Low-fare airlines are not new, but of late, their market share has been increasing in the US aviation industry. In order to remain competitive, the big players are coming up with discount carriers in the form of subsidiaries.
The low-cost airliners have their business models based on low fares. Liberalization of the aviation industry and low-cost airlines go hand in hand. After the deregulation of American skies in 1978, a Texas-based carrier, Southwest Airlines was the first one to explore the no-frills airline sector and has pioneered the discount model. At present, there are many players in the industry like Jet Blue Airways, Frontier and Air Tran, which are rapidly increasing low fare carriers. Big brothers (traditional big carriers) like United Airlines and Delta Air are also entering the market with their discount carriers called Ted and Song respectively.
So, what are Low Cost Carriers (LCC) all about? LCC is based on no-frill business model, which involves no free meals, coffee or newspaper and other services that are usually provided by the big carriers. On the other hand, they provide passengers with other kinds of facilities like online booking of tickets and designing their own travel packages by giving them access to cheap car hires and accommodation. The fares charged by the discount carriers are around one-fifth of those charged by the major carriers. In addition, they have no separate classes and operate only one kind of aircraft like Boeing 747 or Airbus.
The basic drivers for the low-cost airlines are the low turnaround time, point-to-point location and choice of less congested and faraway airports. In contrast, the big carriers have high turnaround time, in-flight amenities, hub and spoke network and use of main airports.
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