business model low cost airline

The Evolution of The Low-Cost Airline Business Model

Low-cost carriers have proven to be fierce, resilient airlines that have found massive success across the world, particularly in the United States. Annually, millions of passengers take advantage of the low fares and affordable travel opportunities these airlines offer. However, despite their success, the low-cost business model that is dominant in today’s marketplace contrasts with the strategy low-cost pioneers utilized when first introducing a bare-bones product to America. 

One of the first airlines to successfully and sustainably implement the low-cost business model was Southwest Airlines. Launched prior to the Airline Deregulation Act of 1978, at first Southwest was only permitted to fly within the state of Texas. The close proximity of the cities it served presented the carrier with a unique opportunity: despite competing with other airlines, Southwest’s main competition came from buses and the options travelers held to drive themselves between city pairs throughout Texas. This meant that in order to make money and stay in business flying solely within Texas, the carrier would have to offer fares so low that they could undercut the fares of ground transportation options.

To achieve this, Southwest had to examine the standard airline business model and find methods to reduce costs. First, it turned to its onboard product. It filled its fleet (which exclusively consisted of 737 aircraft) with coach seats. By offering only an economy class cabin, the airline avoided the costs associated with a first-class cabin: it fit more seats into their airplanes, only served snacks instead of meals, and offered an open seating policy that encouraged passengers to show up on time for their flight. 

After the airline launched, it focused on increasing its productivity. Because of its simplified product, Southwest employees had the ability to turn its aircraft around in 10 to 15 minutes. With their aircraft capable of performing more flights daily because of lessened time at the gate, the carrier utilized its assets more productively, which allowed for reduced costs that were passed on to the customer. Additionally, even after the carrier expanded outside of Texas, Southwest focused on serving smaller, underutilized airports rather than major hub airports. Not only did this allow them to save money on airport costs, but thanks to smaller runways and less congestion, it also allowed their aircraft to remain more productive while still serving major metropolitan areas.

While Southwest continued to grow its presence across the United States by relying on the tactics that first allowed them to become successful, another carrier, JetBlue Airways, built off of some aspects of its business model when it launched in 2000. Like Southwest, JetBlue operated a fleet of all-economy configured aircraft. It utilized only one type of aircraft to save on maintenance and training costs, much like Southwest. However, JetBlue used the A320 family while Southwest used the 737. However, unlike Southwest, JetBlue did not stray away from major hubs: rather, it set up its base at one of the nation’s busiest airports, John F. Kennedy International Airport in New York, believing there was an opportunity to undercut competitors in the Big Apple. Additionally, JetBlue strove to create an onboard product with more amenities (like more legroom and live, seatback TV) while still offering low fares. 

For several years, the two low-cost carriers, despite a significant difference in how they achieved their low fares, found success as they expanded their offering across America. However, another radical shift in the low-cost model came to America in 2005, when Spirit Airlines made headlines for dramatically unbundling its fares. Now, passengers on Spirit enjoyed fares significantly lower than that of Southwest or JetBlue, however, they would be forced to pay additional fees for perks that came included with a ticket on the other carriers. Additionally, Spirit crammed more seats into their aircraft, leading to some of the worst legroom in the industry.

Despite the controversy, Spirit Airlines experienced massive success and rapid growth following its transformation to what people began calling an “ultra-low-cost carrier”. Its impact has been felt across the industry, as low-cost and legacy carriers alike began adopting traits of Spirit’s pricing model to entice budget customers. Now, almost every major airline has begun offering significantly different ticket classes through unbundling fares and reserving certain perks for certain ticket classes. Something like checking a bag, which was a perk formerly included in virtually all tickets, became an additional fee. Ancillary revenue became the key to Spirit Airlines’ success.

Additionally, Spirit focused on expanding its presence in some of the nation’s busiest hubs: airports other low-cost airlines avoided. With base fares so low, Spirit began focusing on markets dominated by legacy carriers and undercut its fares on countless routes, especially ones to leisure destinations. The success its business model found encouraged two other U.S. airlines, Allegiant and Frontier, to transform into ultra-low-cost carriers as well.

Today, each low-cost airline has changed at least slightly in response to the shift in product and pricing strategies now utilized in America. Southwest has expanded to serve busier hub airports, such as Denver (now its largest city), Philadelphia, Boston, New York-LaGuardia, and San Francisco, and has used offerings like their Earlybird Check In to boost ancillary revenue. Despite these changes, the carrier still offers only an economy product, simple onboard service, and two free checked bags for any customers flying the airline. 

JetBlue has changed certain aspects of its product as well. While still mainly targeting the leisure traveler, the carrier offers several ticket classes onboard (depending on the route), such as its Mint Business Class. Depending on the ticket class, the carrier also now charges for checked bags and even carry-ons. The airline has also strayed away from its one aircraft type strategy, now operating both the Embraer E190 and Airbus A220-300 along with the A320 family it began with. Spirit, while still focused on offering the lowest possible base fares, has changed too. It offers options like the Big Front Seat, a more expensive option that offers more legroom, seat padding, and additional frills.

Low-cost travel has changed dramatically since its start in the 1970s in Texas. Many of these changes, however, have proven to be successful and popular with travelers in America. As the competitive dynamic within America shifts as demand returns, there could be more changes in store for the business model that brought flying to the masses.

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The Changing Face of Air Travel

The rise of low-cost carriers, why low-cost carriers soared, pandemic symptoms, the biggest lccs in the u.s., the bottom line.

• Fundamental Analysis
• Sectors & Industries

An Economic Analysis of the Low-Cost Airline Industry

Occasional recessions , market crashes, and COVID-19 notwithstanding, there is little doubt that life has improved steadily in recent decades. Products and services that were once the province of the rich became widely available as living standards rose. No business better exemplified the democratization of services than the airline industry. Low-cost carriers (LCCs) were at the forefront of that movement. Here we will take a closer look at that segment of the industry.

Key Takeaways

• The deregulation of the U.S. airline industry accelerated the use of low-cost carriers in the U.S., and the trend spread worldwide between 1990 and 2020.
• Low-cost carriers offer lower fares but travellers have to pay an extra fee for additional services.
• The average price of a domestic round-trip ticket in the U.S. fell from $647.94 in 1990 to $420.70 in 2019 (adjusted for inflation)
• Airlines also went from filling about 54% of seats in 1975 to using 85% of their seating capacity in 2019.
• The COVID-19 pandemic dramatically impacted the airline industry, causing a cut in demand for air travel. However, the number of flights, seating occupancy, and revenue in the industry have since then rebounded to almost pre-pandemic levels.
• Southwest Airlines, JetBlue, and Spirit are some examples of popular LCCs.

In the old days, flying was a luxury experience. Airlines primarily catered to the affluent and business travelers . Flyers were a pampered lot, plied with food and wine. In those days, flights were seldom full. One could stretch out on the adjacent empty seat and enjoy a nap in the hushed passenger cabin.

Air travel grew in popularity, with the industry offering more flights and lower fares after deregulation, as the passenger traffic swelled, air travel's cachet faded just as low-cost carriers arrived, pushing fares even lower. It now costs extra to secure more leg room or glass of wine in a business or first-class section of the cabin. All too often, air travelers have been forced to put up with long delays, overcrowded flights, lengthy security procedures and noisy cabins.

While many bemoaned the decline in quality, the number of complaints was not exceptionally high compared to the greater number of air travelers. That was because airfares dropped substantially after adjusting for inflation . Consumers have always known that you get what you pay for. Paying cheap fares for no-frills air travel was a bargain accepted by the majority of air travelers. Those who pined for the glamour days of flying always had the option of paying more for first class.

Deregulation

Pioneers, including Southwest Airlines, ushered in mass air travel in the U.S. during the 1970s. In that same decade, the deregulation of the U.S. airline industry accelerated the widespread use of low-cost carriers. The 1978 Airline Deregulation Act partly shifted control over air travel from the government to the private sector. That led to the termination of the once all-powerful Civil Aeronautics Board (CAB) in 1984.

The CAB previously had an iron grip on critical aspects of the U.S. airline industry. It controlled the pricing of airline services, agreements between carriers, and mergers within the industry. Airlines were only able to compete on tangible factors, such as food, service quality, and cabin crew. Their hands were tied concerning the most crucial consideration for most consumers—ticket price.

The Results of Deregulation

The liberalization of the airline industry yielded spectacular results. The number of U.S. air traveler enplanements soared from 209 million in 1975 to a record 930 million by 2019. The figure dropped to less than 370 million the following year due to COVID-19 but has recovered to 857 million as of 2022. Adjusting for inflation, the average price of a domestic round-trip ticket in the U.S. fell from $647.94 in 1990 to $420.70 in 2019. That's a decline of about 35%, but the drop mostly took place between 1990 and 2005. Airlines also went from filling about 54% of seats in 1975 to using 85% of their seating capacity in 2019. The following year, the seating capacity dropped to 58.3% and has since rebounded to almost pre-pandemic levels.

Around the World

The low-cost carrier revolution spread worldwide between 1990 and 2020. The LCCs came to Europe in the 1990s and Asia in the 2000s. Flagship national airlines still exist in most countries. Italy even renationalized Alitalia during the coronavirus crisis. Low-cost carriers had been making progress for years. However, the extreme stress of dealing with the coronavirus put their survival at stake, especially in newer markets.

The success of low-cost carriers before 2020 can be attributed to many innovations and developments since the 1970s.

The Point-to-Point Model

Many large airlines were quick to adopt the hub-and-spoke model after deregulation. In that model, a major airport becomes the hub, and other destinations become the spoke. However, LCCs abandoned that system in favor of the point-to-point model.

The hub-and-spoke system allows airlines to consolidate their passengers at the hub and then fly on to their ultimate destinations (the spokes) in smaller aircraft. That boosts the percentage of seats filled, which helps to drive down fares. Furthermore, the hub-and-spoke system increases the number of possible destinations. However, it also has some drawbacks , such as the high costs required to maintain such a complex infrastructure. The hub-and-spoke system also imposes longer travel times on customers who must transit through the hubs. Finally, it is vulnerable to cascading flight delays caused by hub congestion.

The point-to-point system, on the other hand, connects each origin and destination via nonstop flights. That provides substantial cost savings by eliminating the intermediate stop at the hub, which gets rid of costs related to hub development. The point-to-point system also reduces total travel time and enables better aircraft utilization. Limited geographical reach is the major constraint of the point-to-point model. Unfortunately, direct flights are not economically viable for many city pairs.

Discount Pricing

The higher efficiency and better fleet utilization of LCCs, coupled with their reduced costs, enable them to offer significant airfare discounts. Ticket pricing is now the biggest competitive factor for airlines. Most consumers want to reach their destinations quickly and economically, and are willing to give up in-flight food and entertainment to save money. This drive for economy also extends to business travelers as companies increasingly clamp down on travel costs.

