Low cost carriers (LCCs) are increasingly changing with the passage of time and trying to snatch market share from the full-fledge airlines as the competition intensifies in the LCC segment.
In order to attract more passengers and increase their revenues, airlines are now looking to add more add-ons and are targeting more business destinations.
For instance, Wizz Air and Ryanair run flights from London to Vilnius, the economic hub of Lithuania and one of the biggest financial centers of the Baltic States. Europe’s two leading LCCs in terms of seats sold – Ryanair and Easyjet – are also making profits. In 2015, Ryanair (101.4 million) sold more seats than IAG (95 million), which owns Iberia, British Airways, Vueling, and Aer Lingus
Similarly, LCCs in general do not add anything extra, which increases the cost; however, the trend is changing. For instance, flydubai offers free meals on flights from Prague to Dubai.
LCCs usually operate on short-haul routes and do not fly on long-haul networks because of the additional expense incurred in flying over six hours. However, this is changing as airlines such as Norwegian and Scoot are able to operate on long-haul routes as they are using more fuel-efficient aircraft such as the Dreamliner 787. Norwegian runs flights on transatlantic routes.
In terms of seat capacity, the global low cost carrier (LCC) industry is expanding.
According to the International Air Transport Association (IATA), LCCs hold 26% share in Asia-Pacific, 54% in Southeast Asia, and 26% globally.
More than 12 airlines started operating in Asia-Pacific during the period 2005-2015. The fast growth in Asia-Pacific can be attributed to the fact that it has some of the fastest-growing economies including China and India
The US is the largest market in the world in terms of revenues and seats sold.
In 2015, its revenues stood at $31.6 billion and the number of passengers carried totaled 216.6 million.
Spain and the UK held second and third position in terms of seats sold, while Japan was the fastest-growing market at a CAGR of 33.7% during the historic period (2011-2015). Switzerland (90.6%) had the highest load factor in 2015, followed by France (90.5%) and Mexico (89.9%). In terms of revenue per passenger, New Zealand was the largest market while China was the fastest-growing market at a CAGR of 3.7% during the historic period
LCCs are increasingly gaining a foothold in the global aviation industry and their growth is not driven only by leisure customers.
Today, LCCs are also adding direct flights to business destinations.