How low-cost model helped Airlines

As I mentioned in my last article about how the count of passengers going to get increase coming years and listed few reasons, the article is a continuation of how low-cost model helped airlines. Those who missed having a look at my earlier blog please check here.

One of the biggest recent changes in aviation has been the rise of low-cost carriers; budget carriers characterized by lower fares and fewer add-ons than those offered by best heritage carriers. Often, travelers booking with low-cost carriers provide the experience with full-service airlines such as complimentary meals, loyalty programs and the option of tiered seating classes.

Low-cost carriers (LCC) have become a popular alternative to traditional scheduled airlines over the last two decades. The low-cost model focuses on business and operational practices that reduce airline costs. That means using secondary airports (with lower taxes), offering no frills on the flight and charging for services like seat reservation and checked-in baggage.

Features of low-cost carriers

• Low fares with which smart buying and use of strict fares can produce similar fares from heritage carrier.
• No loyalty programs
• No airport lounges
• Single-class cabins: While the original LCCs had only economy class seating, some airlines in this category now have a few ‘business class’ seats or charge more for rows with extra legroom, like exit rows.
• Online booking: The LCC model is based on direct bookings, but increasingly, these carriers are being forced to make their inventory available through the traditional distribution channels.
• No corporate deals: Don’t expect to be able to negotiate incentives or discounts on published fares.

Source by Eurocontrol int

While full-service airlines are struggling to boost profits, how are low-cost carriers meeting demand and increasing profit while maintaining the lowest fare prices possible? Here are seven popular practices of low-cost carriers.

1. With over 450 mostly small, publicly-owned, loss-making airports, these airports use subsidies given by their local governments to offer discounted landing and/or baggage fees and other incentives to persuade low-cost carriers to fly there.
2. Since the budget airline fares are so cheap and offer so few amenities.
3. All airlines use a method called ‘fuel hedging’ to save on fuel by signing contracts locking in the price for certain amounts or durations when oil costs are expected to rise. Additionally, low-cost carrier fleets are typically made up of newer, more fuel-efficient planes. To further save on training and maintenance, their fleets tend to be made up of the same model aircraft. This practice also allows them to save on bulk purchases from aircraft manufacturers.