Technology Adoption

The widespread adoption of ticketless travel and Internet distribution has been a boon for LCCs. It decreases the need for complex and expensive ticketing systems used by legacy airlines to handle their complicated pricing structures. The emergence of the internet as the primary medium for booking tickets has dramatically increased the transparency of ticket pricing. That works in favor of the low-cost carriers because of their lower fares.

Fleet Uniformity

A significant benefit of the point-to-point model is that LCCs can use a single fleet type. They frequently do not have much variability in passenger demand between the major city pairs that they serve. Traditional carriers often need larger planes to carry passengers between hubs, and smaller ones for flights to the spokes. The fleet uniformity of low-cost carriers leads to lower training and maintenance costs.

Motivated Staff

Several LCCs prided themselves on the high motivation levels of their employees. They motivated employees with competitive compensation, incentives like profit-sharing, and a strong corporate brand identity. Additionally, most LCCs tend to fly shorter routes. That means employees might only be away from home for a few hours, as opposed to a couple of days or longer for long-haul flights. More time at home can also be good for morale.

Fewer Flyers

The COVID-19 pandemic dramatically cut demand for air travel. In the final week of March 2020, commercial traffic had declined 62.9% from the same period in 2019. For year 2020, there was an overall wordlwide reduction of 50% of seats offered by airlines (compared to 2019 levels) and an overall reduction of 2,703 million passengers ( a 60% drop compared to 2019 levels)

The Bailout

In March 2020 the airline industry secured nearly $60 billion in U.S. government funding under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, saving the industry from bankruptcy. However, there were strings attached that have significant consequences for potential investors. The airlines had to agree to forego layoffs , stock buybacks , and dividend payments. The dire situation for airline earnings was already highly unfavorable to buybacks and dividends, so those restrictions mattered little. The prohibition of layoffs, on the other hand, limited the companies; flexibility in adapting to a dramatically different business environment. Nonetheless, the aid represented a significant win for the airlines and their employees.

Buffett Departs

Legendary investor Warren Buffett sold in 2020 all the airline stocks owned by his company Berkshire Hathaway Inc. ( BRK.A ). Berkshire Hathaway's holdings were in the larger airlines, including a substantial stake in the large low-cost carrier Southwest . Buffett's company paid $7 billion to $8 billion for its stakes in the airlines, but they were worth closer to $4 billion when sold amid the COVID-19 pandemic, marking a rare loss for Buffett and his firm. "I don't know that three, four years from now, people will fly as many passenger miles as they did last year," Buffett said. "You've got too many planes."

Startup Success Stories?

The economic environment after the pandemic could be extremely favorable to new entrants in the low-cost carrier space. Fear of the virus is likely to decline dramatically under most scenarios, unleashing repressed demand. The industry's contraction during the pandemic promises to leave many older planes on the market, along with additional gates and take-off slots at some airports. That, in turn, could lower startup costs for new low-cost carriers. New LCCs would also be free of the massive debt and restrictive agreements with governments weighing down the incumbent carriers.

While startups seem likely to emerge in the future, large established low-cost carriers are not going away. The top U.S. low-cost carriers are listed below.

Southwest Airlines Co.

Dallas-based Southwest Airlines ( LUV ) began operations in 1971. It became the largest U.S. carrier in terms of originating domestic passengers boarded and also operates one of the world's largest fleet of Boeing aircraft. Southwest had a 16.9% share of the domestic U.S. air travel market in the 12 months through April 2023, behind Delta's 17.2% and American Airline's 17.5%. As of July 18, 2023, Southwest had a market capitalization of $21.79 billion.

JetBlue Airways Corp.

JetBlue ( JBLU ) launched in 2000 and grew to become one of the largest U.S. passenger carriers by focusing on some of the top U.S. travel markets. JetBlue differentiated itself by offering the most legroom in coach class, as well as free TV and broadband Internet service on its flights. JetBlue had a 5.5% share of domestic U.S. air travel in the 12 months through April 2023. The company had a market capitalization of $2.73 billion as of July 18, 2023.

Spirit Airlines, Inc.

Spirit ( SAVE ) has operations in the U.S., Latin America, and the Caribbean. The airline's strategy is to offer an unbundled, stripped-down "Bare Fare" and charge customers for options like baggage, seat assignments, and refreshments. Spirit launched its initial public offering in May 2011 and had a market capitalization of about $2 billion as of July 18, 2023. Spirit held a 5.0% share of the domestic U.S. air travel in the year through April 2023.

On July 28, 2022, Spirit Airlines and JetBlue Airways Corporation announced that their boards of directors had approved a merger agreement under which JetBlue would acquire Spirit for $3.8 billion. The combined airline would be the fifth-largest in the U.S.

Allegiant Travel Co.

Allegiant Travel ( ALGT ) is the parent company of Allegiant Air, which was founded in 1997. Allegiant focuses on the U.S. domestic market, flying passengers from small and mid-sized cities to top holiday destinations like Las Vegas and Honolulu. Allegiant Travel had a market capitalization of $3.2 billion as of July 18, 2023.

What Are the Best Low-Cost Airlines Worldwide?

AirAsia received the World Airline Award 2023 in the best low-cost airline category for its excellence in providing the best service and experience to guests at a minimum fare. Other companies at the top of the world’s best low-cost airlines are Scoot, IndiGo, Flynas, and Volotea. Singapore Airlines was awarded the world’s best first-class airline and Qatar Airways was awarded the world's best business-class airline.

What Is the Low-Cost Airline Strategy?

The low-cost airline strategy consists of minimizing operations costs to offer the cheapest tickets possible. This is achieved, among others, by offering one single service class: only one type of passenger service exists within the company, and services like seat allocation or onboard meals are provided at an additional fee. Also, low-cost airlines usually cover shorter routes which allows them to operate a larger volume of flights per day. In order to reduce fuel costs, low-cost airlines use younger fleets of fuel-efficient fleets, and they usually operate at smaller airports.

What Are Some Challenges That Low-Cost Airlines Face?

According to the World Bank, low-cost airlines face considerable obstacles such as a limited existing network, high levels of economic inequality hampering demand, high infrastructure costs, limited human resources, high fuel costs, and restrictive Air Service Agreements.

Whether one calls them low-cost carriers or LCCs, budget airline stocks are risky investments. However, high risks sometimes give investors high returns. While the stocks have already rallied impressively from their 2020 lows, the rebound in air travel as the COVID-19 pandemic subsides may drive additional gains for the shares of low-cost carriers.

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Peer-reviewed

Research Article

Flying high on low cost: Success in the low-cost airline industry

Roles Data curation, Formal analysis, Methodology, Project administration, Software

Affiliation Faculty of Economics and Administration, Department of Business Management, Masaryk University, Brno, Czech Republic

Roles Conceptualization, Funding acquisition, Methodology, Supervision, Visualization, Writing – original draft, Writing – review & editing

* E-mail: [email protected]

• Veronika Majerová, 
• Michal Jirásek

• Published: December 21, 2023
• https://doi.org/10.1371/journal.pone.0294638
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Low-cost airlines have embraced diverse business models, yielding varying degrees of success. In our study, we apply a configurational approach that allows us to evaluate business models not as isolated components but as intricate business configurations. Through this lens, we identify two distinct models that successful low-cost airlines adopt: the pure low-cost model and the hybrid model. Each model has its own specific, often contradictory, attributes. Most significantly, our findings indicate that low-cost airlines must choose between offering a broad spectrum of additional services or focusing on high productivity and on-time performance. Our analyses reveal that low-cost airlines cannot sidestep this trade-off, as a simultaneous offering of both models does not lead to success.

Citation: Majerová V, Jirásek M (2023) Flying high on low cost: Success in the low-cost airline industry. PLoS ONE 18(12): e0294638. https://doi.org/10.1371/journal.pone.0294638

Editor: Baogui Xin, Shandong University of Science and Technology, CHINA

Received: December 8, 2022; Accepted: November 6, 2023; Published: December 21, 2023

Copyright: © 2023 Majerová, Jirásek. This is an open access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Data Availability: All relevant data are within the paper and its Supporting information files.

Funding: The research was supported by the Masaryk University research project MUNI/A/1233/2022 Organizations in the era of uncertainty.

Competing interests: The authors have declared that no competing interests exist.

Introduction

Navigating the turbulent skies of the air transportation industry places the business models of airlines under constant pressure [ 1 ]. Therefore, scholars have devoted considerable attention to identifying the critical factors in their success [ 2 , 3 ]. However, such studies often fall into the trap of analyzing success factors in isolation, overlooking the fact that these attributes are interrelated components of more comprehensive business models [ 4 , 5 ]. This underscores the need for a holistic evaluation that takes into account the synergistic effects and relational aspects of the business model attributes–an area in which conventional correlational methods fall short. A more appropriate tool for this task is Qualitative Comparative Analysis (QCA, [ 6 , 7 ]), which allows for a nuanced exploration of the complex interactions within business models ([ 8 ]–and illustrated by, e.g., [ 9 ]).

Our research focuses on a specific category of airlines—low-cost carriers (LCCs). Characterized by their streamlined, all-economy configurations and their use of secondary airports, these airlines offer a narrowed down service at reduced cost [ 10 ]. Despite their potential to disrupt the air transport market [ 11 ], LCCs face their own competitive pressures, prompting the ongoing evolution and diversification of their business models [ 12 ]. In this respect, determining what truly contributes to the success or failure of LCCs is paramount. Moreover, given the recent trend of traditional full-service carriers (FSCs) launching low-cost subsidiaries [ 13 ], understanding the conditions for success has become increasingly important.

This study aims to contribute to this understanding by highlighting the distinguishing features and limitations of successful LCC business models. While there have been many previous studies on airline (and LCC) business models (see below), most have relied on traditional correlation methods that assess the business model attributes in isolation. Although one study [ 9 ] has used configurational methods to look at other aspects of business models (i.e., configurations of different innovative activities), it differs from our research, which is focused on general attributes of LCC business models. Furthermore, by identifying distinct business models–the pure low-cost and hybrid models–and their specific attributes, our research provides invaluable insight into strategic decision-making in existing and emerging LCCs. Our findings thus advance the academic discourse on airlines’ business models and offer practical implications for industry stakeholders seeking to navigate the complexities of the low-cost market.

Theoretical overview

Airline business models.

As in other industries, distinctive business models constitute the basis of competition between individual airlines [ 10 ]. While some scholars have distinguished two [ 14 ] or more [ 10 , 15 , 16 ] categories of airline business models, others have argued for a more fluid understanding, suggesting that there is a spectrum of business models rather than simple categories [ 1 ].

