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parked on the apron at [Ninoy Aquino International Airport].

A low-cost carrier or low-cost airline (also known as a [no frills] or [discounts and allowances] carrier / airline) is an [airline] that offers generally low fares in exchange for eliminating many traditional passenger services. The concept originated in the [United States] before spreading to [Europe] in the early 1990s and subsequently to much of the rest of the world. The term originated within the airline industry referring to airlines with a lower operating cost structure than their competitors. Through popular media the term has since come to define any carrier with low ticket prices and limited services regardless of their operating costs.

Business model Typical low-cost carrier [business model] practices include:

a single passenger class
a single type of [fixed-wing aircraft] (commonly the [Airbus A320] or [Boeing 737]), reducing training and servicing costs
a minimum set of optional equipment on the aeroplane, often excluding modern conveniences such as [ACARS], further reducing costs of acquisition and maintenance
a simple fare scheme, such as charging one-way tickets half that of round-trips (typically fares increase as the plane fills up, which rewards early reservations)
unreserved seating (encouraging passengers to board early and quickly)
flying to cheaper, less congested secondary [airport]s and flying early in the morning or late in the evening to avoid air traffic delays and take advantage of lower landing fees
fast turnaround times (allowing maximum utilization of aircraft)
simplified routes, emphasizing point-to-point transit instead of transfers at hubs (again enhancing aircraft utilization and eliminating disruption due to delayed passengers or luggage missing connecting flights)
emphasis on direct sales of tickets, especially over the Internet (avoiding fees and commissions paid to [travel agent]s and [Computer reservations system])
encouraged use and issuance of the [electronic ticket] or ticketless travel
employees working in multiple roles, for instance flight attendants also cleaning the aircraft or working as gate agents (limiting personnel costs)
"Free" in-flight catering and other "complimentary" services are eliminated, and replaced by optional paid-for in-flight food and drink (which represent an additional profit source for the airline).
Aggressive [fuel hedging] programs.
"Unbundling" of ancillary charges (showing airport fees, taxes as separate charges rather than as part of the advertised fare) to make the "headline fare" appear lower.

Not every low-cost carrier implements all of the above points (for example, some try to differentiate themselves with allocated seating, while others operate more than one aircraft type, still others will have relatively high operating costs but lower fares). Nonetheless these are general characteristics, most of which apply to any given low-cost carrier.

Particular characteristics of the United States market The principal area of competition tends to be the full-coach or "walk-up" fare. Advance purchase fares tend to be competitive with [major carrier]s but not significantly lower. Most successful LCCs try to offer a modicum of additional benefits, such as better on-time performance or more leg room. [AirTran Airways] and [Spirit Airlines] have been very successful with their low-fare Business Classes, while [Frontier Airlines] and [JetBlue] offer live in-flight television.

History [image:low.cost.carrier.easyjet.arp.jpg] of UK low cost carrier [easyJet] waiting for take off at [Bristol International Airport]

The first successful low-cost carrier was [Pacific Southwest Airlines] in the [United States], which pioneered the concept when their first flight took place on [May 6], [1949]. Often, this credit has been incorrectly given to [Southwest Airlines] which began service in 1971 and has been profitable every year since 1973. With the advent of aviation [deregulation] the model spread to [Europe] as well, the most notable successes being [Ireland]'s [Ryanair], which began low-fares operations in 1991, and [easyJet], formed in 1995. Low cost carriers developed in [Asia] and [Oceania] from 2000 led by operators such as [Malaysia]'s [AirAsia], and [Australia]'s [Virgin Blue]. The low-cost carrier model is applicable worldwide, although deregulated markets are most suited for its rapid spread. In 2006, new LCCs were announced in [Saudi Arabia] and [Mexico].

Low-cost carriers pose a serious threat to traditional "full service" airlines, since the high cost structure of full-service carriers prevents them from competing effectively on price - the most important factor among most consumers when selecting a carrier. From 2001 to 2003, when the aviation industry was rocked by [terrorism], [war] and [SARS], the large majority of traditional airlines suffered heavy losses while low-cost carriers generally stayed profitable.

Many carriers opted to launch their own no-frills airlines, such as [KLM]'s [Buzz (airline)], [British Airways]' [Go Fly], [Air India]'s Air India-Express and [United Airlines]'s [Ted (airline)], but have found it difficult to avoid cannibalizing their core business. Exceptions to this have been [Bmi (airline)]'s [bmibaby], [germanwings] which is controlled 49% by [Lufthansa] and [Qantas]'s [Jetstar Airways] all of which successfully operate alongside their full-service counterparts.

For holiday destinations, low cost airlines also compete with seat-only charter sales. However, the inflexibility of charters (particularly as regards length of stay) makes them unpopular with many travelers.

