The effects of “low cost carriers” (LCCs) such as Southwest Airlines and JetBlue Airways on the competitive landscape of the U.S. airline industry have been thoroughly documented in the academic ...literature and the popular press. However, the more recent emergence of another distinct airline business model—the “ultra low cost carrier” (ULCC)—has received considerably less attention. By focusing on cost efficiencies and unbundled service offerings, the ULCCs have been able to undercut the fares of both traditional network and low-cost carriers in the markets they serve.
In this paper, we conduct an analysis of ULCCs in the U.S. aviation industry and demonstrate how these carriers' business models, costs, and effects on air transportation markets differ from those of the traditional LCCs. We first describe the factors that have enabled ULCCs to achieve a cost advantage over traditional LCCs and network legacy carriers. Then, using econometric models, we examine the effects of ULCC and LCC presence, entry, and exit on base airfares in 3,004 U.S. air transportation markets from 2010 to 2015. We find that in 2015, ULCC presence in a market was associated with market base fares 21% lower than average, as compared to an 8% average reduction for LCC presence. We also find that while ULCC and LCC entry both result in a 14% average reduction in fares one year after entry, ULCCs are three times as likely to abandon a market within two years of entry than are the LCCs. The results suggest that the ULCCs represent a distinct business model from traditional LCCs and that as the ULCCs grow, they will continue to play a unique and increasingly important role in the U.S. airline industry.
•Ultra Low Cost Carriers (ULCCs) represent a distinct airline business model in the U.S.•A new classification scheme for U.S. carriers is proposed.•ULCCs have both lower unit costs and revenues than LCCs or NLCs.•ULCC presence in a market lowers fares more than LCC presence.•ULCCs are three times as likely to exit a market within 2 years as LCCs.
Low-cost carriers (LCCs) are assumed to adopt a certain business model in which an important element is the concentration of services at secondary and regional airports. Yet, evidence suggests that ...increasingly LCCs also establish themselves in what can be considered the major airports. This raises the question of whether LCCs are changing their business model and adopting practices associated with the traditional, incumbent airlines, and if so what might cause such change. Based on categorization of airports and using OAG flight data the US and European markets are investigated. Focusing on several LCCs, with more attention given to Southwest and Ryanair, their profile of operation with respect to the type of airports used is analysed for a period of between 15 and 25 years and up to 2015. The results clearly indicate that LCCs are increasing their operations from major airports, while generally continuing their growth and expansion strategy. The main implication of which is the increase in direct competition between LCCs and traditional airlines while the impacts of this change on the smaller airports are not clear yet and need to be investigated further.
•The LCCs analysed here are still growing and most of them have increased their services from the largest cities' main airports.•The large LCCs that usually focused their operation on secondary airports are now expanding to serve largest cities' main airports.•The largest cities' traditional airports are not anymore sanctuaries for the traditional airlines.•The impacts of LCCs expansion to the larger airports on the secondary airports are diverse and require further investigation.
We examine longitudinal changes (2005–2015) in the characteristics of passengers flying with two types of airlines in the United States: low-cost carriers (LCCs) and legacy carriers (or non-LCCs). In ...addition to the extant views on passenger similarities and dissimilarities across LCCs and NLCCs, we find that airline-type passenger segments are dynamic and constantly changing. Furthermore, we argue that such dynamics in passenger segments may have been escalated by the introduction of a new type of airline – ultra low-cost carriers (ULCCs). We assert that taking more caution in targeting air passengers is necessary, as we found a mixture of both convergence (e.g., airport access time, per diem) and divergence (e.g., number of checked bags, terminal wait time) in the key passenger characteristics across airline types.
•Airline-type passenger segments are dynamic and constantly changing.•Both convergence and divergence among airline-type passenger segments are found.•Dynamics in passenger segments are escalated by a newly introduced airline type.