Despite this ongoing debate, classifying business models still facilitates our understanding of airlines’ operations. A standard classification [ 10 , 14 ] divides airlines into low-cost carriers (LCC) and full-service carriers (FSC). The business models of LCCs are characterized by numerous key attributes, including direct sales, significant outsourcing, high-density seating, high public awareness, and a focus on short-haul travel [ 10 , 17 , 18 ].

Moreover, FSCs and LCCs differ significantly in the design of their networks. FSCs often rely on a hub-and-spoke system, considered the most effective logistical system for moving passengers [ 19 ]. The hub is the airline’s main base and is located in its country of origin. The airline operates direct lines from its hub to other destinations (i.e., the spokes). There is no direct connection between the spoke airports, and it is only possible to travel between them by transferring to another flight at the hub [ 20 ]. Thanks to the higher frequency of flights, this system offers economies of scale on connections and at hubs [ 21 ].

In contrast, LCCs typically operate on a point-to-point basis [ 10 ]. This system affords certain advantages, such as direct connections between airports, resulting in potential savings and convenience for passengers [ 14 ]. Nevertheless, it also has drawbacks, such as the low frequency of flights on routes, the need for a higher number of airplanes, low yields per seat, and the need for a high-density market to operate point-to-point flights [ 20 ].

In reality, distinguishing between business models is not black and white. As Lohmann and Koo [ 1 ] suggest, business models can be visualized on a continuum rather than as distinct entities. Today, many airlines adopt attributes from both FSC and LCC business models, creating a hybrid model that better caters to demand and competitive pressures [ 5 , 22 ].

A further convergence in business models can be observed in cases where FSCs establish or acquire low-cost subsidiaries [ 3 , 10 , 23 ]. However, these ventures often fail due to inappropriate role identification for the subsidiary LCC, overlaps in management, inadequate operational knowledge of the low-cost model, and other issues [ 13 ].

Identification of business models

There are several approaches to identifying the business models of airlines [ 5 ]. For instance, Sengur and Sengur [ 24 ] base their conceptualization on multiple general business model frameworks, such as the Business Model Canvas. However, such broad applications may present challenges in subsequent empirical studies. Daft and Albers’ [ 25 ] approach is more tailored to empirical research and provides a comprehensive framework for describing the business models of airlines by means of three main components: corporate logic, value chain structure, and assets.

Yet it is the framework of Mason and Morrison [ 2 ] that seems to have attracted the most attention of researchers [ 5 ]. Their “Product and Organizational Architecture” (POA) offers a standardized method for categorizing key attributes, facilitating differentiation between airline models and their effects on profitability. Nevertheless, the POA framework also has shortcomings, one of which is that it assesses the relationship between components and profitability in isolation. Furthermore, subsequent studies have indicated difficulties in applying this framework due to data unavailability and the need for model adaptation (e.g., [ 1 , 26 ]).

In line with previous literature, we argue that business models are composites of various interrelated attributes that contribute to a complex structure that distinguishes each airline. A piecemeal assessment of the significance of these components (as in [ 2 ]) may mask their actual effects. Therefore, we view business models as exemplifying causal complexity and as defined by three features [ 27 ]: conjunction (the outcomes are not the product of a single cause but combinations of multiple conditions), equifinality (there can be more than one combination that leads to a particular outcome), and asymmetry (the conditions may have varying–or even contradictory–roles in different combinations).

One example of causal complexity is network types. There are successful airlines that operate either hub-and-spoke or point-to-point networks (e.g., Lufthansa and Ryanair), while others using the same network type do not fare as well (e.g., Eurowings and Thomas Cook). Although the network is crucial for success, it works best in conjunction with other conditions. There is also equifinality, as airlines with different network types can both succeed. However, a specific network type that is beneficial to one business model may not work for another, which is an illustration of asymmetry (e.g., an LCC using a hub-and-spoke network while maintaining low prices would not be sustainable due to the added transfer costs).

Methodology

Our study concentrated on European airlines that followed various versions of the low-cost business model. We derived our sample of low-cost European airlines from a list provided by ICAO [ 28 ], subsequently analyzing 21 airlines that met our criteria and had adequate data for 2019. Our primary interest was to identify the business model attributes (conditions) that, when combined, either facilitated the airlines’ success or hindered it.

To scrutinize the complex causality inherent in our case, we deployed a crisp-set Qualitative Comparative Analysis (QCA, e.g., [ 6 ]). Unlike conventional correlational approaches that examine conditions individually, QCA evaluates conditions collectively, highlighting their synergistic effects. This configurational approach embraces the asymmetry of conditions, indicating that the causes for an outcome do not necessarily mirror the causes for the absence of the said outcome [ 29 ]. Therefore, separate analyses need to be done for combinations leading to success and combinations leading to the absence of success among airlines.

A key feature of QCA is that it offers valid results with a moderate number of cases (10–100). Relative to qualitative methods, QCA accommodates more cases while preserving benefits such as in-depth case knowledge. Moreover, its variable-oriented approach promotes the identification of generalized variable relationships [ 6 ]. We used FsQCA 3.0 software for all the calculations.

Qualitative comparative analysis in brief

QCA operates on principles based on Boolean algebra and Mill’s methods [ 7 ]. Firstly, the selection of conditions (independent variables), the outcome (dependent variable), and the cases must be grounded in theoretical understanding. The data used in the analysis may be either qualitative or quantitative, but it must be convertible into binary codes (where 1 signifies the presence of a condition and 0 its absence). This is relevant for crisp-set QCA, which is the form of QCA we employed in our research.

QCA analysis involves multiple stages [ 6 ]. A critical step in the process is the creation of a “data matrix” and, subsequently, a “truth table.” The data matrix is a simplified summary of binary values for each case, from which the truth table is derived. The truth table encompasses all empirically observed combinations of causal conditions. The following step involves the logical minimization of all combinations leading to the presence of the outcome (and, separately, combinations leading to the absence of the outcome). Logical minimization refers to the simplification of complex expressions into “prime implicants” according to Boolean algebra rules, which form the basis for interpreting the results. The findings are presented in three solutions–parsimonious, intermediate, and complex–which differ in the degree of simplification they offer.

Business model attributes

Our study concentrates on the business models of LCCs and their connection to business success. We formulated six conditions (attributes of the business model) that differentiate various business models and might contribute to success or the absence of it: (i) operational size, (ii) membership in an airline group, (iii) breadth of services, (iv) focus on on-time service; (v) productivity, and (vi) provision of long-haul flights. The choice of these conditions was informed by the POA framework [ 2 ], other discussed business model frameworks, and a deep understanding of the individual cases. We focused on conditions that differentiate between the various LCC business models and excluded features which are commonly found in LCC models, such as paid onboard refreshments, the use of secondary airports, tight seat pitches, and limited seat widths. These conditions are common to all LCCs and, therefore, not decisive in distinguishing between successful and not successful ventures. We also did not include conditions (or their indicators) for which there are no openly available data for a sufficient number of airlines or where this data is largely incomplete (e.g., data related to the competition an airline is facing).

It should also be noted that we chose to work with these attributes regardless of whether they were found to be correlated to LCC success or its absence in previous studies. As we argued in the theoretical overview, findings from studies using correlational methods would be misleading, since they do not assess business model attributes as configurations (i.e., they do not assess how they work together and instead focus on their effects “in isolation”).

We chose operational size (i) and airline group membership (ii) due to their potentially significant impact on business models, as they heavily influence management decisions and capital structure. Breadth of services (iii), on-time performance (iv), and productivity (v) are integral to the POA analysis and they are directly adjustable by airlines and leave room for innovation ([ 19 ] also supporting their critical role in LCC business models). We added (vi) the provision of long-haul flights as an additional feature that can distinguish between LCCs.

Table 1 displays the indicators for the individual conditions. The third column presents the criteria used for calibration, with the level of each quantitative condition derived from industry data (values that clearly divide the airlines into two subsets) or from the authors’ knowledge of the industry and individual cases. We used the first approach (values that divide the airlines) where there is no (however abstract) threshold indicating the presence or absence of a condition. The best example for this case is the Size condition that works with airline-specific indicators. With six indicators, all airlines, apart from one, satisfy either a maximum of one criterion or five or six of them (the only exception, Jet2, satisfies two criteria). In most other cases, we combined our knowledge of where the threshold might be with insight into the actual criterion values (case and industry data).

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https://doi.org/10.1371/journal.pone.0294638.t001

Where appropriate, we employed several indicators to ensure the condition’s validity and to decrease dependence on individual calibration criteria. Where there were multiple indicators, we marked the condition as present when any majority of the criteria of corresponding indicators was satisfied. We obtained the data for the analysis from various sources, including individual airlines’ websites, other published documents and from industry sources. When data for any indicator was missing, we worked with the remaining indicators, the majority of which decided the presence or absence of a given condition.

Breadth of services includes the offer of through-ticketing (guaranteed compensation for missed connecting flights), a frequent flyer program, and business class quality. Although typically associated with FSCs, some LCCs have recently adopted these attributes. The focus on punctual service can be directly measured by OAG [ 30 ] statistics, with on-time flights defined as those that depart or arrive within 15 minutes of the scheduled time. High on-time performance enhances customer satisfaction while simultaneously improving the utilization of ground staff, aircrews, and aircraft.

We measured fleet and labor productivity by means of five indicators. The fleet is considered uniform if a single type of aircraft comprises over 80% of the fleet, which has a significant impact on operating costs and productivity. The second attribute is maximum seat capacity, which reflects the extent to which an airline utilizes its predominant aircraft type’s maximum seat capacity. For example, the Boeing 737–800 has a maximum certified configuration of 189 seats [ 31 ]. A fleet operating at maximum seat capacity typically provides a single travel class and can sell more tickets per flight. Available seat kilometers per employee and passengers per employee are used interchangeably, given their high correlation in POA analysis [ 2 ].

Table 2 displays the indicators and corresponding criteria for the outcome. We identified seven indicators signifying success. However, we did not include any financial indicators due to the unavailability of data. For many of the observed airlines, financial reports are consolidated and fail to offer detailed information about subsidiaries. Thus, we chose alternative indicators with better availability of data. As before, we set the calibration criteria based on industry data.

https://doi.org/10.1371/journal.pone.0294638.t002

In QCA analysis, reporting the inputs (the data matrix and the truth table) and outputs (analyses) in a research paper is standard. In the following section, we adopt QCA notation to streamline the textual presentation. More precisely, we use the symbol “~” to signify the absence of a condition or outcome (for example, an airline not offering long-haul flights is denoted as “~Long-haul”) and the symbol “*” to indicate a combination of conditions (e.g., “~Long-haul*Group” signifies an airline that does not offer long-haul flights and which is a subsidiary of another airline).

