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Definition Of 'Low Cost Carrier'  
User currently offlinebristolflyer From United Kingdom, joined May 2004, 2302 posts, RR: 0
Posted (2 years 5 months 4 days 3 hours ago) and read 3100 times:

So what makes an airline an LCC? I was listing to the radio today and they mentioned that DEN has the lowest airfares countrywide as there are 2 LCCs competing, Southwest and Frontier. There has been a few threads on here recently about WN not being any cheaper than the 'conventional' airlines. At what point would WN be not classed as an LCC? How would they be described if they're not an LCC - surely not a legacy airline?


Fortune favours the brave
29 replies: All unread, showing first 25:
 
User currently offlinefrmrCapCadet From United States of America, joined May 2008, 1730 posts, RR: 1
Reply 1, posted (2 years 5 months 4 days 3 hours ago) and read 3082 times:

Some of the factors, but none of these are absolute:

obviously labor costs

A route structure that doesn't have a lot of money losing feeder routes (not that there is anything wrong with that business model if an airline can swing it)

Equipment, including planes, that match up well with the route structure

Ability to maintain prices that produce a profit

Keeping fuel costs under control


Also what determines a 'Low Cost Carrier' is a definitional sort of thing. Different people and different companies and analysts may have different ideas.



Buffet: the airline business...has eaten up capital...like..no other (business)
User currently onlineMr AirNZ From New Zealand, joined Feb 2002, 872 posts, RR: 1
Reply 2, posted (2 years 5 months 4 days 3 hours ago) and read 3043 times:

Quoting bristolflyer (Thread starter):
There has been a few threads on here recently about WN not being any cheaper than the 'conventional' airlines. At what point would WN be not classed as an LCC? How would they be described if they're not an LCC - surely not a legacy airline?

Low cost does not necessarily mean low priced airfares. There are many variables to consider.


User currently offlineredrooster3 From United States of America, joined Oct 2010, 229 posts, RR: 2
Reply 3, posted (2 years 5 months 4 days 2 hours ago) and read 3035 times:

Quoting bristolflyer (Thread starter):
There has been a few threads on here recently about WN not being any cheaper than the 'conventional' airlines.

I find it funny that people are still forgetting that you get two free bags. Which makes the price a bit higher. But not an ultimate fee.

Examining SAN-DEN route for June 20th to June 25th, flying with two checked bags.

Frontier SAN-DEN 630am dep. $121.80
WN SAN-DEN 7:30am dep. $121.80

Frontier DEN-SAN 6:50am dep. 121.80
WN DEN-SAN 6:15am dep. $121.80

Total:
WN: 241.60 with two checked bags and taxes included
Frontier: 261.60, a $20 fee each bag checked in. Taxes included

Quote:
1st and 2nd checked baggage fees vary based on the Fare Option purchased. See the fees and benefits of your fare listed above. For all Fare Options, there is a $50 fee for each bag beyond the first two checked bags. Any bag that exceeds 62 linear inches (up to a maximum of 110 linear inches) will incur a $75 oversize fee. Any bag that exceeds 50 pounds (up to a maximum of 100 pounds) will incur a $75 overweight fee.



Where was I going? Well, even though WN seems to be higher priced than other competition, you still don't have to deal with a baggage fee. I chose the "cheapest" fares I could find.

Quoting bristolflyer (Thread starter):
At what point would WN be not classed as an LCC?

If they added baggage fees, rose their fares even higher.



The only thing you should change about a woman is her last name.
User currently offlinetugger From United States of America, joined Apr 2006, 5676 posts, RR: 10
Reply 4, posted (2 years 5 months 4 days 2 hours ago) and read 3025 times:

Quoting bristolflyer (Thread starter):
So what makes an airline an LCC?

As others have said, there are many factors that go into being an LCC, but a big one that hasn't been mentioned is the scope of work that the various employees do. That really impacts a carriers costs and cost structure.

Tugg



I don’t know that I am unafraid to be myself, but it is hard to be somebody else. -W. Shatner
User currently offliner2rho From Germany, joined Feb 2007, 2687 posts, RR: 1
Reply 5, posted (2 years 5 months 3 days 22 hours ago) and read 2817 times:

The traditional definition of LCC is obsolete, the lines are becoming increasingly blurred and the formerly clear distinction between legacy/LCCs is no longer valid. The term LCC leads to a lot of misinterpretation when applied to the current airline environment. We need to classify airlines by cost base and service/frills offered; fare levels only to a very limited extent. High fares or cost bases do not necessarily imply high frills & service levels anymore, nor viceversa.