Underpinned by social exchange and social information processing theories, our study proposes and tests a research model that investigates flight attendants' perceptions of corporate social ...responsibility practices. Data came from flight attendants in a major low-cost carrier at different, successive points in time. The structural equation modeling results reveal that work engagement is the underlying mechanism through which corporate social responsibility, as manifested by the economic, legal, ethical, and philanthropic practices, is linked to flight attendants' career satisfaction and voice behavior. Simply stated, the empirical data support all hypotheses and the research model we have proposed is viable. The results have important implications about flight attendants' perceptions of corporate social responsibility practices and the aforesaid outcomes.
•Corporate social responsibility practices foster flight attendants’ work engagement, career satisfaction, and voice behavior.•Work engagement stimulates flight attendants' career satisfaction and voice behavior.•Work engagement is a mediator in the aforesaid relationships.
The low profitability of regional airports is a major impediment to the development of regional aviation. Without subsidies, regional airports struggle to subsist financially. This paper elucidates ...the various revenue and expenditure heads of Indian airports and discusses the financial status of regional airports. This study also uses panel data from 42 Indian regional airports from 2014–2015 to 2018–2019 to examine the effect of possible determinants on regional airport profits and revenue. Applying Hausman-Taylor regression, the findings indicate that regional airports can expand their profits and revenue primarily by increasing domestic and international passenger flow. Lower levels of seasonality contribute to the airport revenue. Airport capacity utilisation has a favourable and considerable impact on airport profits but not airport revenue. Civil enclaves were found to be profitable. Additionally, the research findings emphasise the unpredictable nature of low-cost carriers and provide managerial implications to policymakers and regional airport operators.
•This paper highlights the financial status of regional airports in India.•Lower levels of seasonality contribute to airport revenue.•Airport capacity utilisation has a favourable and considerable impact on airport profits.•Civil enclaves are found to be profitable.•The unpredictable nature of low-cost carriers is emphasised.
As two of the fastest-growing economies, China and India share many similarities. However, the air transport sector of the two countries exhibits substantial differences 30 years after deregulation. ...Private and low-cost airlines have become dominant players in the Indian airline market while the state-owned airlines still enjoy a dominant status in the Chinese market. The econometric analysis of this research suggests that the presence of a low-cost carrier (LCC) on a route has the effect of reducing the airfare and stimulating the demand for air travel in India, no matter the LCC presence is measured by market shares or dummies. Chinese LCCs have similar competitive effects only when the LCC entry is measured by dummy variables. Airport concentration in India could lead to cost savings and thus lower airfares, but this did not occur in China due largely to the lack of a culture of antitrust compliance. In both countries, airport concentration is positively associated with traffic demand. In India this may imply an increase in consumer welfare as airport concentration increases while in China this could mean that consumers would not be able to explore their welfare benefits to the full potential since concentration is positively associated with airfares. We also find that the absolute value of the price elasticity of the Indian market is much larger than that in the Chinese market, probably due to the high LCC penetration rates in India.
•Private and low-cost airlines are dominant players in India, while state-owned airlines dominate in China.•Airport concentration in India is negatively associated with airfares and positively with traffic demand.•Airport concentration in China is positively associated with airfares and positively with traffic demand.•The demand elasticity is about −2.6 for the Indian markets and −1.2 for the Chinese markets.
•Low-cost carrier flight supply boosts international tourism to Italy.•Weak/smaller evidence on tourism is found in the case of full-service carriers.•Results are robust to different estimation ...techniques.
This paper analyzes the effect of flight supply on international tourism flows between 20 Italian regions and 24 European countries, observed half-yearly from 1999 to 2010. We find that low-cost carriers have a prominent role in attracting international tourism flows. Our estimates suggest that an additional round-trip flight operated by a low-cost carrier generates about 74 arrivals and 248 overnight stays in hotels or similar facilities; in the case of a full-service carrier these figures decrease to 29 and 97, respectively. These findings are relevant for the current debate on the drivers of tourism development.