Data matrix and truth table

Table 3 represents the data matrix that serves as the starting point for QCA. It concisely summarizes the condition and outcome values for the 21 airlines examined. In the table “1” indicates the presence of a condition or outcome, while a “0” signifies its absence (marked as “~” in the text).

https://doi.org/10.1371/journal.pone.0294638.t003

Table 4 presents the truth table that includes the 14 combinations of causal conditions and outcomes observed in our data. Given that there are six conditions, there are 64 (2 6 ) theoretically possible combinations, for which it is clearly impossible for 21 airlines to represent. However, as Ragin [ 32 ] points out, limited diversity is natural, as the empirical world seldom depicts all logically conceivable combinations.

https://doi.org/10.1371/journal.pone.0294638.t004

Analysis of necessary conditions

In addition to identifying combinations of conditions sufficient for the outcome, QCA also allows for the analysis of the necessary conditions. It is important to understand that the necessary conditions can be sufficient or insufficient for the outcome. The results for both success and its absence are displayed in Table 5 , which are based on two separate analyses. Consistency denotes the ratio of cases that have both the condition and the outcome. According to Ragin [ 32 ], a consistency of 0.9 indicates a necessary condition. Coverage, on the other hand, reveals the empirical relevance of a condition in the sample, computed as the ratio of cases possessing the condition in the total number of cases. None of the conditions in this analysis can be deemed necessary, as they fail to pass the consistency threshold of 0.9. Only the consistencies of the ~Long-haul (outcome: Success) and ~Size (outcome: ~Success) conditions come close to this figure, both of which recorded consistencies of 0.857.

https://doi.org/10.1371/journal.pone.0294638.t005

Analysis of sufficient conditions

To simplify the QCA output, we will now concentrate on the intermediate solutions, which are typically those most frequently interpreted [ 6 ]. The intermediate solutions for the presence and absence of success are presented in Tables 6 and 7 , while the complex and parsimonious solutions can be found in the supporting information section ( S1 – S4 Tables). Each table is divided into four columns: the first outlines the combinations of conditions determined by the analysis; the second presents the raw coverage (the ratio of cases with the outcome possessing this combination); the third presents the unique coverage (the ratio of cases with the outcome possessing this combination and none of the others); and the fourth pertains to consistency (the proportion of cases with a combination that also exhibits the outcome).

https://doi.org/10.1371/journal.pone.0294638.t006

https://doi.org/10.1371/journal.pone.0294638.t007

Intermediate solutions (Success)

Some unexpected findings were revealed regarding the combinations of conditions linked to success ( Table 6 ). Despite the potential correlational-logic supposition that the On-time condition would be present in the Success outcomes, we identified three combinations where this condition was absent. However, these only accounted for 29% of the Success outcome. By contrast, a single solution featuring the On-time condition covered 43% of the Success outcome. As we will discuss later, this potentially indicates that LCCs face a trade-off. Specifically, maintaining on-time flights appears incompatible with offering a broad range of services (the presence of the Services condition).

Notably, it seems that being a subsidiary does not play a significant role. The combinations that include the presence and absence of this condition (Group) appear equally in combinations leading to success, and the condition is absent in combination with the highest coverage (0.429, ~Services*On-time*Productivity*~Long-haul). Productivity is present in two combinations (~Services*On-time*Productivity*~Long-haul and Size*Group*~Services*Productivity*~Long-haul) covering 50% of cases. Its absence does not feature in any of the combinations. We are cautious when interpreting the role of long-haul flights, given that this condition only appears in four cases. Nevertheless, it seems that successful European LCC airlines tend not to have this condition (and therefore only operate within Europe and its neighboring regions).

Intermediate solutions (~Success)

The combinations of conditions leading to the absence of success ( Table 7 ) support the general trade-off between on-time performance and breadth of services. All of the airlines that were not successful exhibited either both or neither of these two conditions (see all six combinations of conditions in Table 7 ). The airlines that were not successful were typically small (~Size feature in five out of six combinations that are part of the intermediate solution for ~Success), although this may not apply to airlines that are subsidiaries (Group). It could be argued that for airlines that are failing, maintaining their size is challenging unless they have a parent company to provide financial support.

Interpretation of results

Our analysis reveals two distinct business models that contribute to the success of LCCs (see Table 6 ). The first, which we term the “hybrid model”, closely resembles an FSC in its broad range of services. However, this model tends to compromise when it comes to on-time performance (Services*~On-time). In our study, airlines such as easyJet and Norwegian exemplify this model.

The second successful business model, which we term the “pure low-cost model”, is characterized by a limited range of services and the absence of long-haul flights (~Services*~Long-haul). A limited offer of services, such as catering, enabling rapid aircraft turnaround and improved on-time performance facilitates this business model’s efficiency [ 33 ]. The model aligns with Mason and Morrison’s [ 2 ] characterization of a successful LCC. In our sample, Ryanair and WizzAir are examples of this model.

While successful airlines cannot simultaneously offer a broad range of services and maintain a highly productive/on-time business model (see Table 7 and its interpretation above), they must adopt one of these approaches. Either they can copy aspects of the FSC business model or focus on delivering the core product with cost efficiencies. To illustrate the trade-offs airlines face, we have constructed a trade-off triangle, which is depicted in Fig 1 .

https://doi.org/10.1371/journal.pone.0294638.g001

According to the notional trade-off triangle, LCCs cannot afford the absence of productivity (~Productivity; see also the argument by [ 19 ]). As they compete on low prices, they need to maintain business efficiencies, particularly when they do not offer additional services (~Services), as is the case for the pure low-cost model. The hybrid model allows for some flexibility in this area but does so at the expense of on-time performance (~On-time) and, potentially, the core product itself. In both models, LCCs must appeal to customers by offering additional services (Services) or delivering high on-time performance (On-time). However, they cannot provide both without jeopardizing their overall success. Such an offering would essentially mean adopting a traditional FSC model while retaining low prices, which is an untenable strategy in the long term. This is reflected in our analysis of LCCs that were not successful ( Table 7 ).

Finally, being a subsidiary seems to be somewhat of a liability for LCCs (and as Gillen and Gados, [ 19 ], argue, most such ventures have failed). This observation is supported by the frequent exits of LCC subsidiaries from the market segment [ 34 ]. Overlapping management and unclear subsidiary roles may contribute to this issue [ 13 ].

Discussion and conclusion

The configurational logic guiding our research enables us to evaluate LCC business models as complex combinations of diverse attributes [ 8 ]. We argue that this study reflects the three features of causal complexity [ 27 ]. Firstly, our results uphold the conjunction principle–success or failure cannot be traced back to a single attribute. Instead, it results from various business model attributes operating in conjunction. Secondly, we observed equifinality in our findings, having identified two prevalent approaches adopted by successful airlines: the pure low-cost and hybrid business models. Finally, we found asymmetry, which means that the individual attributes exerted different effects when combined with others. We view this last characteristic as the fundamental strength of our approach, contrasting with traditional correlational logic (as adopted in, for instance, [ 2 ]).

To illustrate the asymmetry, consider the attribute of a broad range of services. This feature is common throughout our sample and appears with successful and unsuccessful airlines. Thus, a correlation or regression analysis would likely yield a non-significant or a slightly significant relationship. However, we demonstrated that a broad range of services is a critical element in one business model of successful LCCs: the hybrid model. While this attribute might be overlooked in a correlational analysis, it is crucial to one of the pathways to success.

Hence, we argue that our research sheds additional light not on the attributes of business models, which are widely acknowledged in the industry, but on the relationships between these attributes. The correlational approach calls for the adoption of individual best practices. However, our study suggests that the ill-considered adoption of industry practices could potentially harm an organization if these practices are incompatible with its current business model. This observation probably accounts for why some FSC low-cost subsidiaries have succeeded while others have exited the sector [ 34 ].

Our study employed crisp-set Qualitative Comparative Analysis (QCA), chosen for its straightforward interpretation and communication of results. Nevertheless, this approach is constrained by its binary value system, which acknowledges a condition as either present or absent. Fuzzy set QCA offers a more nuanced approach that accommodates the subtleties observed in real life [ 6 ]. This is a promising avenue for future research that may lead to more robust findings than one which relies on crisp-set QCA.

Our analysis concentrated on attributes that distinguish between alternative LCC business model features. Given that many attributes are incorporated into most LCC models (e.g., paid onboard refreshments, use of secondary airports, small seat pitches and seat width), we argue that they play a minimal role in differentiating between success and failure. Therefore, these attributes were excluded from our analysis, which allowed us to focus on differentiating LCC features. However, this might inadvertently suggest that these attributes are unimportant. While we recognize that some business model attributes might be redundant, many others must be present in every LCC business model. Identifying these conditions would be a suitable task for the related Necessary Condition Analysis method [ 35 ], in the case where it was supplemented with more detailed data on these attributes. Such an analysis could yield important insights for LCCs considering abandoning or limiting these practices.

Finally, our analysis was based on European LCCs. Given the differences in regional air transportation markets (reflected in, e.g., [ 18 ]), our study would require replication in other markets to extend its findings to them.

In conclusion, our research identified two distinct business models adopted by successful LCCs: the pure low-cost model and the hybrid model. Specifically, LCCs must choose between offering a broad range of additional services and focusing on their core product, represented by on-time performance and high productivity. While they must select one of these models to attract customers, they cannot adopt both without rendering their model unworkable. By employing a configurational approach, we examined the fundamental attributes of business models holistically, rather than treating them as separate factors. We believe this approach is particularly beneficial when investigating such complex phenomena.

Supporting information

S1 table. complex solution (success)..

https://doi.org/10.1371/journal.pone.0294638.s001

S2 Table. Parsimonious solution (success).

https://doi.org/10.1371/journal.pone.0294638.s002

S3 Table. Complex solution (~success).

https://doi.org/10.1371/journal.pone.0294638.s003

S4 Table. Parsimonious solution (~success).

https://doi.org/10.1371/journal.pone.0294638.s004

https://doi.org/10.1371/journal.pone.0294638.s005

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The Leading Source of Insights On Business Model Strategy & Tech Business Models

The Southwest Airlines Business Model In A Nutshell

• Southwest Airlines is a low-cost American commercial airline company founded by Herbert Kelleher and Rollin King in 1967. The company began operations in Texas at a time when interstate travel was heavily regulated.
• Southwest Airlines makes money across three categories: passenger revenue , transport revenue , and revenue for ancillary services such as early check-in.
• Southwest Airlines recorded profits for 47 straight years, with the streak only broken by the coronavirus pandemic. The success of the company in an industry with slim to non-existent profits is due to intelligent route selection, flexible seating, free checked baggage, and a point-to-point destination strategy .

Table of Contents

Southwest Airlines origin story

Southwest Airlines is a low-cost American commercial airline company founded by Herbert Kelleher and Rollin King in 1967.

