Charting the trends - the rise and rise and rise of the Low Cost Carriers

9 November, 2020

Liberalisation was the platform for the last major change in airline structure. Now, COVID-19 looks likely to deliver the next. It was over 50 years ago that US lawyer Herb Kelleher developed the idea to launch a LCC in the post-liberalised US domestic market. It will be 50 years this December that it finally got the green light from the US Supreme Court following legal challenges from competitors. Southwest Airlines was born and took to the air in Jun-1971. The US carrier changed flying forever becoming the blueprint for the LCC tsunami that has now spread across most of the world.

In the current challenging world Low Cost Carriers (LCCs) are seen best placed in the short- and medium-terms. With a business model – mainly based on short-haul flying and with a strong leisure focus – offering a distinct competitive advantage over legacy operators they are growing market share and building customer loyalty at the expense of mainline carriers, whose networks have been crippled by the subdued travel demand and especially the collapse in corporate travel.

LCCs have long targeted secondary level, and even tertiary level. But a sea-change in LCCs’ circumstances has resulted in many of them flying increasingly from primary and even major hub airports. the trade off: passenger yields can be considerably higher, even if loads are lower and costs higher. On the downside, a rapid turnaround is more difficult to achieve.

COVID-19 will accelerate this trend. In fact we are already seen this with Romanian LCC Blue Air a good example as it switches some flights into London from Luton to Heathrow after successfully securing slots at the UK’s largest airport. Similarly, in Paris, it is switching flights from Beauvais to Charles de Gaulle. It is not alone.

They say ‘a picture paints a thousand words’. In this new regular section CTC – Corporate Travel Community offers a graphical insight into a key industry observation or trend. In this fifth edition we use OAG schedule data and CAPA interiors information to look at the increasing role LCCs are playing in the global market and how this unprecedented year has seen their role increase in importance.

Over the course of the 2010s the LCC share of seat capacity within regions increased from one in four seats to just over one in three seats (Source: OAG and CAPA - Centre for Aviation)
This year LCCs have taken on a greater prominence and have at times during the COVID-19 pandemic accounted for more than 35% of seat capacity within regions, peaking at over 37% in Jun-2020 and Jul-2020 (Source: OAG and CAPA - Centre for Aviation)
LCCs are most dominant in Latin America and year-to-date account for over 25% of capacity to and from the region and approaching 45% of capacity within the region. Europe has the weakest LCC penetration for traffic to and from the region, while Africa has the lowest LCC penetration across the continent (Source: OAG and CAPA - Centre for Aviation)