WHAT IS LOW-COST CARRIERS?

By Tika R. Kandel

(Part of my dissertation)

Lowcost airline also known as lowcost carrier, budget airline, lowfare airline, nofrills carrier is an airline that offers cheaper services. To be able to offer lower fare; lowcost airline liminates most of the traditional services such as free inflight services and replaced by optional paidfor inflight
services such as food and drink. Having only one passenger class and one type of planes, flying to cheaper or secondary airports, point to point flights with fast turnaround times are some of the strategies used by most of the lowcost airlines. Tickets are often sold through Internet and call centre, which cut down administrative cost.

Lowcost airlines use special pricing strategy where fares increase as the planes fill up. This strategy rewards customers for early reservation, which is known as yield management. Further more the seating density on low cost aircraft is higher than full service carriers. Thus cost saving are mainly made in the areas of distribution, service and aircraft utilisation. (See Dogains: 2006, Piga and Filippi: 2002, Pender & Baum: 2000).

The concept of low cost airlines or no frills carriers was started from USA. Initially implemented by Pacific South West airlines and later replicated by various new entrants however few of them survived; Southwest airlines, most successful lowcost carrier adapted lowcost strategy in 1973. Despite the early success of low cost business model in USA, it took 18 years to adapt in European market. Ryanair became, the pioneer to adopt lowcost strategy after a visit to Southwest Airlines in 1991. Later, in 1995 and 1996 EasyJet and Debonair respectively joined the lowcost race. (See DDogains: 2006, Creaton:2004, obruszkes: 2006).