Kelleher and King developed the concept for Southwest Airlines in a San Antonio hotel bar. The original business plan was illustrated on a cocktail napkin with a triangle connecting the Texan cities of San Antonio, Dallas, and Houston.

Initially, the company operated flights within the state of Texas only. Federal authorities controlled interstate air travel in the United States at the time, deciding where an airline could fly and how much it could charge. This turned out to be a blessing in disguise for Southwest Airlines, enabling it to establish a strong presence in Texas where it was free to undercut competitors including Braniff and Texas International. During those early years, the company was also known for its ability to turn planes around in just ten minutes.

When President Jimmy Carter signed the Airline Regulation Act on October 24, 1978, the company began introducing routes around the United States. A service between Houston and New Orleans was the first such route, with additional flights to Tulsa, Oklahoma City, and Albuquerque following in 1979. That same year, the company introduced self-ticketing machines to make the check-in process more efficient.

Over the following decades, Southwest Airlines stayed true to its low-fare brand . For a customer checking in two bags, the company claims its fares will be the lowest on offer in 87% of cases . Competition-beating prices are possible because Southwest operates Boeing 737s exclusively, enabling it to save money on training mechanics and pilots on a range of different aircraft. The company also prefers routes between smaller airports where taxes and gate access are more affordable.

Third-quarter operating revenue for 2021 was $4.7 billion , representing a 161% year-over-year increase. The company now services routes to over 100 destinations across the United States, Mexico, Central America, and the Caribbean. 

Southwest Airlines’ Value Proposition:

• Affordable Travel: Southwest is known for its low-cost airfare, making air travel accessible to a broader range of travelers, including budget-conscious individuals and families.
• No Change Fees: The airline allows passengers to change their flights without incurring change fees, providing flexibility and convenience, which is especially valuable for business and leisure travelers.
• No Baggage Fees: Southwest offers free checked baggage, reducing the overall cost of travel for passengers and eliminating the need to pay additional fees for luggage.
• Open Seating: Southwest’s open seating policy means passengers can choose their seats upon boarding, promoting a stress-free and egalitarian boarding process.
• Point-to-Point Routes: The airline’s point-to-point route strategy minimizes layovers and streamlines travel, reducing the chances of delays and making travel more efficient.
• Customer-Centric Approach: Southwest places a strong emphasis on customer service and satisfaction, striving to create a positive and enjoyable flying experience.

Customer Segments:

• Budget-Conscious Travelers: Passengers seeking affordable airfare options and the ability to save on travel expenses .
• Business Travelers: Professionals who value flexibility and the option to change flights without incurring hefty fees.
• Families: Families appreciate the affordability and baggage policy of Southwest, which can reduce the overall cost of family travel.
• Leisure Travelers: Vacationers who prioritize cost -effective travel options and a hassle-free experience.
• Travelers Seeking Convenience: Passengers who prefer direct flights and streamlined travel experiences without extensive layovers.

Distribution Strategy:

• Official Website: The airline’s official website serves as a primary distribution channel , allowing customers to search for flights, make reservations, and manage their bookings online.
• Mobile App: Southwest offers a mobile app for easy booking, check-in, and access to travel information, enhancing the convenience for travelers.
• Travel Agencies: While Southwest primarily sells tickets directly, it also works with travel agencies and platforms to reach a broader audience.
• Customer Service: Southwest Airlines maintains a strong customer service presence, providing support for travelers through various channels, including phone and email.

Marketing Strategy:

• Low-Cost Messaging: The airline consistently promotes its low fares as a central marketing message, highlighting affordability as a key selling point.
• Transparency: Southwest emphasizes transparency in pricing and policies, ensuring that customers are aware of the airline’s no-change-fee and no-baggage-fee policies.
• Customer-Centric Messaging: Southwest markets itself as a customer-focused airline, emphasizing its commitment to providing a positive and enjoyable travel experience.
• Advertising Campaigns: The airline runs advertising campaigns to showcase its low fares, flexibility, and the benefits of flying with Southwest.
• Community Engagement: Southwest engages with communities through sponsorships and partnerships, fostering a positive brand image and connection with local markets.
• Social Media Presence: The airline actively uses social media platforms to interact with customers, share travel updates, and address inquiries.

Southwest Airlines revenue generation

Southwest Airlines generates revenue by providing domestic and international airline services. 

Revenue is spread across three categories:

• Passenger revenue – or the sale of domestic and international airline tickets to travelers. 
• Transportation revenue – encompassing shipping and freight services, and
• Other revenue – derived from the sale of ancillary services such as early check-in and in-flight purchases. Unlike other airlines, Southwest does not charge premium seating fees and offers light refreshments such as peanuts and crackers for free. 

Profitability

While the company uses a revenue generation strategy common to many airlines, its successful business model deservers further mention. Before the COVID-19 pandemic grounded planes around the world, Southwest Airlines made a profit for 47 consecutive years between 1973 and 2019. 

Despite operating in an industry where it is notoriously difficult to do so, the company has managed to not only survive but thrive. 

This has been achieved in the following ways:

• Intelligent route selection – as noted in the previous section, the airline prefers to operate routes where airport taxes are minimal. It also chooses routes where it is more likely to sell every seat.
• Flexible seating – Southwest doesn’t assign seat numbers to passengers. This means that if a plane is swapped out with a different seating configuration, the company doesn’t have to reissue boarding passes.
• Free checked baggage – while most airlines charge for checked baggage, Southwest does not. Former Vice President of ground operations Chris Wahlenmeier explained the reasoning: “ When you charge people to check bags they try to carry more on, sometimes more than can fit in the overhead bins. That results in more bags being checked at the gate, right before departure. And that wastes time. ”
• Point-to-point destinations – lastly, Southwest flights are point-to-point. This means the plane lands, turns around, and travels back to where it came from. The point-to-point strategy is seen as less vulnerable to delays than flying into major hubs, which are connected to hundreds of different airports and experience heavy air traffic as a result. A simpler network also means the company wastes less time searching for lost luggage, with Southwest boasting a bag completion rate of 99.6%.

Key Takeaways

• Southwest Airlines is a low-cost American commercial airline founded in 1967 by Herbert Kelleher and Rollin King.
• Initially, the company operated within Texas due to heavy regulation on interstate travel, which allowed it to establish a strong presence in the state by undercutting competitors.
• President Jimmy Carter’s signing of the Airline Regulation Act in 1978 enabled Southwest Airlines to expand its routes throughout the United States.
• The company stayed true to its low-fare brand , operating exclusively Boeing 737s to save costs on training and preferring routes between smaller airports.
• Southwest Airlines has been profitable for 47 consecutive years, with its streak only interrupted by the coronavirus pandemic.
• Revenue generation includes passenger revenue from airline ticket sales, transportation revenue from shipping and freight services, and other revenue from ancillary services like early check-in and in-flight purchases.
• The airline’s success can be attributed to intelligent route selection, flexible seating arrangements, offering free checked baggage, and using a point-to-point destination strategy .
• Southwest Airlines has expanded its services to over 100 destinations across the United States, Mexico, Central America, and the Caribbean.
• The company’s point-to-point flight strategy contributes to a high bag completion rate of 99.6% and reduced vulnerability to delays compared to flying into major hubs.
• Southwest Airlines places a strong emphasis on cost -saving measures and customer-friendly policies, which have contributed to its long-term profitability and success in the highly competitive airline industry .

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Simple Flying

Ultra low-cost carriers: who are they & what sets them apart.

Ultra-low-cost carriers (ULCCs) may offer a budget experience, but their business models prove that some travelers prefer this type of flying.

There are low-cost carriers, and there are ultra-low-cost carriers (ULCCs). These terms are not synonymous, and each category has its distinctions. These low-budget airlines sometimes get a bad rap because of well-publicized stories where passengers claim they are treated like second-class citizens.

While the experience is undoubtedly no-frills, there are some benefits to flying in the low-cost world. We take a look at some of the more common ULCCs and their successful business models, giving their legacy carrier counterparts a run for their aeronautical money.

Defining ultra-low-cost carriers

An ultra-low-cost carrier is an airline that operates with a low-cost business model, with marketing focusing on offering its customers airfare at much lower costs than competing legacy carriers. These airlines offered unbundled fares, which do not include seat assignments, check-in or carry-on baggage fees, or in-flight meals. Each of these services incurs an additional cost, allowing passengers to determine which options they are willing to pay for.

This bare-bones approach is one differing factor from ULCCs and low-cost airlines. While low-cost airlines are not focused on passenger perks, ultra-low-cost carriers have minimal inclusions in the fare and a more significant number of add-on fees.

The following sampling of ULCCS shows some of the most successful airlines in this category. As you’ll notice, many are in The United States, partly because domestic flights there are shorter, have fewer frills, and therefore are cheaper to operate.

Las Vegas-based Allegiant is the 9th largest commercial airline in the United States. It only flies domestic routes within the United States and primarily focuses on tourism-heavy destinations.

With its headquarters at Denver International Airport, Frontier Airlines’ service has branched out to new domestic and international locations. It has moved into competitive markets (like Miami), traditionally serving as legacy-dominated hubs. The airline was founded 25 years ago, in 1994.

Frontier Airlines

When it comes to European ULCCs, Ryanair usually is one of the first to come to mind. This Irish airline is the continent’s largest carrier. Its business model is based on low fares for short to medium-haul routes, and everything over and above the seat on the plane is chargeable. Like Southwest Airlines, Ryanair operates a fleet of all Boeing 737s, which keeps its maintenance and operational costs lower than a mixed-aircraft fleet.

Spirit Airlines

Spirit is the seventh-largest commercial airline in the United States and will become much larger if its proposed merger with JetBlue occurs. This airline was founded in 1983, and its route structure serves the United States, Latin America, Mexico, South America, and the Caribbean.

Sun Country Airlines

Like Allegiant, Sun Country targets the tourism market. However, unlike Allegiant, its main hub at Minneapolis-Saint Paul Airport allows this airline to serve a variety of domestic and medium-haul international destinations such as Dallas Fort Worth, Las Vegas, Mexico, Jamaica, Costa Rica, Aruba, and Belize.

This relatively new airline was founded in 2017 and is owned by low-cost carrier Canadian WestJet. With hubs at Hamilton Airport and Edmonton Airport, the carrier flies to over 15 destinations domestically in Canada, but also to North America and the Caribbean.

The pros and cons of flying an ULCC

These are just a sampling of some of the most prominent ULCC. Passengers who have never flown on such an airline may wonder if this type of flying is for them. It all depends on several factors. If assigned seating and no carry-on fees are your preference, then these airlines are not a good choice. These will charge you for nearly everything except the guarantee that you will sit somewhere on an aircraft flying from A to B. If that's your goal, ULCCs are the travel option worth exploring.

