The low-cost carrier (LCC) business model has proved successful
throughout the world but particularly so in Asia Pacific. Typical
LCC strategies include operating at secondary airports, fling
a single airplane type, increasing airplane utilization, relying
on direct sales, offering a single-class product, avoiding
frequent-fler programs, and keeping labor costs low. Over the
past 10 years, the region’s LCCs have generated an average
annual growth rate of 24.5 percent. By comparison, Europe’s
LCCs grew 13.4 percent annually during the same period,
and North America’s grew a modest 2.2 percent annually.
The countries in Southeast Asia were some of the fist in the region
to employ the LCC business model, and today, LCCs are fling
nearly 20,000 weekly flights. Northeast Asia, on the other hand,
has been slower to see the growth of LCCs, owing in part to the
large high-speed rail network in Japan and to an aging population.
China is the latest region to embrace the LCC model, with a large increase in the number of entrants in the past two years.
To expand outside their home country, many airlines have
created joint-venture subsidiaries to avoid restrictions on foreign
ownership. These subsidiaries, which employ the LCC business
model, are often cobranded with the parent airline and share
its name and livery. Although the vast
majority of this activity has been in
short-haul markets using single-aisle
airplanes, the region is beginning to
see joint ventures fling widebody
airplanes on medium-haul operations
in response to strong traffi growth.
The low-cost carrier (LCC) business model has proved successfulthroughout the world but particularly so in Asia Pacific. TypicalLCC strategies include operating at secondary airports, flinga single airplane type, increasing airplane utilization, relyingon direct sales, offering a single-class product, avoidingfrequent-fler programs, and keeping labor costs low. Over thepast 10 years, the region’s LCCs have generated an averageannual growth rate of 24.5 percent. By comparison, Europe’sLCCs grew 13.4 percent annually during the same period,and North America’s grew a modest 2.2 percent annually.The countries in Southeast Asia were some of the fist in the regionto employ the LCC business model, and today, LCCs are flingnearly 20,000 weekly flights. Northeast Asia, on the other hand,has been slower to see the growth of LCCs, owing in part to thelarge high-speed rail network in Japan and to an aging population.China is the latest region to embrace the LCC model, with a large increase in the number of entrants in the past two years.To expand outside their home country, many airlines havecreated joint-venture subsidiaries to avoid restrictions on foreignownership. These subsidiaries, which employ the LCC businessmodel, are often cobranded with the parent airline and shareits name and livery. Although the vastmajority of this activity has been inshort-haul markets using single-aisleairplanes, the region is beginning tosee joint ventures fling widebodyairplanes on medium-haul operationsin response to strong traffi growth.
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