A low-cost carrier or low-cost airline (occasionally referred to as no-frills, budget or discount carrier, and abbreviated as LCC) is an airline that is operated with an especially high emphasis on minimizing operating costs and without some of the traditional services and amenities provided in the fare, resulting in lower fares and fewer comforts. To make up for revenue lost in decreased ticket prices, the airline may charge extra fees - such as for hand-carry luggage.
The term originated within the airline industry referring to airlines with a lower operating cost structure than their competitors. While 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 regional airlines that operate short flights without service, or with full-service airlines offering some reduced fares.
Some airlines actively advertise themselves as low-cost, budget, or discount airlines while maintaining products usually associated with traditional mainline carrier's services—which can increase operational complexity. These products include preferred or assigned seating, catering other items rather than basic beverages, differentiated premium cabins, satellite or ground-based Wi-Fi internet, and in-flight audio and video entertainment. More recently, the term "ultra low-cost carrier" differentiates some low-cost carriers, particularly in North America where traditional airlines increasingly offer a similar service model to low-cost carriers.
Overview[]
Aircraft[]
Most low-cost carriers operate aircraft configured with a single passenger class, and most operate just a single aircraft type, so cabin and ground crew will only have to be trained to work on one type of aircraft, however some low-cost carriers operate more than one type. This is also beneficial from a maintenance standpoint as spare parts and mechanics will only be dedicated to one type of aircraft. These airlines tend to operate short-haul flights that suit the range of narrow-body (single aisle) planes. As of lately however there is also a rise in demand for long range low-cost flights and the availability of next generation planes that make long haul routes more feasible for LCCs.
In the past, low-cost carriers tended to operate older aircraft purchased second-hand, such as the McDonnell Douglas DC-9 and older models of the Boeing 737. Since 2000, fleets generally consist of the newest aircraft, commonly the Airbus A320 family and Boeing 737. Although buying new aircraft is usually more expensive than second-hand, new planes are cheaper to operate in the long run since they are extremely efficient in terms of fuel, training, maintenance, and crew costs per passenger.
In 2013, ch-aviation published a study about the fleet strategy of low-cost carriers. They summarized 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. Of course, the strategies of negotiating discounts for large orders and reselling planes are also available to higher-cost carriers as well.
Aircraft often operate with a minimum set of optional equipment, further reducing costs of acquisition and maintenance, as well as keeping the weight of the aircraft lower and thus saving fuel. Ryanair seats do not recline and do not have rear pockets, to reduce cleaning and maintenance costs. Others have no window shades. Pilot conveniences, such as ACARS, may be excluded. 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. Most do not offer reserved seating, hoping to encourage passengers to board early and quickly, thus decreasing turnaround times. 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.
Simplicity[]
Airlines often offer a simpler fare scheme, such as charging one-way tickets half that of round-trips. Typically fares increase as the plane fills up, which rewards early reservations. In Europe (and early in Southwest's history) luggage is not transferred from one flight to another, even if both flights are with the same airline. This saves costs and is thought to encourage passengers to take direct flights. Tickets are not sold with transfers, so the airline can avoid responsibility for passengers' connections in the event of a delay. Low-cost carriers often have a sparse schedule with one flight per day and route, so it would be hard to find an alternative for a missed connection. Modern US-based low-cost carriers generally transfer baggage for continuing flights, as well as transferring baggage to other airlines. Many airlines opt to have passengers board via stairs, since jetways generally cost more to lease.
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 landing fees. This is why Ryanair flies to Gatwick Airport, Luton Airport, and Stansted Airport in the London area and how easyJet is able to fly to Paris-Charles de Gaulle, and Amsterdam. In London's case however, low-cost carriers would not be able to use Heathrow anyway 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 don't wait for late passengers, allowing maximum utilization of aircraft.
Bases[]
Like the major carriers, many low-cost carriers develop one or more bases to maximize destination coverage and defend their market. Many do not operate traditional hubs, but rather focus cities.
Principles of operation[]
At IATA, a LCC operation is defined as including the following characteristics, at least to some degree:
- Primarily point-to-point operations
- Short-haul routes, often between regional or secondary airports
- Strong focus on price-sensitive traffic, mostly leisure passengers
- Typically a single service class, with no (or limited) customer loyalty programmes
- Limited passenger services, with additional charges for some services (e.g., on-board catering)
- Low average fares, with a strong focus on price competition
- Different fares offered, related to aircraft load factors and length of time before departure
- A very high proportion of bookings made through the Internet
- High aircraft utilisation rates, with short turnaround between operations
- A fleet of just one or two aircraft types
- Private-sector companies
- A simple management and overhead structure with a lean strategic decision-making process
While low-cost airlines differ from the service offerings, by definition they feature the most of the following:
- Standardized fleet (lower training, maintenance costs; purchasing aircraft in bulk)
- Absent non-essential features (reclining seats, frequent flyer schemes)
- Use of secondary airports for lower landing fees and marketing support
- Avoidance of airports with high costs
- Rapid turnaround (less time on the ground, more flights per day)
- Fly also less convenient times of the day, which price sensitive tourists accept (while business travellers want to fly at times suiting their schedule)
- Online ticket sales to avoid the cost of call centres or agents
- Online check-in (fewer check-in desks), charge for desk check-in
- Baggage charges for checked bags to offset baggage handling and loading costs
- Passenger loading via stairs rather than jetways
- Use staff for multiple jobs (cabin crew also check tickets at the gate, clean aircraft)
- Hedge fuel costs (buying fuel in advance when cheaper)
- Charge for all services (including on-board services, reserved seating, and extra baggage)
- Do not use reserved seating (which slows down boarding), or charge extra for reserved seating or early boarding.
- Fly point-to-point (passenger transfers to other flights are not accommodated, no compensation for missed connections)
- Carry little extra fuel (reducing aircraft weight )
- Outfit plane with cost-cutting modifications, such as winglets
- Route planning before aircraft arrives at airport (saving time on the ground)
- Market destination services such as hotels and rental cars for commissions
Innovative practices[]
Some airlines resort to very innovative practices. Many airlines these days work with aircraft manufacturers, but airlines such as AirAsia goes a step further, working with airports to develop specially designed low-cost terminals that require far less overhead. Lower costs are passed on to the airline, and in turn to the customer. Ryanair generally make the airports accept their boarding passes which passengers print themselves, although at some airports (where Ryanair is not dominating) passengers have to replace it with a normal boarding pass from the airport. Other practices that reduce expenses are the use of UAVs for aircraft checkups, tablet PCs instead of logs on paper (reduces airplane weight), and smartglasses for the pilot.
Singapore[]
In Singapore, low-cost airlines make its market such as Scoot, Tigerair and Jetstar Asia. Notably AirAsia is the largest for the Southeast Asia.
Low-cost offerings such as Ouigo and Peach were relevant to the market.
North America[]
On 26 October 2006, Oasis Timothy Airlines was created from Hannover and Hamburg to Boston Airport, but the later ceased operations on 20 April 2008 due to dwindling losses.