• Airline Business
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• _Airports Safety
• _Safety Management
• _Human Factors
• _Air Cargo Marketing
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Ultra low-cost carriers (ULCCs): Ultimate guide

• Post author: Andrew D'Amours
• Post published: April 7, 2022
• Post category: Flight tips / Travel tips
• Post comments: 0 Comments

The overall price of plane tickets has never been lower in the history of air travel, which is obviously amazing for those who love to travel more for less, as I do (and hopefully you do too). You can thank ultra low-cost carriers (ULCCs) for this: they are almost entirely responsible for flights now being so much cheaper in general… including on other airlines!

ULCCs are airlines whose unique business model is to give you the option to fly for less if you want to. I’ve been on more ULCC flights than most, and I paid as low as $10 for flights. That’s how cheap it can be! ULCCs are truly amazing!

Here is Flytrippers’ ultimate guide to ultra low-cost carriers — we’ll add to it soon to help you even more since they’re growing so quickly in Canada (including with a review of my experience on the inaugural flight of Lynx Air, Canada’s newest ULCC).

Basics: What is a ULCC?

ULCC is the acronym for u ltra l ow- c ost c arrier.

The key element about ULCCs is very simple : you just get no-frills air tickets and à la carte pricing for everything else, which allows you to fly for the lowest possible price. 

Almost no extras are included in the basic price so that you can get a plane ticket for less. It gives you the option to save money (an option you just don’t have with other airlines) and having more options when booking travel is always better for consumers. 

ULCCs get you from point A to point B with a seat, a small bag, and a safe ride. That’s it though, nothing else is typically included. No add-ons.

Everywhere else in the world, ULCCs have been around for decades. We are just very late to the game here in Canada. The largest airline in Europe is a ULCC! They’re great.

There are so many myths around ULCCs (which I cover below), but honestly, most of the complaints people have about ULCCs are because they didn’t know what ULCCs were and, for lack of knowing any better, expected the same experience (and the same inclusions) as on airlines that are twice as expensive!

You can fly for as low as $10 (depending on the country, obviously; more examples below) if you simply:

• Travel light
• Sit anywhere on the plane
• Eat before your flight/bring your own food
• Entertain yourself like a grown adult
• Don’t expect any extras/aren’t too picky

It just takes a mindset adjustment, but once you try it, you’ll see that it’s much better to spend your money on more travel experiences rather than the flight. Without a doubt.

And even for those who don’t want to travel for the lowest possible price:

• If you do want some extras , ULCCs are still the cheapest option most of the time
• If you don’t want to fly ULCCs at all , ULCCs make all other airlines cheaper too

ULCCs are now FINALLY in Canada (there are 3 here now), and they’re growing fast, too!

Flytrippers often spots ULCC deals at around $30 one-way, or $58 roundtrip. Yes, $30! Here in Canada! And all mandatory taxes and fees are always included in the plane ticket prices you see.

Most of the 50%-off flight deals Flytrippers spots every day are on regular airlines. And taking advantage of those (by being flexible and prepared ) will also save you a lot of money on your flights, no matter the type of airline.

But if you can’t do that, flying on ULCCs is one of the best alternatives to find cheap flights (being flexible and prepared helps with that too… can you spot the trend?).

In short, ULCCs allow you to fly for the lowest possible amount of money as their entire business model is designed around that concept, unlike all other airlines.

Misunderstanding: Are ULCCs the same as LCCs?

To be very clear, ULCCs (like Swoop ) are not the same thing as just “low-cost carriers” or “budget airlines” or “discount airlines” (like Air Canada Rouge). ULCCs are a really distinct business model designed specifically to offer rock-bottom prices.

It’s a completely different type of airline. That’s why it’s ultra low-cost, not just low-cost.

(It is a bit confusing, and it doesn’t help that almost all journalists — and even some people who consider themselves travel “experts” — confuse both definitions and just don’t get that ULCCs are entirely different.)

Since my first ULCC flight all the way back in 2011, I’ve taken 80+ flights on 15+ different ULCCs in 20+ countries and on 4 continents…

So I’m well-positioned to tell you everything you need to know about this type of airline, one whose rise is one of the best things to ever happen to the airline industry, at least for travelers who love cheap flights (including for those who don’t even like ULCCs).

List: Which airlines are ULCCs?

Pro travelers should know which ones among the hundreds of airlines around the world are ULCCs, because there aren’t that many of them.

We’re not sharing this list so that you consider these airlines only: as I’ll explain in the myths below, it makes no sense to do that because you should always compare all airlines for your specific dates and destination to make sure you see the cheapest option.

We’re sharing the list so that you know which airlines are actually ULCCs. That way, you can more quickly analyze flight search results (by knowing which ones are ULCCs) and know which specific routes to look at for the cheapest options.

In the next part of this guide coming soon, you’ll be able to check out the list of all ULCC routes for Canadians as well as the list of long-distance intercontinental ULCC routes, as those are very good to know about too.

Flytrippers will soon have even more content about ULCCs, including a section with pictures of each ULCC we’ve tried up to now.

So here’s a list of ULCCs by region (of course some of these airlines fly to other regions, but they’re listed based on their home country).

ULCCs in Canada

• Flair Airlines
• Jetlines (launching “soon” since 2013)

ULCCs in the United States

• Sun Country

ULCCs in Latin America

• Viva Aerobús
• Viva Air Colombia
• Viva Air Perú

ULCCs in Europe

• Norse Atlantic (coming soon)

ULCCs in Asia/Pacific

• VietJet Air
• Spring Airlines

ULCCs in Africa and the Middle East

• FlySafair 

Prices: How cheap can ULCC flights be?

Since the base airfare portion of the price is so tiny, how low ULCC flight prices can go mostly depends on how much taxes a country charges on airplane tickets.

For example, in Europe, $10 flights are common because taxes are extremely low. In the US, it can often be US$14 (≈ C$18).

In Canada, the most common lowest price will be around $30, which is not as good, of course… but it’s still incredibly cheaper than the prices regular airlines got away with charging for decades.

Here are a few examples of actual prices I paid myself on ULCCs (or prices you can easily find on ULCCs in those regions):

• $10 in Europe
• $20 in the US
• $20 in South America
• $30 in Asia

In Canada specifically, here are very common prices we spot for different routes on our cheap flight deals page (in this case, these are one-way prices, unlike in our deals, but this is just to show you the individual price point):

• Edmonton-Vancouver for $30
• Toronto-Vancouver for $45
• Montréal-Vancouver for $60
• Montréal-Toronto for $45
• Montréal-Halifax for $40
• Montréal-Calgary for $60
• Ottawa-Calgary for $45
• Calgary-Victoria for $40
• Winnipeg-Vancouver for $45

Again, to find these, make sure to always use an aggregator to compare all prices for your specific dates and destinations (if you’re not flexible enough to wait for the turnkey deals we spot for you).

Advantages: Why are ULCCs great?

Here are the 6 main reasons why ULCCs are great.

Saving money

Obviously, this is the main benefit. I love ULCCs and they’re a big part of why I’m able to travel a lot (for example, in 2019 I went on 12 international trips).

If you like to travel, you probably want to travel more. And it’s not rocket science: saving money is how you can easily travel more. ULCCs can save you a lot of money.

When you think about it, why should you subsidize the cost of extras other travelers want through your own ticket price if you just want to get where you’re going for the lowest cost?

Separate tickets trick

At Flytrippers, we call one of our favorite flight booking tips the “separate tickets trick.” We’ve told you this many times: for many destinations, you can save a lot of money by simply splitting your itinerary into separate tickets.

We’ll have a detailed post about this soon, but let’s look at just one example. Flying from Canada to Bulgaria will often cost $1,200 roundtrip! And there are no direct flights, you’ll have to do a layover anyway at that price.

Instead, what I did was buy the cheapest flight I could find to Europe, which was $300 roundtrip at that time. From that European city to Bulgaria, flights were less than $100 roundtrip. So $400 total instead of $1,200. For the exact same itinerary. Just by buying separate tickets!

The separate tickets trick is almost always made possible thanks to ULCCs, because they don’t partner with other airlines and therefore will not show up as an option if you’re looking to get the complete route on 1 same ticket.

And as a bonus, I got to spend a few days visiting my layover city. If you like to travel, you probably like to visit more cities; after all, visiting new places is literally the definition of travel. ULCCs and their low point-to-point pricing allow you to visit more places.

More flexible routings

This isn’t as true as it used to be, but some airlines still charge more for a one-way flight than just half of the roundtrip price. 

ULCCs always price their flights individually as one-way tickets, so for world travelers who love to go from one place to another and want the flexibility of not always having to buy roundtrips, ULCCs are sometimes the best option (although as I said, many regular airlines now price their one-way flights separately too, especially for shorter distances).

Lowering prices on other airlines

As I alluded to earlier, ULCCs force all other airlines to lower their prices, so they really benefit all travelers. I explain this in greater detail in the myths section below.

More environmentally friendly

Yes, if you’re going to fly and want to reduce your carbon footprint, ULCCs are the most environmentally friendly plane ticket option. I also explain this one in the myths below.

No regional jets

On regular airlines, flights are sometimes operated by smaller regional jets which are usually less comfortable and noisier.

ULCCs only operate regular-sized jets, almost always from the Airbus A320 or Boeing 737 families of aircraft.

Downside: What’s the only real issue with ULCCs?

A good way to give you more important details about how ULCCs work is to debunk 10 myths about ULCCs that are pretty widespread… and the one real issue.

Here are 10 myths that I’ll break down in more detail further down in the guide:

• ULCCs aren’t trustworthy
• ULCCs aren’t as safe
• ULCCs have a worse customer service
• ULCC flights always end up costing more
• ULCCs aren’t cheaper if you want extras
• ULCCs are always the cheapest option
• ULCCs aren’t as comfortable
• ULCCs are bad for the environment
• ULCCs aren’t for me so I don’t care about ULCCs
• There has to be a catch with flights so cheap

Those 10 myths are all absolutely false . 

Like so many other things in life (and in travel specifically) a lot of people love to see scams everywhere, but that doesn’t mean they’re right. I repeat: those 10 myths are completely unfounded.

That said, there is one major downside that we will mention as your trustworthy reference for all things travel, to give you all the information.

(But it’s not really even that specific to ULCCs, but rather to all airlines that are smaller, that aren’t part of airline alliances , or that don’t have many airline partners in general — it just happens that pretty much all ULCCs fit in this category.)

The main issue with ULCCs is that if something goes wrong, alternative flights are not as frequent. 

To be clear, ULCCs don’t even necessarily have more canceled flights than other airlines based on the available data. That’s not it. What I mean is that in the off-chance that your flight is canceled (which can obviously also happen with any airline), ULCCs have fewer planes, so fewer flight frequencies. And that means you can be stuck somewhere for longer than if you fly on a major “regular” airline for sure. 

