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Low-cost Carriers

Special Report - History Lessons

When low-cost carriers (LCCs) burst on to the scene in the late 1990s, it was certainly the start of a trend. But perhaps it was less a rise in their fortunes at the expense of network carriers, than a move towards the ideal of low costs for all carriers.

The idea isn’t immediately obvious. The granddaddy of LCCs, Southwest Airlines, began flights in 1971. Some 25 years later it started selling over the Internet and offering ticketless travel. It was these innovations that sparked the rise of copycat LCCs around the globe.

Today, Southwest carries 100 million passengers annually. In Europe, LCC pioneer easyJet serves more than 500 routes with 182 aircraft and carries over 46 million passengers a year. In all, worldwide LCCs have a 24% market share. The biggest impact has been on the European market, where LCC market share has grown from 9% to 39% in the last decade.

But the figures don’t tell the whole story. Time has shown the best answer is responsible cost-cutting and patience. The once distinct borders between LCCs and network carriers have blurred. Because of LCC success, their costs are on the rise just as network carriers have dipped thanks to individual and industry-wide schemes.

Looking ahead, there will still be LCC success. The growth of the Asian market, coupled with liberalization efforts from the ASEAN countries, could see the 12% market share there increase dramatically. But the modus operandi is no longer unique. Extensive use of the Internet, e-ticketing and new labor deals have put network carriers on a par. In one respect, some aviation market dynamics may finally have settled down.


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