Sorry, but I just read another "I hate LCC's" / "they ruin the airline business" and couldn't take it anymore. First I will state that I am Chairman's Preferred on US Airways and Premier Executive on United, so I fly a lot and enjoy the perks of high tier programs. That said, I have no problems with the LCCs and realize that they are shaping the future of air travel IN A VERY POSITIVE WAY. I have flown Southwest on business regularly since the mid-80s and enjoy flying them when flying in the south and midwest. I welcome them to Philadelphia.
In the original days of passenger service on the scheduled carriers, they offered very high levels of service and worked the "glamour" angle to encourage people to overcome any reservations they had to fly. Prices were relatively high, but since capacity was low, that was fine.
For those of us who have been flying long enough, yes the "old days" were nice from a standpoint of perks and service, but due to high prices, only a few could fly. In those days before deregulation, routes were awarded and there was little or no competition. The prices were set, so the only way to get a person to fly you from point X to point Y was to offer a little better service or amenities. It was alright, because you could pass the cost on to the consumer. Employees could go on strike, and the airlines always would cave to wage and work rule demands, because they lost revenue not flying and, of course, they always could pass the costs on to the consumer. It was a pretty sweet time for the airlines and their employees. Flying under those conditions, was "special" because most people (and many small businesses) could not afford to it. This was not a free market and was not good for the consumer. I can remember driving to a lot of places because it was too expensive to fly.
I liken the airline business in those days to what happens in nature when a species has no natural predator and is allowed to grow fat and lazy. Sooner or later, disease sets in or a new predator comes along and the population gets put back to where it belongs. Nature always achieves a balance, one way or another.
For the airlines in the US, that change came with deregulation. Suddenly the old fat carriers were like the dinosaurs with the invasion of the mammals. The very slow-witted and footed of the herd (TWA, Eastern and Pan Am) became extinct. In a competitive environment, inept management no longer could make mistakes year after year and survive. Some that were quick of foot, made the wrong decisions (Branniff and pre-bankruptcy Continental) and paid the ultimate price. Like watching lions pull down an antelope or an animal that has wandered into quicksand, it is not pretty to watch and, definitely, not good for the poor employees who are the ones that paid the price. In nature, however, nothing is static and only the quick and smart survive.
Some of the legacy carriers that were smart, were able to cover their high costs by very complex yield management and pricing plans. They also introduced the frequent flyer programs to build consumer loyalty. All were schemes to allow them to mask their pre-competion costs and workrules so that they could compete with the low-cost start-ups. For many years these tools worked as many start-ups (People Express, Air Florida, Midway) were even more dumb than the legacy carriers and mismanaged themselves out of existence. In the US, however, there was one (Southwest) that had a good business model, stayed with the plan and slowly became a major player in the market. Finally, a few others saw the light and followed the lessons learned by Southwest and others to become strong in the market (Airtran and JetBlue). With the growth of these stable LCCs, the legacy carriers now have competition that will eat their lunch if they don't adapt. I feel badly for the employees of the legacy carriers who have lost jobs or taken substantial pay cuts, however, in many cases, their wages, benefits and work rules had been so far out of touch with the true market that the day of reckoning had to come eventually. [I'm surprised it took this long! Also, it isn't just the base pay, but the workrules and the defined benefit (not defined contribution) retirement plans. Not many companies have defined benefit plans these days - they are too expensive and nobody can afford them.]
At the same time, the LCCs will need to adapt and may have to add amenities to meet the demands of the market. Again, the lesson is that all carriers have to constantly evolve and change with the market or they also will face the same problems as the legacy carriers. In business, companies must change and evolve with the market. It is not pretty. It is not nice. It is, however, life.