User currently offlinePHX787 From Japan, joined Mar 2012, 7757 posts, RR: 18
Reply 6, posted (2 years 5 months 3 days 22 hours ago) and read 2806 times:

Quoting redrooster3 (Reply 3):

Quoting bristolflyer (Thread starter):
At what point would WN be not classed as an LCC?

If they added baggage fees, rose their fares even higher.

WN's main advertising slogan is "Bags Fly Free," at what point would WN have to jump onboard the bag fee bandwagon? I recall that these fees have only been around for a few years now.



我思うゆえに我あり。(Jap. 'I think, therefore I am.')
User currently offlinePe@rson From United Kingdom, joined Jan 2001, 19236 posts, RR: 52
Reply 7, posted (2 years 5 months 3 days 22 hours ago) and read 2802 times:

If you're interested, you could spend an hour or two performing searches on www.google.co.uk/books and www.google.co.uk/scholar - beyond the obvious search of 'low cost airline characteristics' or whatever, search for low-cost hybridisation, etc. Enjoy researching the topic in books and (free) journal papers. There are many relevant papers. For books, I'd first start with Straight and Level: Practical Airline Economics and search within it for 'low-cost carriers' . Alternatively, or ideally supplementarily, search on www.centreforaviation.com - a highly useful website (while a number of its articles are pay-for, a lot are also free).

[Edited 2012-05-24 01:48:55]


"Everyone writing for the Telegraph knows that the way to grab eyeballs is with Ryanair and/or sex."
User currently offlinePezySPU From Croatia, joined Dec 2011, 283 posts, RR: 0
Reply 8, posted (2 years 5 months 3 days 21 hours ago) and read 2756 times:

CAPA offers a good definition of LCC model:

'Classic' [note the word "classic"] characteristics of the low-cost model include:

High seating density; High aircraft utilisation; Single aircraft type; Low fares, including very low promotional fares; Single class configuration; Point-to-point services; No (free) frills; Predominantly short- to medium-haul route structures; Frequent use of second-tier airports; Rapid turnaround time at airports.

http://www.centreforaviation.com/pro...sues/low-cost-carriers-lccs#lccdef

Quoting r2rho (Reply 5):

Agreed!


User currently offlineEagleboy From Niue, joined Dec 2009, 1853 posts, RR: 2
Reply 9, posted (2 years 5 months 3 days 21 hours ago) and read 2705 times:
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Quoting r2rho (Reply 5):
The traditional definition of LCC is obsolete, the lines are becoming increasingly blurred and the formerly clear distinction between legacy/LCCs is no longer valid..........We need to classify airlines by cost base and service/frills offered; fare levels only to a very limited extent.

I agree but we are seeing a lot of established 'legacy' carriers cutting back on their cost base to achieve traditional LCC style cost bases. I think 'frills' are a point of difference.

But this does differ from region. Compare SW to FR in terms of the 'biggest LCC in the market' Both operate with a different style/

Quoting PHX787 (Reply 6):
WN's main advertising slogan is "Bags Fly Free," at what point would WN have to jump onboard the bag fee bandwagon?

I thought this was due in part to the inability of the SW booking engine to handle extra bag charges. Therefore they incorporated it as a PR point.


User currently offlineGCT64 From United Kingdom, joined Nov 2007, 1411 posts, RR: 1
Reply 10, posted (2 years 5 months 3 days 21 hours ago) and read 2649 times:

Quoting r2rho (Reply 5):
The traditional definition of LCC is obsolete, the lines are becoming increasingly blurred and the formerly clear distinction between legacy/LCCs is no longer valid. The term LCC leads to a lot of misinterpretation when applied to the current airline environment.

I agree with this. I also don't see why anyone automatically associates the lowest cost supplier with the lowest priced supplier, yet even on a.net you see this assumption being trotted out or challenged multiple times a day. The customer doesn't see the cost base, all the customer sees are the fares and fees.

In the example futher up, WN and F9 are charging EXACTLY the same price for DEN-SAN and yet clearly they do not have EXACTLY the same costs - so one is making a bigger profit than the other on the sale of the ticket but the customer does not see that difference reflected in a price difference (and why should the customer expect to?).

I think the problem is that the original LCCs understandably tried to associate (that's what marketing is for) LCC airlines with LFC (Low Fare Carrier) in the passenger's minds - which is, of course, not necessarily true - meanwhile legacies (HCC - High Cost Carriers) were competing on price with the LFCs (and inevitably losing money, but that isn't the passenger's problem).

