Business Models and Architecture

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The low-cost carrier business model

A low-cost carrier or low cost airline (also known as a no-frills or discount carrier / airline) is an airline that offers generally low fares in exchange for eliminating many traditional passenger services. The concept originated in the United States before spreading to Europe in the early 1990s and subsequently to much of the rest of the world.

Business model

Typical low-cost carrier business model practices include:

1. a single passenger class
2. a single type of airplane, commonly the Airbus A320 or Boeing 737 (reducing training and servicing costs)
3. a simple fare scheme (typically fares increase as the plane fills up, which rewards early reservations, known as "yield management")
4. unreserved seating (encouraging passengers to board early and quickly)
5. flying to cheaper, less congested secondary airports (avoiding air traffic delays and taking advantage of lower landing fees)
6. short flights and fast turnaround times (allowing maximum utilization of planes)
7. simplified routes, emphasizing point-to-point transit instead of transfers at hubs (again enhancing aircraft utilization)
8. emphasis on direct sales of tickets, especially over the Internet (avoiding fees and commissions paid to travel agents and corporate booking systems)
9. employees working in multiple roles, for instance flight attendants also cleaning the aircraft or working as gate agents (limiting personnel costs)
10. "Free" in-flight catering and other "complimentary" services are eliminated, and replaced by optional paid-for in-flight food and drink
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