Low Cost Airlines

What is a Low Cost Airline or a Low Cost Carrier ???

A low cost airline or carrier, also known as no-frills or discount or budget airline/carrier is an airline that offers generally low fares in exchange for eliminating many traditional passenger services. This concept first originated in the United States before spreading to Europe in the early 1990s and subsequently to much of the rest of the world.

What is the difference between a Full Service Airline and Low Cost Airline ???

A low cost airline is an airline that operates point-to-point network, pays employees below the industry average wages and offers no frills service to its customers. A regular full service airline operates hub-and-spoke network, pays employees industry or above industry average wages and offers a series of complex services. A traditional airline has a number of tools with which it can deter entry or lessen the competitiveness of recent airlines. These tools are predatory pricing, loyalty program and congestion at the nation’s most popular airports. These tools are somehow ineffective against low cost airlines with point-to-point network. A low cost airline can engage in Bertrand competition, with a high cost competitor, without pricing at its own marginal cost states Charles Najda from Department of Economics, Standford University. The low cost carrier can successfully neutralize the dominance of its competitors by competing on price. The low cost structure can be quantified by aggregating the costs of point-to-point networks, wage savings and savings from elimination of various add on services. Amongst other major cost factors defining the airline sector, labor costs are the largest single cost item.