Defining The Low Cost Carrier (LCC)

August 9, 2016

Defining The Low Cost Carrier (LCC)

In this series of posts we’re looking at the all the different types of passenger airlines that operate in the world, and narrowing that list down to the most basic types. After doing some research and analysis, we have determined that there are six fundamental airline types. In this post we look at the definition of the Low Cost Carrier (LCC).

Introduction: Defining the Six Fundamental Types of Airlines

Type 1. The Legacy Carrier
Type 2. The Regional Carrier
Type 3. The Low Cost Carrier (LLC)
Type 4. The New Era Carrier (NEC)
Type 5. The World Carrier
Type 6. The All Business Class Airline (ABC)

Additional Notes on the six fundamental airline types.

Low cost airline, budget airline, discount airline, low-frills, no-frills airlines, ultra low cost carrier… Any name you want to put on it, a price competitive airline is a Low Cost Carrier, or LCC. The unambiguous poster child for the low cost carrier is Southwest Airlines. Everyone knows this behemoth in the airline industry and many people find it as it’s preferred choice for passenger air service. But even considering it’s popularity and history (Southwest Airlines started in 1967) the low cost carrier has been around since the second half of the 20nth century.

PSA, the original low cost carrier

This first low cost carrier of any success was Pacific Southwest Airlines (PSA) out of San Diego in 1949. It was the first discount airline of size and it eventually merged into US Airways in 1988. Herb Kelleher one of founders of Southwest Airlines was a big fan of PSA and modeled much of the early Southwest Airlines after PSA’s business model.

Southwest was a trailblazer of business practices for many of todays low cost carriers. Many of these practices were originally copied from PSA and then popularized by Southwest. Southwest Airlines perfected streamlining operational costs with practices such as operating a single fleet, and fast turns on tightly scheduled flights.

Spirit, the bad boy of US based LCCs

Frontier is a low cost carrier based out of Denver

Despite its small size LCC Allegiant has an extensive network.

The Low Cost Carrier (LCC)

Low cost carriers are different from their legacy competitors in that they offer a less upscale and serviced product in return for lower cost fares. The product has really evolved over the last few decades, and again is more complicated than this simple definition. Our definition includes “Ultra-low Cost Carriers” as to not split hairs. Todays low cost carries include the following attributes:

Most of todays low cost carriers came after the 1979 airline deregulation, and many have come about in the last 10 to 20 years. Southwest being the notable exception.
Fares, while not always the lowest, are typically marketed to the price sensitive customer.
A high portion of an LCC customer base is the leisure traveler, and they frequently market to that segment.
Low cost carriers almost always have 1 class of service, coach. Seating attributes can be differentiated, sometimes, but onboard service is almost always uniform and the same for all passengers.
Route structure is much more point to point in service with the addition of focus cities scattered throughout a served market.
Routes are mostly short with some medium haul and little long haul business taking place. There are usually no transcontinental or transoceanic routes (again with some notable exceptions in Europe).
Shorter routes lead to high aircraft utilization rates with short turns and multiple runs during an operational day.
Fleets are principally homogeneous with typically 1 or 2 types of planes.
Passenger services are more limited and they are usually charged and provided as an individual basis.
Most LCCs don’t belong to one of the 3 major alliances, and also have very few (if any) route partners. They prefer to go it alone.
Frequent flyers programs tend to be more simple and less generous, reflecting the fewer ancillary services the airline offers.