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costs for the LCC:
• Use of a single aircraft type or interchangeable family of aircraft: as will be discussed
in Section 6.1, “fleet commonality” reduces the costs of spare parts, maintenance and
crew training.
• Operation of “point-to-point” instead of connecting hub networks: focusing on non-stop
flights serving only local passengers flying from point A to point B reduces costs
associated with the handling of connecting passengers, and improves the productivity
of both aircraft and crews (see Section 6.2).
• No labor unions and lower wage rates for employees: keeping their employees
non-unionized allows LCCs to pay lower salaries and achieve higher productivity due
to less restrictive work rules.
• Single cabin service, with no premium classes offered: given that LCCs focus on very
low fares aimed at price-sensitive leisure travelers, multiple product offerings would
both increase complexity and costs.
• No seat assignments: open seating means less time spent on processing passengers at
the airport and no need to print boarding passes, again improving productivity and
reducing costs.
• Reduced “frills” and seating space on board: elimination of food and beverages reduces
passenger service costs, while reduced seating space increases the ASK produced by
each flight, in turn lowering its unit costs.
• No frequent-flyer loyalty programs: such programs incur administrative costs that can
be avoided.
• Avoid use of traditional distribution channels: travel agencies still receive commission
fees in many countries, and make use of computer reservations systems called “global
distribution systems (GDS)”, as will be discussed in Chapter 16. GDS charge fees
for booking ands ticketing, which can be avoided if the LCC limits its passengers to
making reservations and buying tickets directly from the airline, either on its website
or by telephone.
Although not exhaustive, this list of characteristics captures what most would agree are
the basic elements of the LCC business model, as it has evolved and been adopted by
airlines in this general category around the world. The only problem is that many of these
characteristics do not accurately represent the actual strategies employed by some of the
largest and most successful LCCs. Figure 5.6 presents a comparison of six well-known