In 2015, the global aviation network carried 3.5 billion passengers on 34 million scheduled departures (preliminary figures). By 2030, current projections suggest those numbers will nearly double. Low-Cost Carriers have played a major role in this extraordinary expansion of aviation over the past quarter century, and there is every expectation that they will continue to do so. Low-cost carriers carried 984 million passengers in 2015, which was 28 per cent of the world total scheduled passengers. This marked a 10 per cent increase compared to 2014, which means Low-Cost Carriers experienced a passenger growth rate that was about one and a half times the rate of the world total average passenger growth.
What underlies the LCC success story?
First, the growth of LCCs has gone hand-in-hand with market liberalization. As domestic aviation markets have been progressively deregulated in many countries and as market-oriented air services agreements have increasingly became the new international norm, LCCs have seized the opportunity to offer innovative air services that have spawned new passenger demand, the so-called "Southwest effect".
- For example, Ryanair, easyJet, and other European LCCs have taken advantage of the creation of a common aviation area in the European Union to capture 41% of the seat capacity on scheduled services in Europe in 2015. In Africa, where market access barriers remain high, the share of LCCs within the region is at 9%. In Asia, the LCC share in 2015 accounts for 23%.
- A second observation: although LCCs have pursued a number of different business models, common to all is a laser-focus on the customer: identifying what prospective airline passengers value—that is, what they are willing to pay for—and then offering them products to meet that demand.
- Third: in a cyclical industry subject to surges in the cost of fuel, not to mention crises such as terrorist attacks and health scares, LCCs have understood that maintaining a competitive advantage requires a relentless drive to cut costs, expand revenues, and maximize efficiency.
There is no single airline type - whether traditional network carrier, LCC or some hybrid of the two - that is "best." Likewise, both hub-and-spoke and point-to-point service respond to consumer needs and market conditions. These different business models encourage innovation and offer passengers enhanced connectivity, whether for short- or long-haul journeys.
Click here to view a list of LCCs.