If I was an airline CEO (in our minds, aren't we all on here   ), I would be trying to make as much money as possible (shouldn't all airline CEOs?). My belief is that this that in the 2010s this is done by being a ULCC (Ultra Low Cost Carrier) with the highest possible fares (+ fees, auxiliary sales etc.) that can be obtained. On that basis Allegiant, Spirit and Ryanair seem to be adopting the most sensible / viable business strategies.



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User currently offlineEagleboy From Niue, joined Dec 2009, 1853 posts, RR: 2
Reply 11, posted (2 years 5 months 3 days 20 hours ago) and read 2560 times:
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Quoting GCT64 (Reply 10):
.........The customer doesn't see the cost base, all the customer sees are the fares and fees.

In the example futher up, WN and F9 are charging EXACTLY the same price for DEN-SAN and yet clearly they do not have EXACTLY the same costs - so one is making a bigger profit than the other on the sale of the ticket but the customer does not see that difference reflected in a price difference (and why should the customer expect to?)........

.......My belief is that this that in the 2010s this is done by being a ULCC (Ultra Low Cost Carrier) with the highest possible fares (+ fees, auxiliary sales etc.) that can be obtained. On that basis Allegiant, Spirit and Ryanair seem to be adopting the most sensible / viable business strategies.

Good point. To use the FR example. They just posted 2011 profits of 503M Euro's.

The achieve this by keeping their costs down (secondary airports who offer incentives to FR, high turn over of short term employees, forget about frills, you are lucky to get a seat) and maximising their revenue stream at all points. (highly flexible fare structure to maximise revenue, high ancillary fares/charges, constant network changes to maximise revenue)

By keeping the gap between cost and fare as high as possible, the airline will maximise their profits. Unfortunately most 'legacy' carriers are dealing with an existing high cost base.


EG. their wheelchair pax charge (levied on all tickets) is £0.50, x 70M pax = STG£35M per year. That equals some airlines profits for the year. I doubt they spend that much on offering WCHR services to the small number of pax who require them.


User currently offlinechieft From Germany, joined Jun 2005, 357 posts, RR: 0
Reply 12, posted (2 years 5 months 3 days 20 hours ago) and read 2511 times:
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But FR earns only a minor part with ticket sales.

1/3 of the revenue is generated through non-used tickets - not so much the fare itself, but fees and taxes no-shows do not reclaim either because they don't know they have right to do so or they find the whole procedure (Ryanair tries to make it as difficult as possible) too painful. The number is, by the way, from an interview MOL has given some years ago.

Another major source of income are, of course, subsidies paid by local authorities for having the privilege of being connected to the outside world with a Ryanair flight. If no more subsidies are piad, Ryanair withdraws the route. Recent example is the cancellation of services from Klagenfurt in Austria.

Other income:
- Approx. 16m EUR p.a. in charging an obscure "wheelchair levy" of 50ct per pax..
- Horrendous credit card fees for paying online
- Horrendous telefon charges for calling their hotline
etc. etc.

They make their money not from the flight-operations but on the auxillary revenues.
Carental agreements ( huge revenue generator !!!) - hotel-bookings -booking-fees for E-Tickets,excess-baggage,-sponsor-revenues from Chamber of commerce budgets,sodas and sandwiches..



Aircraft are marginal costs with wings.
User currently offlinePe@rson From United Kingdom, joined Jan 2001, 19236 posts, RR: 52
Reply 13, posted (2 years 5 months 3 days 18 hours ago) and read 2447 times:

Quoting chieft (Reply 12):
They make their money not from the flight-operations but on the auxillary revenues.

In their latest FY results, released this week, ancillary revenue comprised 21% of Ryanair's total revenue, or €11.69/passenger. In comparison, and in its FY2011, easyJet earned 20.8% of its total revenue from ancillary sources, which represented £13.19 (converted into EUR, albeit at today's rate for simplicity, is €16.46. Even reducing it produces a higher ancillary revenue figure per-passenger). So, ancillary revenue only constitutes one-fifth of their total revenue - which is no bad thing. (Source for Ryanair's figures: end-of-year performance press release. Source for easyJet figures: their 2011 annual report.)

[Edited 2012-05-24 05:05:57]


"Everyone writing for the Telegraph knows that the way to grab eyeballs is with Ryanair and/or sex."
User currently offlinebrilondon From Canada, joined Aug 2005, 4303 posts, RR: 1
Reply 14, posted (2 years 5 months 3 days 18 hours ago) and read 2414 times:

There really is no true definition of a "Low cost carrier" (LCC). WS was/is considered a low cost carrier, but their fares are quite pricey. You have FR and WN, also B6. These are vastly different airlines. FR and WN cater to the bare bones traveller just looking for a cheap ride, where as B6 seems to be a different sorts as they have some frills available to the traveller. Then you have the legacy carriers that have available amenities that are important to some travellers.