The entry of new nations into the [European Union] from [Eastern Europe] and moves towards compliance with EU legislation by those who have not yet joined, has led to an extension of [open skies] arrangements. This has led to the establishment of low-cost routes by existing and new operators such as Hungarian [Wizz Air] which took its first flight on 19th May 2004. From 2004 to 2006 routes have been established into [Bulgaria], [Slovenia], [Poland], [Hungary] and the [Czech Republic]. Low cost airlines are also now starting to fly into [Turkey].

In [Canada], [Air Canada] has found it difficult to compete with new low-cost rivals such as [Westjet], [Canjet], and [Jetsgo] despite its previously dominant position in the market: [Air Canada] entered a period of [bankruptcy] protection in 2003, but emerged from protection in September 2004. Air Canada operated two low-fare subsidiaries, [Air Canada Tango] and [Zip (airline)], but both were discontinued. (Jetsgo itself ceased operations on [March 11] [2005] and Canjet announced that it will discontinued scheduled air services on [September 10], [2006].)

[India]'s first low-cost airline, [Air Deccan] started service on [August 25], [2003]. The airline's fares for the [Delhi]-[Bangalore] route were 30% less than those offered by its rivals such as [Indian Airlines], [Air Sahara] and [Jet Airways] on the same route. The success of Air Deccan has spurred the entry of more than a dozen low-cost airlines in India. Air Deccan now faces stiff competition from other low-cost Indian carriers such as [SpiceJet], [GoAir] and [Paramount Airways]. [IndiGo Airlines] recently placed an order for 100 [Airbus A320]s worth 6 billion [USD] during the [Paris Air Show], the highest by any Asian domestic carrier. After a year of operation, in 2006, [Kingfisher Airlines] changed its business model from low-cost to value airlines.

In [Finland] the competition went in a different direction, as the national carrier [Finnair] lowered prices so that the low-cost competitor [Flying Finn (airline)] was forced to cease its operations. Three months after Flying Finn's bankruptcy, the other operator [Blue1] began flights to three of Flying Finn's most profitable destinations.

In [Norway] the first low cost carrier was [ColorAir] in 1998. Their low prices were matched by competitors [Scandinavian Airlines System] and [Braathens], and [Color Air] folded in 1999. The next low cost carrier, [Norwegian Air Shuttle] (or Norwegian), starting their [Boeing 737] operations in September 2002, provided tougher competition for the merged Norwegian part of SAS and Braathens. Although Norwegian started with domestic routes, today their international operations are larger than their domestic service. By launching nonstop flights from cities like [Stavanger], [Bergen, Norway], [Trondheim] in addition to [Oslo], they soon became very popular. Norwegians are amongst the most frequent fliers in the world, mostly due to the geography of the country but also due to the high level of income.

[Australia]'s first low cost airline was [Compass Airlines (Australia)] which launched operations in 1990 but was short lived. In 2000 [Impulse Airlines] and [Virgin Blue] commenced low cost operations bringing fierce competition to Australian cities. Virgin Blue has become the nation's second largest airline, whilst [Qantas] purchased Impulse and operated it in a '[wet lease]' arrangement before transforming it into its new low cost carrier [Jetstar Airways]. [Qantas] has launched two low cost carriers: JetStar competes with [Virgin Blue] in the Australian domestic market, while [Australian Airlines] operated internationally to Asian destinations. In 2006 Qantas began operating the Australian Airlines operation in a 'wet leasing' arrangement which essentially means Australian Airlines crew and aircraft operate services under the Qantas brand. As at 2006, Qantas intends to continue developing a sole low-cost brand around Jetstar which will include international destinations.

In 1995, [Air New Zealand] established a low-fare subsidiary, [Freedom Air], in response to the commencement of discount trans-[Tasman Sea] services by the upstart [Kiwi Travel International Airlines]. Fierce competition on trans-Tasman routes lead to the collapse of Kiwi Airlines in 1996. Freedom Air continues to provide discount services between Australia and [New Zealand]. Wholly owned Qantas subsidiary [Jetconnect] was set up as a low cost New Zealand arm of Qantas, with Jetconnect operating all New Zealand domestic services and several trans tasman services in a 'wet leasing' arrangement, using the Qantas brand. Qantas has also launched trans-Tasman Jetstar flights .

