Are Low Cost Carriers the Future of Air Travel?

Low-cost carriers. We love 'em (Southwest). We hate 'em (Spirit).

Either way, they're a fixture in today's travel landscape. And their size and influence are ever-growing.

Advertisement

A report issued this week by travel-technology company Amadeus provides some perspective on the LCCs' presence in the travel marketplace, including a regional breakdown.

Although it's tempting to assume that North America boasts the heaviest LCC presence—Southwest is, after all, the model that most LCCs used as a template—both Europe and the South West Pacific regions are the current leaders in LCC activity.

In 2012, 38.0 percent of Europe's air traffic was carried by LCCs. That's for the region overall. In Spain, LCCs accounted for 57 percent of departing flyers. And in the U.K., the figure was 52 percent.

In North America, LCCs accounted for 30.2 percent of traffic in 2012, up slightly from 29.5 percent from 2011.

Elsewhere, LCCs' 2012 traffic share was 24.9 percent in Latin America, 18.6 percent in Asia, 13.5 percent in the Middle East, and just 9.9 percent in Africa.

Except in Latin America, the LCCs' traffic share in 2012 increased over 2011.

LCCs as Price Leaders

What's so important about the LCC phenomenon? For one thing, industry boosters claim that their lower costs translate into lower fares, and that the LCCs therefore play a critical role in keeping the prices charged by legacy carriers in check. That alleged "pricing discipline" in turn has been used by the legacy carriers—most recently American and US Airways—to counter the argument that industry consolidation would lead to higher prices.

The claim is at least partly true. But as I've argued before, the legacy carriers have, through bankruptcies and mergers, significantly reduced their own costs.

At the same time, LCCs like Southwest and JetBlue have become much more legacy-like in their quest to make inroads into the more profitable market for business travelers.

So the gap between the LCCs and the legacy airlines, in terms of costs, services, and prices, has been narrowing. Which dilutes the argument that we can count on the LCCs to keep fares low even as fewer airlines compete for our business.

It's not difficult to imagine the U.S. going the way of the U.K., with more than half of our air traffic being flown by LCCs. But by the time that happens, we'll almost certainly be debating the definition of "LCC."

Reader Reality Check

What part do LCCs play in your travels?

This article originally appeared on FrequentFlier.com.

Find Cheap Flights!
Find Cheap Flights!
Get Prices
Find Cheap Vacation Packages!
Get Prices
Find Cheap Hotel Deals!
Get Prices
Find Cheap Car Rentals!
Get Prices
Find Cheap Cruises!
Get Prices

Read comments or add your own insight!
Please enable JavaScript to properly view and use this web site.