Rush for ever; Yankees all the way!!
User currently offlineairbazar From United States of America, joined Sep 2003, 8493 posts, RR: 10
Reply 15, posted (2 years 5 months 3 days 18 hours ago) and read 2370 times:

Quoting GCT64 (Reply 10):
If I was an airline CEO (in our minds, aren't we all on here ), I would be trying to make as much money as possible (shouldn't all airline CEOs?). My belief is that this that in the 2010s this is done by being a ULCC (Ultra Low Cost Carrier) with the highest possible fares (+ fees, auxiliary sales etc.) that can be obtained. On that basis Allegiant, Spirit and Ryanair seem to be adopting the most sensible / viable business strategies.

That depends on what kind of airline you're talking about and what kind of airline you want to be. That strategy won't work for everyone. There are plently of "Full Frills" carriers that are profitable.
The problem I see is when an airline tries to be everything for everyone. When an airline sticks to its market segment they usually tend to do well.

Quoting Pe@rson (Reply 13):
So, ancillary revenue only constitutes one-fifth of their total revenue - which is no bad thing. (Source for Ryanair's figures: end-of-year performance press release. Source for easyJet figures: their 2011 annual report.)

Plus that 1/3 from non-used tickets and you can easily see that they're not making any money from the actual transport of passengers. Calling them an airline is almost an error since that's not how they make money. In fact I'm shocked no one has ever came up with a law mandating that an airline must have a certain percentage of their income from actually transporting people and goods in order for it to be considered an airline. That surely would put an end to all these extra fees.


User currently offlinePe@rson From United Kingdom, joined Jan 2001, 19236 posts, RR: 52
Reply 16, posted (2 years 5 months 3 days 18 hours ago) and read 2328 times:

Quoting chieft (Reply 12):
1/3 of the revenue is generated through non-used tickets

What is your source?

Quoting airbazar (Reply 15):
they're not making any money from the actual transport of passengers. Calling them an airline is almost an error since that's not how they make money.

Yes, because so many airlines are profitable merely or overwhelmingly from ticket revenue.   



"Everyone writing for the Telegraph knows that the way to grab eyeballs is with Ryanair and/or sex."
User currently offlinegabrielchew From United Kingdom, joined Aug 2005, 3311 posts, RR: 12
Reply 17, posted (2 years 5 months 3 days 15 hours ago) and read 2231 times:

I hate the term "low cost". Often when comparing fares, the LoCos can be even more expensive that the "tradiational" airlines, especially whe you start to include food/luggage/credit cards etc. "No Frills" is a far more accurate term. It's also much easier to define.

Generally I would say:

Low Cost ≈ No Frills = most 'new' airlines (e.g. U2, FR) = pay to select a seat, pay to use a card, pay for food, pay for bags, pay for airport check in. No frequent flyer program. Staff on harsher contracts (lower wages, longer hours). Planes worked longer. Legroom less. "Worse" service.

Not Low Cost ≈ Frills = most traditional, old airlines (e.g. BA, AF, SQ) = free food, free payment method, free bag, free catering. Often have a frequent flyer program. Staff on 'better' contracts. Multiple classes of travel. "Better" service.

To define a low cost carrier is therefore pretty hard as many airlines can fall into both categories. IB/SK/UA have BOB catering, but free bags. EI has a BOB service shorthual, but a free service longhual. Flybe has no payment charge, but charges for bags and food. WW (bmibaby) charges for food/bags but you can earn miles with BD Diamond Club. U2 has free airport check in, but high payment charges.



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User currently offlinecloudboy From United States of America, joined Jan 2004, 837 posts, RR: 0
Reply 18, posted (2 years 5 months 3 days 13 hours ago) and read 2215 times:

The term is essentially archaic at this point. Originally it signaled a new airline model where costs were meant to be lower compared to established airlines, thus the term Majors. But the majors then started following many of the trends of the LCCs, and the LCCs in turn started doing things like the Majors, and as such it has become meaningless regarding the actual costs.

Today, LCC is usually meant to refer to newer airlines that developed in the 80s or later, usually (but not always) offering a one-class service, limited fleet, mostly domestic or regional flying, and geared primarily towards the leisure market. The established or Major airlines are the older airlines, usually with wider fleets and doing much more long distance and business flying, almost always with a multi-class layout. In fact it sometimes gets hard to tell when an airline is a LCC or a traditional, i.e. Alaska.