The selection of airport is an important consideration for low-cost carriers (LCCs) to remain cost competitive. The objective of this study is to identify and rank the airport selection criteria of ...LCCs. Based on reviewing the existing literature, five main factors comprising 16 sub-factors were developed. The factors were first validated by three industry experts from the aviation industry. Thereafter, a survey questionnaire requiring a comparison of the factors was administered on 28 executives who were involved in the strategy planning and formulation of LCCs based in China or Korea. The collected data were analysed using fuzzy analytical hierarchy process (FAHP). In descending order of their importance, the main factors influencing LCCs' selection of airport are (1) airport charges, (2) airport performance, (3) airport growth opportunities, (4) catchment area and (5) airport infrastructure. The top three sub-factors are airport costs, demand for LCC services and passenger throughput. The research contributes to academic research by providing a holistic assessment of the key considerations influencing LCCs' selection of airport. In addition, it implicates policy formulation of LCCs by providing a framework for assessment of airports that are suitable for LCCs’ operations.
•Identify and rank airport selection criteria of low-cost carriers.•Five main factor and 16 sub-factors were selected.•Airport charges and performance were ranked first and second.•Airport growth opportunities and catchment area were ranked third and fourth.•Airport infrastructure was ranked fifth.
This study conducts a detailed analysis of the response of China's low-cost carriers (LCCs) to the threats posed by the pandemic from a route network perspective, aiming to explore the resilience of ...LCCs and Chinese airlines. Using geographic visualization and network analysis, we evaluate and compare the network connectivity of each Chinese LCC to see the change patterns, then elaborate on the network connection of Spring Airlines. The major results are: the LCC sector has not recovered, but some of them exceed the pre-pandemic levels in a less deregulated environment; different LCCs show different recovery patterns; Spring Airlines outperforms the other four LCCs in terms of network connectivity. The recovery process is supported by various external factors, such as the reduction of new confirmed COVID-19 local cases and international flights, the re-open of inter-provincial tour groups and tourism demand, the nationwide rebound activities promoted by the central government, and the supporting policies, especially new slot allocation processes issued by CAAC. The case study further indicates the effects of high-speed rail (HSR) and regional subsidy measures on the tactical actions of Springs in route planning. This paper serves as a referential case for the LCCs worldwide and has good application for the recovery of other LCCs in other countries. Moreover, the study conducted in this time window offers a chance to assess the development of Chinese airlines in a not fully deregulated aviation environment. It contributes to the debate on the theory of air network resilience.
•Chinese LCCs experience a quick recovery but fail to restore to pre-pandemic level.•Different LCCs show different recovery patterns.•Spring Airlines outperforms other LCCs in terms of network connectivity.•The recovery is supported by various external factors in a less deregulated environment.•Regional airport and government subsidies play an important role in LCC tactical route planning.
The purpose of this paper is to develop and test an extended research model based on the theory of planned behavior (TPB) that identifies factors influencing the intention to use low-cost carriers ...(LCCs) in China. A survey of 596 passengers was conducted in two major airports in China, and a structural equation modeling method was used to test the hypotheses. The results indicate that attitudes, subjective norms, price, service quality, access, uncertainty avoidance, and technology self-efficacy significantly influence passenger decisions to travel by LCCs, while perceived behavioral control (PBC) and frequency are not considered important impact factors. Price is the strongest determinant of the intention to use LCCs, followed by service quality. The findings enhance the understanding of LCC passenger motivation from psychological, service, and cultural perspectives, providing useful implications for LCCs in improving marketing strategies and customer services.
•Passenger motivation for using LCCs in China is examined by an expanded TPB model.•Price is the most important factor for the use of LCCs, followed by service quality.•Attitudes, subjective norms, access, and technology competence are impact factors.•Passenger intentions are also affected by the cultural factor of uncertainty avoidance.•Predictors in the expanded TPB model account for 61% of the variances in intentions.
PDF