On [Feb 3] [2003], [Air Arabia] was established on and started operations on October 29, 2003. Air Arabia can be safely said to be the first budget airline in the Middle East region

On [May 5] [2004], Singapore's first low-cost carrier, [Valuair] was launched, prompting dominant carrier [Singapore Airlines] to invest in a new low-cost startup, [Tiger Airways], to beat the competition. Not to be outdone, [Singapore Changi Airport]'s second most dominant carrier, [Qantas Airways], also started its Asian offshoot, [Jetstar Asia Airways] based in [Singapore] and commencing operations on [December 13] [2004]. [Malaysia]'s [AirAsia] made repeated attempts to set up a Singaporean operation, but its insistence in using [Seletar Airport], in addition to other demands to cut airport usage charges, delayed its abilities in gaining the relevant permits from the authorities in Singapore. This set-back may block AirAsia's Singapore expansion ambitions. In July 2005, the owners of Jetstar Asia took over Valuair and are merging the two carriers. In contrast with AirAsia, none of the Singaporean low-cost carriers are yet profitable.

, [Airbus A319] displaying a full-body Nationwide Insurance advertisement.

As the number of low-cost carriers has grown, these airlines have begun to compete with one another in addition to the traditional carriers. In the US, airlines have responded by introducing variations to the model. [US Airways] offers a first class product and airport lounges, for example, while [Frontier Airlines] and [JetBlue Airways] advertises satellite television. Advertiser-supported [Skybus Airlines] will launch from Columbus in 2007. In Europe, the emphasis has remained on reducing costs and no-frills service. In 2004, Ryanair announced proposals to eliminate reclining seats, window blinds, seat headrest covers, and seat pockets from its aircraft.

Some elements of the low-cost model have been subject of criticism by Governments and Regulators, and in the UK in particular the issue of "Unbundling" of ancillary charges by both low-cost carriers and other airlines (showing airport fees, taxes as separate charges rather than as part of the advertised fare) to make the "headline fare" appear lower has resulted in enforcement action. Believing that this amounts to a misleading approach to pricing, the Office of Fare Trading in February 2007 gave all carriers and travel companies three months to include all fixed non-optional costs in their basic advertised prices. Although the full service carriers had complied within the specificed timescales, the low-cost carriers have been less successful in this respect, leading to the prospect of legal action by the OFT.

No-frills long-haul flights The first airline offering no-frills transatlantic service was [Freddie Laker]'s [Laker Airways], which operated its famous "Skytrain" service between [London] and [New York City] during the late 1970s. The service was suspended after Laker's competitors, [British Airways] and [Pan American World Airways], were able to price Skytrain out of the market.

In 2004 the Irish company [Aer Lingus] lowered its prices to compete with companies such as [Ryanair] and also started offering no-frills [transatlantic flight]s for just above €100. Late in 2004 the Canadian airline [Zoom Airlines] also started selling transatlantic flights between Glasgow, UK; Manchester, UK; and Canada for £89.

It has been suggested that the [Airbus] [A380], able to hold up to 853 passengers in an all Economy layout , would enable true low-cost long-haul service. While the per-seat costs of such an aircraft would be lower than the competition, there are fewer cost savings possible in a long-haul operation and therefore a long-haul low-cost operator would find it harder to differentiate itself from a conventional airline. In particular, low-cost carriers typically fly their aircraft for more hours and flights each day, scheduling the first departure early in the morning and the last arrival late at night. However, long-haul aircraft scheduling is more determined by timezone constraints (e.g. leaving the US East Coast in the evening and arriving in Europe the following morning), and the longer flight times mean there is less scope to increase aircraft utilization by adding one or two more short flights each day.

The industry magazine Airline Business recently analysed the potential for low-cost long-haul service and concluded that a number of Asian carriers are closest to making such a model work. One such airline is Air Asia.

In August 2006, [Zoom Airlines] announced that it was to establish a UK subsidiary, probably based at [Gatwick Airport], to offer low-cost long-haul flights to the [USA] and [India].

On 26 October 2006, [Oasis Hong Kong Airlines] started flying from Hong Kong to [London Gatwick Airport]. It was supposed to fly on 25 October but was delayed for one day because Russia suspended fly-over rights for that flight an hour before the flight's scheduled departure. Tickets for flights between Hong Kong to London can be as low at £75 (approximately US$150) per leg (not including taxes and other charges) for economy class and £470 (approximately US$940) per leg for business class for the same route. Its next planned destination is to [Vancouver], a major city in [Canada], which began service on [28th June], [2007].

Low-cost business only carriers A recent trend is the formation of new low-cost carriers exclusively targeting the long-haul business market, with aircraft configured for a single class of service, initially on transatlantic routings. Probably best described as "less frills" rather than "no frills", the initial entrants in this market, including [Eos Airlines], [Maxjet Airways], and [Silverjet] are using mid-sized twin jets such as [Boeing 757] and [Boeing 767] to service the lucrative London - US Eastern Seaboard market.

See also

[List of airlines]
[List of low-cost airlines]
[Travel search]

External links

Low-Cost Carriers - Europe - Research and information on European low-cost carriers
Budget Bonanza - A flotilla of low-cost airlines is redrawing the economic map of Europe. Article from [Newsweek].

Information Reference: Wikipedia.org

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