The key to minimizing that risk is to simply pay for your plane ticket with a travel credit card that offers free trip interruption insurance! It’ll pay for your flight back home on another airline! 

Because yes, apart from the obvious benefit of giving you a lot of free travel (getting the right cards will give you hundreds of dollars as welcome bonuses), one of the great things about the world of travel rewards is that credit cards provide you with a significant amount of free insurance coverage (we’ll soon have an ultimate guide on that as well)!

Tips: How to fly on ULCCs?

Here’s a slightly more detailed look at how ULCCs work.

Most ULCCs include only a small bag in the basic price, often called a “personal item.” This bag must fit under the seat in front of you.

Yes, that’s it. It’s certainly very possible to travel this lightly, I’ve done it countless times. You might not want to do it, which is perfectly okay… but it’s not okay to say it’s impossible, because it’s really not.

I’ve done it for month-long trips, and it’s not that much harder than the many times I went to Florida just for the weekend thanks to US$40 roundtrip flights on ULCCs.

And as I said, even if you want to add a full-size carry-on or checked bag, ULCCs are still the cheapest option most of the time.

But there’s a reason budget travelers are almost always part of #teamcarryononly, and it’s not even just about the hundreds of dollars in bag fees you’ll save every year: it’s honestly so much more pleasant to travel with a carry-on only, and pro travelers should never check bags.

The hardest part is trying it for the first time, because you’re probably used to bringing way too much stuff. But there’s a reason why people who tried traveling with a carry-on only have never gone back to bringing too much useless stuff. It’s liberating; don’t miss our tips on traveling lightly soon.

Seat selection

Many regular airlines now charge for seat selection as well, but by simply checking in online 24 hours before your flight, you can choose them for free .

But with most ULCCs, that trick doesn’t work and seats are truly randomly allocated if you don’t pay.

In my experience, you’ll almost always be seated with your travel companion for free if you check in online very early (and it seems that all ULCCs won’t split up kids from their parents either).

And if you do end up seated separately, it’s really not the end of the world, you’ll survive.. or you can negotiate with solo travelers onboard who don’t mind switching seats for free!

There’s no free food or beverages, just like literally anywhere else you go in life. You’re paying to get from A to B, so you’ll have to pay for your food yourself just like you have to do about 3 times a day, 365 days a year.

Cheaper option: you can simply bring snacks ( these protein bars are my go-to snacks to feel full for a while for barely over $1/bar).

Even cheaper option: just eat before your flight completely free in an airport lounge thanks to one of the many credit cards in Canada that give you free lounge access (and come with welcome bonuses worth hundreds of dollars, too).

Entertainment

I’ll never understand why someone would pay even a dollar more to have an in-flight entertainment system, but I guess that’s because I really don’t care much for entertainment in general.

That said, you’ll have to entertain yourself on ULCCs, as most of them don’t have anything included. You can download your entertainment in advance to your own devices.

But if you’re among the many people who really aren’t very good at being well-prepared, unless you’re a 10-year-old, you should manage to survive this tough ordeal of not having entertainment for a few hours. 😉

Routes for Canadians: Where do ULCCs fly?

Subscribe to our free newsletter to get our detailed guide on ULCC routes from all Canadian cities soon.

Long-distance routes: How to fly across continents on ULCCs?

The pandemic has greatly reduced long-distance routes in general, and ULCCs have been particularly hard hit because they don’t have essential business travelers to fill their flights as regular airlines do.

We’ll update this section once international travel resumes a bit more.

Rewards: How to fly for free on ULCCs?

Savvy travelers know that travel rewards are a huge reason why many people can travel a lot more.

While it’s true that ULCCs usually don’t have the most worthwhile rewards programs and no ULCC-branded credit cards are available in Canada, that doesn’t mean it’s not relevant.

First, there are many rewards programs that allow you to use points as simple travel credits to erase any travel expense (Amex MR points, HSBC Rewards points, Scotia Scene+ points, RBC Rewards points, etc.), so you can get free ULCC flights easily this way.

Second, with ULCC flights being so cheap in cash, it can allow you to focus your rewards strategy on hotel points for example, which is what I do.

In 2019, I got 53 free hotel nights with Marriott points since I focus most of my spending to earn valuable free hotel nights (when I’m not unlocking one of the many welcome bonuses I get each year, of course).

Economics: How can ULCCs be so cheap?

I’m not quite sure how many of you travelers care about the economics of the ULCC business model and the business side of the whole thing… but the former management consultant in me will be glad to share a brief overview here in the next update in case you’re interested.

Photos: What is it like on ULCCs?

Come back soon for my many pictures of different ULCC experiences.

Myths: What are common misconceptions about ULCCs?

Here are more details about the 10 myths I mentioned earlier.

Myth: ULCCs aren’t trustworthy

ULCCs now carry over 33% of all air passengers in the entire world.

Yes, 1 out of 3 passengers. Just because you don’t know about ULCCs (because Canada has been one of the last places for them to get a foothold) doesn’t mean they aren’t trustworthy.

In Europe, the #1 airline in terms of passengers carried is a ULCC — and it’s been around for decades. In the US, 2 of the fastest-growing and best-performing airlines are ULCCs.

Almost every country in the world has had ULCCs for years… It’s understandable to not know much about them since they’re new here, but skepticism is not warranted.

Myth: ULCCs aren’t as safe

Seriously, this myth is simply ridiculous. Security standards in the aviation industry are not only extremely high, but they’re exactly the same for all airlines , no matter what business model they choose and no matter the cost of their tickets.

Regulators don’t care… so that’s not how ULCCs manage to lower their prices. In fact, ULCCs often have reliable brand-new, state-of-the-art airplanes: many ULCCs have the youngest fleets in their respective countries since they’re growing so fast (this reduces maintenance costs and fuel costs too).

Myth: ULCCs have a worse customer service

Some would argue that every single airline has “bad” customer service. The fact of the matter is that after 82 ULCC flights (and hundreds on non-ULCC airlines), I can confidently say that service on ULCCs is most definitely not worse than on airlines that are twice as expensive.

If anything, the laidback, friendly atmosphere that ULCCs promote makes everyone more approachable. Flight attendants and gate agents aren’t magically less friendly just because you paid your ticket half the price as on other airlines.

Those who don’t like ULCCs are almost always complaining because they didn’t do their homework and were expecting to get the same inclusions on a ULCC as on a regular airline. That’s not on the airline, that’s on them.

Even when it comes to dealing with an airline for flight cancellation or something like that… they’re pretty much all equally terrible, regardless of the price or whether it’s a ULCC or not. That’s just how it is.

No one would ever consider Air Canada as an airline offering low prices… and yet they were literally the worst for customer service during COVID-19. ULCCs are not automatically worse.

Myth: ULCC flights always end up costing more

No. Don’t purchase any extras, and you won’t pay a penny more.

Simple. I’ve done it dozens and dozens of times. It’s easy to just pay the low base price you see with ULCCs: there are absolutely no other mandatory fees, everything else is 100% optional … so just don’t pay more if you don’t want to pay more.

If you want to travel for less, make it a priority to travel for less. And make choices that align with your objective.

That’s the beauty of ULCCs: with other airlines, you’re forced to pay for many things you probably could get used to not having since it means flying for half the price… and you are subsidizing the extras other passengers use.

Myth: ULCCs aren’t cheaper if you want extras

This really depends. For clarity: If you don’t want extras and just want to fly from point A to point B for the lowest price, ULCCs are almost always the cheapest option.

But even if you do want a few extras, ULCCs are often so cheap that the total price is still often the lowest . Just compare , as always.

Myth: ULCCs are always the cheapest option

Of course not, literally no airline can be the cheapest at all times . ULCC or not.

That’s why you should ALWAYS search on an aggregator website that will compare all airlines and why you should NEVER check a specific airline’s website only.

It’s the most basic thing about finding cheap flights.

Prices vary every single day of the week. If a specific flight is full, then another non-ULCC airline can be cheaper that day.

But ULCCs will be cheaper the vast majority of the time, and as I said, if you don’t want any extras, ULCCs will really be the cheapest option almost 100% of the time.

Myth: ULCCs aren’t as comfortable

The reality is that most regular airlines have reduced the legroom in their own economy class sections to try to compete with ULCCs on price, so the difference is really marginal. I’m just under 6 feet tall and rarely see much of a difference , no matter the airline.

Seat pitch (the distance between seat rows) on a vast majority of airlines varies from 27 inches to 31 inches, so it’s really not a huge difference anymore (the price difference can be huge though).

I’ll soon share a post about how to see the seat pitch for any airplane (subscribe to our free newsletter ).

Myth: ULCCs are bad for the environment

That may be true in the sense that ULCCs generate more trips and all air travel is pretty bad for the environment.

But as an individual, if you’re going to fly anyway, ULCCs are actually the most environmentally friendly airlines.

ULCCs produce by far the least pollution on a per-seat basis.

The 3 main reasons for that are the lack of premium seats that take up a lot of space, the very recent energy-efficient airplanes, and the fact that baggage policies tend to encourage people to bring less stuff (lighter planes mean less fuel, as we said in our April Fools’ prank ).

Myth: ULCCs aren’t for me so I don’t care about ULCCs

Keep in mind that literally the only thing that determines the overall price of airplane tickets is competition (as well as supply and demand for each specific date, of course).

Not the distance flown, not the number of flights, nothing else. Only competition.

So the presence of ULCCs is great for all travelers by forcing competitors to lower their prices.

The competition factor is why Americans are sitting next to you on the same Air Canada flight to Europe, but they paid half the price even if they had an extra flight included and their flight obviously costs way more to operate. 

The competition factor is also why when Canadian ULCCs launch new flights, Air Canada instantly cuts its own prices for the same route. The route didn’t magically get cheaper to operate: ULCCs drive prices down for every traveler, not just for travelers who fly ULCCs.

Myth: There has to be a catch with flights so cheap

No, there really isn’t . But because some people are so used to the traditional model, the fact that you’re not forced to pay for every possible service and extras can feel like a catch. But it’s not. You just have to adjust your expectations that all those services and extras are included, because they’re not. But it’s clearly communicated.

But flying for as little as $10 is definitely worth it if you’re aiming to travel more often. ULCCs are safe and fun; forget whatever else you might have heard — and remember that someone else’s 1 or 2 times on any airline can’t be representative of the entire experience.

(But I think my 82 ULCC flights are a pretty good sample size for me to talk about this, but feel free to find someone who has tried it more often than I have and thinks they know more about ULCCs. 😉 )

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Ultra low-cost carriers (ULCCs) are a great way for travelers to fly more for less, with a business model focusing on getting you from point A to point B without you having to pay for extras if you prefer saving money. Forget all the myths you’ve heard about ULCC and try them yourself

What would you like to know about ultra low-cost carriers? Tell us in the comments below.

