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1. Abstract The Low-Cost Carriers (LCCs), also known as no-frills airlines, the Low-cost carriers business model have been very successful operating throughout the USA, Europe and southern Asia since 1990s. They have completely changed the way of people fly, attracting new customers which would otherwise not travel at all, or use other modes of transport by land or sea. They also helped redesign the entire aviation world, sending a powerful wakeup call to the legacy airlines (Market Share Pte Ltd 02/2005). In this report we would like to provide you the essential background information, the typical low-cost carriers business model, low cost advantages between classic airlines and low-cost carriers. The final part of this report will look into the Hong Kong Market, a SWOT analysis can be conducted to figure out the internal factors such as strengths and weaknesses, and external opportunities and threats that may influence the success of low-cost carriers industry. 2. Background information In general, Low-cost carriers also known as No-frills or discount airline, which create totally new product and choice of services to customer, simple product, low fare, point-to-point markets. However, most Low-cost carriers differentiate themselves by providing passengers more services, like seat allocation; special meal, if they are willing to pay for it, or operating different aircraft model in order to extend their long-haul services. The concept of low-cost carrier originated in the United State in 1949. The first successful low-cost carrier was Pacific Southwest Airlines, which pioneered the concept. However, this credit has been incorrectly given to Southwest Airlines, which began service in 1971 (De Groote 2005). And Southwest Airlines is the only one airline to have been consistently profitable in every year of operations since 1973 (Southwest Airlines). Following the successful story in the United States, the expansion of Low-cost carriers to Europe occurred in 1990s. Successful operations began in Great Britain with the Irish company Ryanair. Not only in Europe, Low-cost carriers also developed in Asia and Oceania from 2000. In 2006, new Low-cost carriers were announced in Saudi Arabia and Mexico, which led the Low-cost carrier model to worldwide (De Groote 2005).
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3. The Low-cost carriers Business Model In general, the typical low-cost carrier business model is based on: • a single passenger class • a single type of airplane • a simply fare scheme • free seating • direct, point to point with no...