Typical Low-cost Carrier Business Model

Typical low-cost carrier business model practices often include:

• a single passenger class
• a single type of aeroplane (commonly the Airbus A320 or Boeing 737), reducing training and servicing costs
• a minimum set of optional equipment on the aeroplane, often excluding conveniences such as ACARS, further reducing costs of acquisition and maintenance
• a simple fare scheme, such as charging one-way tickets half that of round-trips (typically fares increase as the plane fills up, which rewards early reservations)
• unreserved seating (encouraging passengers to board early and quickly)
• flying to cheaper, less congested secondary airports^[1] and flying early in the morning or late in the evening to avoid air traffic delays and take advantage of lower landing fees
• fast turnaround times (allowing maximum use of aircraft)
• simplified routes, emphasizing point-to-point transit instead of transfers at hubs (again enhancing aircraft use and eliminating disruption due to delayed passengers or luggage missing connecting flights)
• encourage the use of direct flights. Luggage is not automatically transferred from one flight to another, even if both flights are with the same company.
• generation of ancillary revenue from a variety of activities, such as a la carte features and commission-based products
• emphasis on direct sales of tickets, especially over the Internet (avoiding fees and commissions paid to travel agents and computer reservations systems)
• employees working in multiple roles, for instance flight attendants also cleaning the aircraft or working as gate agents (limiting personnel costs)
• a disinclination to handle Special Service passengers, for instance by placing a higher age limit on unaccompanied minors than full service carriers
• Aggressive fuel hedging programs

Not every low-cost carrier implements all of the above points. For example, some try to differentiate themselves with allocated seating, while others operate more than one aircraft type, still others will have relatively high operating costs but lower fares.

The price policy of the low cost carriers is usually very dynamic, with discounts and tickets in promotion. Even if the advertised price may be very low, sometimes it does not include charges & taxes.

Civil Transport Aircraft

Swiss International Air Lines Airbus A330

There are five major manufacturers of civil transport aircraft (in alphabetical order):

• Airbus, based in France
• Boeing, based in the United States
• Bombardier, based in Canada
• Embraer, based in Brazil
• Tupolev, based in Russia (scheduled to be merged into the United Aircraft Building Corporation)

Boeing, Airbus, and Tupolev concentrate on wide-body and narrow-body jet airliners, while Bombardier and Embraer concentrate on regional airliners. Large networks of specialized parts suppliers from around the world support these manufacturers, who sometimes provide only the initial design and final assembly in their own plants. The Chinese ACAC consortium will also soon enter the civil transport market with its ACAC ARJ21 regional jet.^[3]

Until the 1970s, most major airlines were flag carriers, sponsored by their governments and heavily protected from competition. Since then, open skies agreements have resulted in increased competition and choice for consumers, coupled with falling prices for airlines. The combination of high fuel prices, low fares, high salaries, and crises such as the September 11, 2001 attacks and the SARS epidemic have driven many older airlines to government-bailouts, bankruptcy or mergers. At the same time, low-cost carriers such as Ryanair and Southwest have flourished.