Low cost airlines are passenger airlines, which offer travelling service tickets at relatively cheaper rate compared to other airlines (full service or traditional airline). Low cost airlines are also known as no frills airlines, prizefighters, low-cost carriers (LCC), discount airlines, and budget airlines.
The global low cost airlines industry generated $155.0 billion in 2020 and is anticipated to generate $440.5 billion by 2030, witnessing a CAGR of 15.2% from 2021 to 2030, according to the Allied Market Research new report.
The feasibility of the operation of low cost airlines is attributed to its low cost model. This low cost model may include some of the following characteristics low pricing strategy, simple pricing structure, involves online & direct ticket booking (eliminating extra ground staff & vendors), preference to secondary airport, point-to-point network, single class seating arrangement, ticket fare may not include extra services (food & beverage), intensive aircraft usage, short turnaround time, dense seating arrangements, secondary revenue source (advertisement, onboard selling), and other.
Prime determinants of growth
Low cost airlines market growth exponentially worldwide over the past few years, is owing to rise in economic activity, ease of travel, travel & tourism industry, urbanization, changes in lifestyle, consumers preference for low cost service along with non-stops, and frequent service, increase in purchasing power of middle class households especially in the developing regions, and high internet penetration coupled with e-literacy.
However, factors such as volatile crude oil price and increase in terrorism & crime rate, political uncertainty, & natural calamities hinder the market growth. Conversely, sustainable airport governance, operational & financial improvement is anticipated to leverage the growth of the market. Nevertheless, factors such as high investment & operational cost but low profitability is anticipated to be a major challenge of the low cost airlines industry.
- The outbreak of the COVID-19 pandemic has had a negative impact on the growth of the global low-cost airline market, owing to implementation of lockdown coupled with travel restrictions, especially in the initial period.
- Also, in order to maintain the social distancing norms, people have travelled less during the pandemic.
- However, the market is going to recover soon in 2022.
The online segment to maintain its leadership status throughout the forecast period Low cost airlines
Based on distribution channel, the online segment held the highest market share in 2020, accounting for 85% of the global low cost airlines market, and is estimated to maintain its leadership status throughout the forecast period. Moreover, the same segment is projected to manifest the highest CAGR of 15.4% from 2021 to 2030. Large-scale internet penetration and availability of a myriad of sites for online booking sites are some of the major reasons for growth of online travel booking. Other benefits of online booking are easy availability as well as it reduced time as compared to other ticketing booking method. Moreover, online sales channels have increased the customers reach owing to which has expanded the market.
The domestic segment to maintain its lead position during the forecast period
Based on destination, the domestic segment accounted for the largest share in 2020, contributing to nearly three-fourths of the global low-cost airlines market, and is projected to maintain its lead position during the forecast period. This is because the majority of customers belonging to the middle class prefer domestic travelling for vacations, as it is a more cost-effective form of taking a vacation. However, the international segment is expected to portray the largest CAGR of 15.7% from 2021 to 2030. An increase in disposable income and the promotion of a travelling lifestyle perpetrated by social media are leading to greater spending on international vacations, which in turn, drives the segment.
Asia-Pacific, followed by Europe &North America, to maintain its dominance by 2030
Based on region, Asia-Pacific, followed by Europe & North America, held the highest market share in terms of revenue in 2020, accounting for more than two-fifths of the global low-cost airline market. Moreover, the same region is expected to witness the fastest CAGR of 16.8% during the forecast period. This is because the region is not very prone to taking vacations and holidays very frequently.
Low-cost airlines leading market players
- Air Arabia PJSC
- AirAsia Group Berhad
- Alaska Air Group, Inc.
- Azul S.A.
- easyJet plc
- New World Aviation, Inc.
- Norwegian Air Shuttle ASA
- Qantas Airways Limited
- Ryanair Holdings Plc
- WestJet Airlines Ltd.