"Six becoming three doesn't create more Americans that want to fly." -Adam Pilarski
User currently offlineredrooster3 From United States of America, joined Oct 2010, 229 posts, RR: 2
Reply 19, posted (2 years 5 months 3 days 12 hours ago) and read 2206 times:

Quoting PHX787 (Reply 6):
WN's main advertising slogan is "Bags Fly Free," at what point would WN have to jump onboard the bag fee bandwagon? I recall that these fees have only been around for a few years now.

I don't think you read it clearly. If they added baggage fees, and raised tickets fares, they then wouldn't really be considered a LCC no more.



The only thing you should change about a woman is her last name.
User currently offlineplaneguy727 From United States of America, joined Mar 2007, 1250 posts, RR: 1
Reply 20, posted (2 years 5 months 2 days 19 hours ago) and read 2070 times:

To the airline industry Low Cost Carrier = business with costs that are low

To the flying public Low Cost Carrier = airline with low fares

While the two perceived definitions are related, the fact that this phrase is a b2b term is part of the ongoing confusion. The public misperception that LCC = low fare carrier is based on the arrival of new airlines in a market that generally bring fares down (initially). To be fair, carrier with lower fares have such fares made possible, in part, by having lower business costs.



I want to live in an old and converted 727...
User currently offlinechieft From Germany, joined Jun 2005, 357 posts, RR: 0
Reply 21, posted (2 years 5 months 2 days 18 hours ago) and read 1979 times:
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Quoting planeguy727 (Reply 20):

To the airline industry Low Cost Carrier = business with costs that are low

As we all know in this industry "Aircraft are marginal costs with wings"



Aircraft are marginal costs with wings.
User currently offlineRara From Germany, joined Jan 2007, 2114 posts, RR: 2
Reply 22, posted (2 years 5 months 2 days 16 hours ago) and read 1928 times:

Typical features of an LCC:

- No FF programme
- Short-haul only
- No assigned seating
- Charges for checked baggage
- Food and drink have to be purchased
- No connecting flights / only point-to-point operations
- No lounges
- Only one booking class
- Marketing via ticket pricing as opposed to service, frequency, exclusiveness etc.
- Simple fleet structure
- No inflight entertainment
- Use of smaller airports, further away from cities, or cheaper budget terminals at large airports


Not every LCC ticks all the boxes, but the more boxes an airline ticks, the more you can say it's an LCC.



Samson was a biblical tough guy, but his dad Samsonite was even more of a hard case.
User currently offlinepeterinlisbon From Portugal, joined Jan 2006, 558 posts, RR: 0
Reply 23, posted (2 years 5 months 1 day 19 hours ago) and read 1729 times:

Definition of low cost airline: No room to fart, but a quarter of the price!

User currently offlineElPistolero From Canada, joined Feb 2012, 1019 posts, RR: 4
Reply 24, posted (2 years 5 months 1 day 19 hours ago) and read 1700 times:

Quoting r2rho (Reply 5):
The traditional definition of LCC is obsolete, the lines are becoming increasingly blurred and the formerly clear distinction between legacy/LCCs is no longer valid. The term LCC leads to a lot of misinterpretation when applied to the current airline environment. We need to classify airlines by cost base and service/frills offered; fare levels only to a very limited extent. High fares or cost bases do not necessarily imply high frills & service levels anymore, nor viceversa.
Quoting brilondon (Reply 14):
There really is no true definition of a "Low cost carrier" (LCC). WS was/is considered a low cost carrier, but their fares are quite pricey.

From an industry perspective, an LCC is easy enough to define - ie - not burened with legacy costs (pensions, union requirements etc).

From a consumer perspective (at least in N. America), that distinction is all but gone. As pointed out by other, prices have nothing to do with service levels.

All of N. America's 'legacy' airlines - AA, AC, CO, DL, UA, US offer what one would consider LCC products in domestic Y. In fact, airlines like UA, AA are indistinguishable from FR (apart from the fares). AC and CO at least offer some kind of IFE on some of their aircraft.


25 BERFlyer : Just a reminder: the original term "low cost airline" was minted in the late 80's as an industrie standard for airlines which operational costs on a p
26 Post contains images Rheinbote : A low cost carrier is a profitable low fare carrier Seriously, there was a number of carriers that branded themselves "low cost" carriers, but in fact
27 kl911 : As for next weekend and the wekend after a return Budapest - Milan ( Bergamo, but thats even closer to Milan then Malpensa, nonstop bus to citycenter
28 bond007 : The term is meaningless now, and was even questionable when it was first used. It obviously was initially used to describe airlines with low operating
29 GT4EZY : I think those who cite that the term LCC has become increasingly blurred, are right. Not everything definitively fits the definition. Whilst labour co
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