The future of low cost
They were born as a strange entity in commercial aviation. Among the network of connection hubs in the United States, Southwest, which inaugurated the concept, looked like a swallow that would not make through summer. The normal – economic – approach was to use big hubs to distribute flights, taking advantage of the connection concept that allowed economies of scale.
But the LCC concept creators realized that there was another market in parallel to the traditional one. It wanted fast flights, point to point, without food, without major services and, above all, lower costs. It was not easy to create the concept but, taking into account that in the United States there were secondary (or primary but disused) airports that were willing to lower rates and provide efficient services at a lower price, the model managed to take off.
Today, half a century later, low cost has become the preferred means of travel for a third of the world's passengers. It is estimated that in 2027 - that is, within ten years - half of the nearly 7 billion flights globally will be of this type.
The consultant OAG estimates that this year more than 50 percent of travelers from 10 European countries are already choosing low-cost airlines. Macedonia tops this list; however, the country that offers most low-cost seats is Spain, with 82.2 million last year. Meanwhile, Irish airline Ryanair is a leading low cost carrier, but due its labor problems this year, it can be overtaken by Easyjet. The low cost model has provided the means of travel to many people, who were previously unable to do it.
Fifteen years ago, only 2% of Mexico’s inhabitants took a plane. Today, the percentage has risen to almost 8%. And, if properly facilitated, this percentage can rise across the territory of the country, whose orography is complicated for road or rail journeys.
It is ironic, that the model, which was born in secondary airports and with short flights, is transforming. As it happens, now low cost airlines hold large hubs where they can grow. The OAG consultant says the superhubs host the new connectivity. The largest of them is Kuala Lumpur in Malaysia and, in America, Fort Lauderdale, in Florida.
Despite the fact that seven largest low cost hubs are located in Asia, the eight site is in Spain, while the following two – in the United States. The International Airport of Mexico City is ranked 12th – not insignificant in a world which is connected by air more and more every day. The ranking can improve further, if the AICM manages to relocate in order to accommodate a larger number of connecting flights.
Another rising phenomenon is the so-called low-cost, long-range (low-cost long-haul) – a bet, already taken by Norwegian. 20% of its fleet is currently devoted to such flights, and the airline is already expanding, by adding subsidiary in Argentina or opening new transoceanic routes like the one planned between London and Rio de Janeiro.
As in low cost sector, traditional airlines are now offering segmented seats at various rates or taking a more aggressive approach by creating their own low cost subsidiaries. We will see what this competition brings.
Rosario Avilés graduated in Journalism from the "Carlos Septién García" School. She holds a Master's in Journalism from the University of Miami.
She has worked as founder, editor, columnist and collaborator in various media, among them: El Economista, Reforma, El Financiero, Grupo Imagen, Radio 13 and La Crónica de Hoy. She has been writing the Despegues y Aterrizajes (Takeoffs and Landings) column, where she analyzes and discusses topics related to the air sector for 20 years.
Her column has been kindly provided by our friends at A21.mx, a Spanish-language aviation portal from Mexico.
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