All the passengers always opt for the travelling options which are fast, safe and affordable. Among all means of transport travelling by plane usually embodies all these qualities. For those who are not dependent on luxurious ways of travelling there are low cost carriers.
Basics:
A low-cost carrier or low-cost airline (also known as a no-frills, discount or budget carrier or airline) is an airline that generally has lower fares and fewer comforts. To make up for revenue lost in decreased ticket prices, the airline may charge for extras like food, priority boarding, seat allocating, and baggage etc.
The term originated within the airline industry referring to airlines with a lower operating cost structure than their competitors. While the term is often applied to any carrier with low ticket prices and limited services, regardless of their operating models, low-cost carriers should not be confused with regional airlines that operate short flights without service, or with full-service airlines offering some reduced fares.[1]
Low cost carriers – Impact
Low cost carriers led to strong competition on the aviation market, also for the traditional airlines. But the full cost carriers can survive in parallel and do not loose too many clients. Low cost carriers led to a large extension in the number and density of civil airports. But the passenger number at traditional airports did not decrease.
Consequently it can be said that low cost airlines induced either an additional demand or won clients for the air traffic which would have gone otherwise by train or car. In fact an interview showed that 59% of the clients of the LCC are new clients and 37% changed from other airlines. From the new clients 6% stated they would have used the train, 15% the car and 71% said, they would not have travelled at all if there would not have been the low cost offer.[2]
Low-cost airlines continue to exert an influence in air transport markets and small airports face pressures to compete for their business. The low-cost model motivates airlines to negotiate contracts that significantly reduce aeronautical revenues, leaving airports to compensate by seeking commercial revenues from the increase in passengers. This has consequences for the airports, their passengers and the relationship between the airport and its existing operators. It is found that it is important for airport management to see both passengers and airlines as customers and to understand the resultant revenue streams, before negotiating preferential contracts with low-cost carriers.[3]
A number of EU low-cost airlines have reported their success in attracting business travellers on some of their routes. Recent research shows that business travellers working for small companies are more willing to trade in-flight service, frequency and FFP points for lower fares than those working for larger companies. A survey of short haul business travellers using a major carrier at Heathrow airport is compared with travellers of a low-cost airline at a secondary London airport. The hypothesis that business travellers using low-cost airlines form a separate market segment from business travellers using full-service airlines is not shown. Short haul business travellers are, en masse, becoming increasingly price sensitive. Travellers using network carriers use low-cost airlines and vice versa. Corporate influence in purchase decision making is more evident in travellers choosing network carriers and this is partly a function of the size of the company, with larger companies favouring such carriers. Marketing implications for both low-cost and full-service airlines are discussed. [4]
The Example of Ryanair:
We analyse the pricing policy adopted by Ryanair, the main low-cost carrier in Europe. Based on a year’s fare data for all of Ryanair’s European flights, using a family of hyperbolic price functions, the optimal pricing curve for each route is estimated. The analysis shows a positive correlation between the average fare for each route and its length, the frequency of flights operating on that route, and the percentage of fully booked flights. As the share of seats offered by the carrier at the departure and destination airports increases, fares tend to decrease. The correlation of dynamic pricing to route length and the frequency of flights is negative. Conversely, as competition increases discounts on advance fares rise. [5]
There are various websites on which one can easily find cheap flights. [6]
Conclusion:
Low cost carriers have mostly a positive effect on both people’s budgets as well as economy in general. While providing new working positions for the unemployed they also give their passengers a chance to save their money and travel more for less.
References:
[1] http://en.wikipedia.org/wiki/Low-cost_carrier
[2] http://www.atmosphere.mpg.de/enid/Information_2/Low_cost_airlines_-_impacts_61j.html
[3] Airport–airline interaction: the impact of low-cost carriers on two European airports, by: Graham Francis, Alessandro Fidato and Ian Humphreys
[4] Marketing low-cost airline services to business travellers, by: Keith J. Mason
[5] Pricing strategies of low-cost airlines: The Ryanair case study by: Paolo Malighetti Stefano Paleari and Renato Redondi
[6] http://www.studentflights.com.au/
