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A low-cost carrier or '''low cost airline''' (also known as a ''no-frills'' or ''discount'' carrier / airline) is an Airline that offers generally low fares in exchange for eliminating many traditional passenger services. The concept originated in the United States before spreading to Europe in the early 1990s and subsequently to much of the rest of the world. BUSINESS MODEL Typical low-cost carrier Business Model practices include:
HISTORY The first successful low-cost carrier was Pacific Southwest Airlines in the United States , which pioneered the concept when their first flight took place on May 6 , 1949 . Often, this credit has been incorrectly given to Southwest Airlines which began service in 1971 and has been profitable every year since 1973 . With the advent of aviation Deregulation the model spread to Europe as well, the most notable successes being Ireland 's Ryanair , which began low-fares operations in 1991 , and EasyJet , formed in 1995 . As of 2004, a wave of low cost carriers developed in Australasia , led by operators such as Malaysia 's Air Asia , and Australia 's Virgin Blue . The low-cost carrier model is applicable worldwide, although deregulated markets are most suited for its rapid spread. In 2006, new LCCs were announced in Saudi Arabia and Mexico . Low-cost carriers pose a serious threat to traditional "full service" airlines, since the high cost structure of full-service carriers prevents them from competing effectively on price - the most important factor among most consumers when selecting a carrier. From 2001 to 2003 , when the aviation industry was rocked by Terrorism , War and SARS , the large majority of traditional airlines suffered heavy losses while low-cost carriers generally stayed profitable. Many carriers opted to launch their own no-frills airlines, such as KLM 's Buzz , British Airways ' Go , and United 's Ted , but have found it difficult to avoid cannibalizing their core business. Two exceptions to this have been Bmi 's Bmibaby and Qantas 's Jetstar which both successfully operate alongside their full-service counterparts. In and Zip , but both were discontinued. (Jetsgo itself ceased operations on March 11, 2005.) India 's first low-cost airline, Air Deccan started service on August 25 , 2003 . The airline's fares for the Delhi - Bangalore route were 30% less than those offered by its rivals such as Indian Airlines , Air Sahara and Jet Airways on the same route. The success of Air Deccan has spurred the entry of more than a dozen low-cost airlines in India. Air Deccan now faces stiff competition from other low-cost Indian carriers such as Kingfisher Airlines , SpiceJet , GoAir and Paramount Airways . IndiGo Airlines recently placed an order for 100 Airbus A320 s worth 6 billion USD during the Paris Air Show , the highest by any Asian domestic carrier. In Finland the competition went in a different direction, as the national carrier Finnair lowered prices so that the low-cost competitor Flying Finn was forced to cease its operations. Three months after Flying Finn's bankruptcy, the other operator Blue1 began flights to three of Flying Finn's most profitable destinations. In Norway the competition started when Norwegian Air Shuttle started their Boeing 737 operations in September 2002, providing tough competition for the merged Norwegian part of SAS and Braathens . Norwegian started with domestic routes, but today their international operations are larger than their domestic service. By launching nonstop flights from cities like Stavanger , Bergen , Trondheim in addition to Oslo , they soon became very popular. Norwegians are amongst the most frequent fliers in the world, mostly due to the geography of the country but also due to the high level of income. competes with Virgin Blue in the Australian domestic market, while Australian Airlines operates internationally to Asian destinations. Qantas has recently announced its intention to discontinue the Australian Airlines operation and build a sole low-cost brand around Jetstar. In 1995 , Air New Zealand established a low-fare subsidiary, Freedom Air , in response to the commencement of discount trans- Tasman services by the upstart Kiwi Airlines . Fierce competition on the trans-Tasman routes lead to the collapse of Kiwi Airlines in 1996 . Freedom Air continues to provide discount services between Australia and New Zealand . On May 5 2004 , Singapore's first low-cost carrier, Valuair was launched, prompting dominant carrier Singapore Airlines to invest in a new low-cost startup, Tiger Airways , to beat the competition. Not to be outdone, Singapore Changi Airport 's second most dominant carrier, Qantas Airways , also started its Asian offshoot, Jetstar Asia Airways based in Singapore and commencing operations on December 13 2004 . Malaysia 's Air Asia made repeated attempts to set up a Singaporean operation, but its insistence in using Seletar Airport , in addition to other demands to cut airport usage charges, delayed its abilities in gaining the relevant permits from the authorities in Singapore. This set-back may block Air Asia's Singapore expansion ambitions. In July 2005, the owners of Jetstar Asia took over Valuair and are merging the two carriers. In contrast with Air Asia, none of the Singaporean low-cost carriers is yet profitable. As the number of low-cost carriers has grown, these airlines have begun to compete with one another in addition to the traditional carriers. In the US, airlines have responded by introducing variations to the model. America West Airlines , now a part of the US Airways Group , offers a first class product, for example, while JetBlue Airways advertises satellite television. In Europe, the emphasis has remained on reducing costs and no-frills service. In 2004 , Ryanair announced proposals to eliminate reclining seats, window blinds, seat headrest covers, and seat pockets from its aircraft. NO-FRILLS LONG-HAUL FLIGHTS The first airline offering no-frills transatlantic service was Freddie Laker 's Laker Airways , which operated its famous "Skytrain" service between London and New York City during the late 1970s . The service was suspended after Laker's competitors, British Airways and Pan Am , were able to price Skytrain out of the market. In 2004 the Irish company Aer Lingus lowered its prices to compete with companies such as Ryanair and also started offering no-frills Transatlantic Flight s for just above €100. Late in 2004 the Canadian airline Zoom Airlines also started selling transatlantic flights between Glasgow, UK; Manchester, UK; and Canada for £89. It has been suggested that an extended version of the Airbus A380 , able to hold up to 1,000 passengers, would enable true low-cost long-haul service. While the per-seat costs of such an aircraft would be lower than the competition, there are fewer cost savings possible in a long-haul operation and therefore a long-haul low-cost operator would find it harder to differentiate itself from a conventional airline. In particular, low-cost carriers typically fly their aircraft for more hours and flights each day, scheduling the first departure early in the morning and the last arrival late at night. However, long-haul aircraft scheduling is more determined by timezone constraints (e.g. leaving the US East Coast in the evening and arriving in Europe the following morning), and the longer flight times mean there is less scope to increase aircraft utilization by adding one or two more short flights each day. SEE ALSO EXTERNAL LINKS |
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