Low Cost Airline Impacts

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LCCs (Low Cost Carriers) first emerged in 1950, by the Pacific South Airlines started offering nothing but low prices on air travel. Followed by the great success of Southwest Airlines from 1967 onwards, as well as facilitated by the liberalisation in air transport market, it has been in centre stage of the global civil aviation industry ever since. In spite of facing many challenges such as high oil prices, softening demand, surplus capacity, new participants as well as subsidiaries from FCCs (Full Cost Carriers) have been joining the main stream to survive, compete and dominate in airline business, mainly on short-haul routes. Given it’s nearly 60% cost advantage (Doganis 2001), some of them did succeed, for example, Ryanair from Ireland, easyJet from UK, these two airlines account for more than 80% of market share in scheduled low cost market in Europe, according to European Tourism Management (2003). However, many LCCs were forced to withdraw services on unprofitable routes, for instance, AirAsia X ceased flying NZ flights, and will stop flying to Europe and India. Some LCCs even filed for bankruptcy, this can be illustrated by Danish LCC Cimber Sterling, which declared bankruptcy due to fierce competition between LCCs and rising costs. This essay is written to discuss the impacts that LCCs have had on the global aviation industry in the 21st century. It breaks down in three areas, namely, economic impacts, environmental impacts and social impacts. The economic impacts focus on tourism and secondary airports. Environmental impacts include positive and negative aspects caused by the rapid development of LCCs. Social impacts set out social inclusion and exclusion in terms of passenger coverage.

LCCs boost up regional tourism by providing more destinations with more frequencies at lower prices. There is a close relationship between civil aviation industry and tourism industry. Travel and tourism is the world’s largest industry, and airlines play a pivotal role within the industry. According to the IATA “aviation fosters economic development by providing and enhancing access to regional and global markets. It is a key driver of business, travel and tourism exports and it creates employment around the globe” (IATA, 2003a, p. 2). While FCCs generally focus on carrying passengers between most advantaged locations, LCCs provide more market access to the less advantaged locations, therefore bring in more people to local services such as accommodation, restaurant, retail, entertainment facility, as well as more business opportunities to local community. Even FCCs serve those less advantaged locations, it is normally less frequent than LCCs do, not to mention the low price. Furthermore, people choose LCCs because of its speed and reach at similar or lower price than other transport modes such as rail and coach. According to Prideaux (2007), train journeys between southern state capitals in Australia take about 12-13 hours but can be flown in a little over an hour for the same price or lower. As a result, a trend for weekend holiday in exotic locations has been spawned. Overall, regional tourism markets benefit from the new routes or added destinations with more frequencies at lower prices. This enhances a city’s nature as an accessible location for the business and leisure traveller (Cooper et al, 2000).

LCCs maximise the use of secondary airports and their ancillary services, consequently generate more revenue to the airports, create more jobs and bring in more investment (Gillen&Hinsch, 2001). Like airline and tourism, there is also a close linkage between airport and airline. The fundamental difference is that airport is in a dominant, stable position, while airline has to keep adjusting itself to volatile circumstances. There are two reasons for LCCs to choose secondary airports. One is pressure from FCCs. In order to prevent entry by LCCs, those FCCs maintain controls at hub airports, for examples BA in London...
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