, to London Stansted. The daily flights are operated by two leased Airbus A340-300s. A one-way economy-class ticket often costs £150, and the premium-class one-way often costs £350. On 12 January 2012, AirAsia announced that it would be suspending services to London on 1 April 2012.
Low-cost European airline, Norwegian Air Shuttle, started long-haul low-cost operations in May 2013 under their Norwegian Long Haul arm. Norwegian initially operated flights to Bangkok and New York from Scandinavia using leased Airbus A340 aircraft, switching to new Boeing 787s in the second half of 2013 after Boeing resumed deliveries following extensive problems and delays. It served direct routes from the United States (Los Angeles, Fort Lauderdale, New York City, Oakland-San Francisco, Boston and Orlando) to Scandinavia (Oslo, Stockholm, Copenhagen). In January 2021 Norwegian announced the immediate cessation of their long-haul operations, along with a large-scale reduction of its fleet of Boeing 737 aircraft and operations.
In March 2017, International Airlines Group established Level, a long-haul low-cost virtual airline based in Barcelona Airport and serving destinations in North and South America. Long-haul low-cost carriers are emerging on the transatlantic flights market with 545,000 seats offered over 60 city pairs in September 2017 (a 66% growth over one year), compared to 652,000 seats over 96 pairs for Air charter and 8,798,000 seats over 357 pairs for mainline carriers.
Former American Airlines CEO Bob Crandall thinks the legacy carriers will force Long-haul LCCS to lose too much money and will continue to dominate. While Asian carriers like AirAsia X, Scoot, Cebu Pacific and Jetstar Airways are successful, the October 2018 demise of Primera Air and its $99 transatlantic flights illustrates the difficulties of the model, as the US World Airways will be relaunched in 2019.
Norse Atlantic Airways was founded in 2021 and commenced operations in 2022, operating transatlantic flights as well as flights to Thailand beginning in 2023.
In June 2024, HiSky started long haul operations between Bucharest-Otopeni to New York JFK.
Similarly, Midwest Express (later Midwest Airlines) which operated from 1984 until it was absorbed into Frontier Airlines in 2010, and Legend Airlines which ceased operations in late 2000 were also founded on this operating model.
Probably best described as "fewer frills" rather than "no frills", the initial entrants in this market utilized second-hand, mid-sized, twin jets, such as Boeing 757 and Boeing 767, in an attempt to service the lucrative London-US Eastern Seaboard market:
Some destination cities lie relatively far from the airports that low-cost airlines use to save costs. Examples of this are Hahn Airport, Weeze Airport and Girona airports—which low-cost airlines advertise as the destinations for Frankfurt, Düsseldorf, and Barcelona, respectively—even though these airports are 50 to 90 kilometres away. This has drawn criticism, mostly from competing airlines that fly closer to the destinations.
IAG CEO Willie Walsh found established airlines arrogant facing the LCC model. For instance, Aer Lingus turned down the opportunity to buy Ryanair for £29 million (€ million). The company further stated that it would not have developed Ryanair and instead would have shut it down.Travel Cheaper: 10 Ways To Travel By Air - Airlinecalls. airlinecalls. 2006–2007 Session.
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