See the deals we spot: Cheap flights

Explore awesome destinations : Travel inspiration

Learn pro tricks : Travel tips

Discover free travel: Travel rewards

Featured image: Touring Swoop’s aircraft (photo credit: Andrew D’Amours/Flytrippers)

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More new ultra low-cost routes coming to Canada (and teaser of our guide with all routes)

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Low-Cost Carriers In The Aviation Industry: What Are They?

Low-cost carriers (LCCs) are responsible for a third of the world’s scheduled airline capacity today, and it looks as though they are set to continue to grow.  In the last 12 months, the respective shares operated by LCCs of Flights, Seats and ASKs have increased by 2 percentage points. 

The COVID-19 pandemic provided an opportunity for LCCs, like Wizz Air and Indigo, to adapt their strategies. These airlines used the pandemic to assess their markets and grow. The next few years will see them, and other LCCs, receive a significant number of aircraft, enabling them to further expand. This growth will involve continuously assessing new route opportunities and steadily encroaching on the networks of legacy carriers.

In this blog, we will explore what defines a low-cost carrier today, the key LCCs by global share of ASKs, what actually makes LCCs cheaper, and why they have been so successful.

What is a Low-Cost Carrier (LCC)?

For the traveler, these airlines may more commonly be referred to as budget airlines, discount airlines, low-fare airlines or no-frills airlines. These terms refer to the fact that the consumer typically spends less money to fly on low-cost carriers. Low-cost airlines specialise in keeping the costs down, minimizing their operating costs by having single aircraft fleets, and without some of the more traditional amenities (like in-flight meals) included in the fare,  meaning they can offer lower fares due to their lower cost of operating – essentially these cost-savings are being passed on to the traveler and for LCCs the trade off is they stimulate more passengers to travel due to lower fares.  Recently, the tactics deployed, and strategies used by many of the LCCs (to keep costs down) are increasingly being adopted by  legacy airlines - creating hybrid airline business models. 

Which Airlines are Low-Cost Carriers?

Today there are 811 scheduled airlines, and of these 102 are low-cost carriers. Despite there being so many airlines, the reality is that 80% of all flying, as measured by Available Seat Kilometers (ASKs), is done by just 13%, or 103 of these airlines. Among these 103 airlines are 29 LCCs, reflecting a strong global presence. 

The largest LCC in the world is Southwest Airlines, based in the USA. It provides 11% of global Available Seat Kilometers (ASKs) , and is closely followed by Ryanair, which contributes 10% of global ASKs.

Although 8 of the Top 10 LCCs are based in either North America or Europe, LCCs are not solely a North American or European phenomenon, as this type of business model has been replicated across the globe. IndiGo, based in India, has grown rapidly and is now the 4th largest LCC in the world while Lion Air, based in Indonesia, is ranked 10th.  South Asia, including India, has the highest market penetration by low cost carriers, who operate 63% of all seats in the 12 months to August 2023. 

What Makes LCCs Cheaper?

Managing costs starts with the business model for the airline, and the operating strategy being pursued by the management team. The primary characteristic of the business model is driven by a compulsion to keep operating costs as low as possible which means the airline can offer air fares that are as low as possible. Competitiveness is based on being able to win customers primarily through price. 

Keeping costs down affects everything about the airline – where it flies, what the airline product looks like, sales, onboard services and even the aircraft itself. Nothing is off limits, apart from safety, of course.

What Makes LCCs Cheaper? The Flight Experience

Single cabin configuration: Keeping the cost of flying down for each passenger means that many LCCs operate with a single cabin configuration and fit in as many passengers in as they can. This means the costs of flying the aircraft are shared by as many people as possible. Fitting a lot of passengers on an aircraft can mean that airline seats are spaced a bit closer together than on some legacy airlines. 

Onboard services: The onboard service is also pared down. Drinks and food options are often more limited and have to be paid for separately, rather than being included in the cost of the ticket.  Baggage allowances are also tightly controlled so that anything more than a small carry-on bag incurs a cost. Similarly, if a passenger wants a specific seat or wants to be able to sit with specific people, they may need to select these in advance and incur charges for having that choice.

While headline fares are low, passengers who choose a number of these additional items may find themselves paying significantly more than that. The most successful LCCs will generate up to about half of all their revenues from what are termed ‘ ancillary products ’, i.e. the extra things that passengers buy.  The breaking down, or unbundling, of what used to be included in an airline ticket purchase is increasingly being copied by legacy airlines, especially for short-haul flights. 

What Makes LCCs Cheaper? Aircraft Fleet Used 

One of the most obvious differences between LCCs and legacy carriers is the aircraft fleet. A typical LCC only operates aircraft from one family of aircraft. 

For instance, both Southwest Airlines and Ryanair, only operate Boeing 737s. This can increase their negotiating power when they first buy or lease aircraft as orders are often very big, though once committed they are somewhat tied in. Their size, however, means they can be a strong voice for changes they want to see in new aircraft development as they will be significant future buyers. 

Unsurprisingly, the primary reason for maintaining a fleet with a single aircraft type is costs. Pilots are interchangeable, being able to fly any aircraft in the fleet. Crew flexibility is also maximised as all the crew are familiar with the aircraft and the size of roster is always the same. Maintenance, spare parts, training and the other costs associated with aircraft are also kept to a minimum. 

Where having a single aircraft type may be limiting is that there is less flexibility to ‘right-size’ an aircraft to a market. The only lever an LCC has is to increase or decrease capacity on a route is the frequency with which a route is flown. There are no larger or smaller aircraft to deploy according to demand. In contrast, large legacy airlines often may have a fleet with 5 or 6 different aircraft types, some suited to small, thin routes and others much larger and capable of carrying much larger numbers of passengers while still only using one airport slot for taking off and landing. In the past, some of the legacy airlines had many more different aircraft types but over time they have reduced the number of different models in their fleet in order to reduce costs. 

Another feature of the LCC aircraft is often its average age. Typically, LCCs operate newer aircraft than legacy carriers, especially given the improved operating efficiency – and therefore costs – of the newest aircraft. 

What Makes LCCs Cheaper? The Route Network 

The traditional airline business aims to grow by creating an ever larger network of routes based around hub airports so that they can offer potential travellers more and more possibilities for travelling between two points. In contrast, the LCC model is focused on point-to-point travel. Passengers who want to make use of the network to connect between flights need to buy multiple tickets and bear the risk themselves of missed connections.  

On paper, every LCC has a route network but for the airline every route operated is like a mini business. Each route must be profitable in its own right, or on a stand-alone basis. Unlike the network carriers - which assess profitability on the basis of the whole network and where unprofitable individual routes may make a valuable contribution to the network as a whole - the LCC can be ruthless and experimental about the routes operated. Under-performing routes will be culled while routes with potential will be added.  

The choice of airports used may be different too. In pursuit of lower costs, LCCs are more likely to opt to fly in to and out of secondary airports, often further from city centers and with fewer facilities. For the LCC, this can also mean less congestion, and airport charges which don’t cover the cost of fancy terminals and boarding gates. For the traveller it may mean a bit of a drenching if it rains while transferring from an airport bus to an aircraft parked at a remote stand, but that is accepted as the price of a cheap ticket.

Why Have Low-Cost Carriers Been So Successful?

Customer-focus: how lccs sell to the consumer.

While airlines have always sold some of their tickets directly to consumers, the LCCs have made this standard. This allows them to better control inventory and fares, and saves the airline from paying commission to the intermediary in the usual distribution channel. It also enables them to be focused on what the customer values, by owning the customer data and search data, the LCCs are adept at using that information to sell product enhancements and ancillary products – and experiment with this. It’s not unknown for LCCs to use their booking website address as the main part of their aircraft livery. 

A notable of LLCs is their operation across multiple markets, such as in Europe where Ryanair, EasyJet and Wizzair have a number of bases covering locations in Scandinavia, Central Europe, Eastern Europe and deep into Southern Europe, stretching ever closer to the Middle East. In similar fashion via a series of franchise operations both Air Arabia and Air Asia have created bases in various countries that allow them to maximize networks within bi-lateral agreements in those countries.

Blurred Boundaries: What Distinguishes An LCC From a Legacy Carrier?

Increasingly the boundaries between what distinguishes an LCC from a legacy carrier are blurred. Many legacy carriers have reduced the number of different aircraft types they fly, seeing the impact on overall costs. New Distribution Capability , or NDC, is bringing a greater degree of commercialisation to legacy airlines, enabling them to offer more personalized and dynamic offers, like those that LCCs use with their customers. Increasingly legacy airlines are unbundling their product, so the passenger is expected to pay separately if they want hold baggage or a pre-assigned seat. The net effect can be that some legacy airlines are treating the economy cabin almost as a low-cost carrier in its own right, while the premium cabins function as traditional legacy airlines.  There are also some LCCs that venture into offering differentiated cabins in order to attract higher fare paying passengers. Technology has always been an important tool for low-cost carriers in their quest for keeping costs low, whether that is manifest in the paperless office or real-time data which ensures fast aircraft turnaround times. Technology is now also enabling some LLCs to offer customers virtual flight connections that allow them to connect between single LCC flights with peace of mind about luggage and missed connections.  

With price a key element of customer decision-making for almost all passengers, legacy airlines will continue to adopt LCC innovations, while LCCs will continue to place pressure on legacy airlines through their consistent drive to keep airfares low.  

What is an ASK?

An ASK, or Available Seat Kilometer, is the total number of airline seats flown multiplied by the distance of each flight. Overall, it is a way of measuring the size of each airlines’ air service offering.

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This Saudi Airline Hopes to Triple in Size: The CEO’s Plan For Getting There

Gordon Smith , Skift

May 13th, 2024 at 5:56 AM EDT

Flyadeal's new CEO Steven Greenway says the scale of airline's expansion attracted him to the role. His challenge now is turning targets into tangible results.

Gordon Smith

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Even by Saudi standards, the goals are ambitious: By 2030,  the country wants 330 million passengers to pass through its airports annually, up from around 112 million last year.

To get there, the Saudi airline sector is growing faster than almost anywhere on the planet.

New carrier Riyadh Air has grabbed  most of the attention . However, there’s another shift underway: The rise of the Saudi low-cost airline. 

Flyadeal is the budget subsidiary of Saudia, the country’s national carrier . Since launching in 2017, it’s grown to become one of the nation’s biggest low-cost operators. 

By the end of the decade, flyadeal is set to triple in size, from 32 planes today, to almost 100. Dozens of new destinations are set to be added to its route map, with international links into Europe and the Indian subcontinent. 

Trying to take this vision from spreadsheet to the skies is Steven Greenway, who was appointed flyadeal CEO in January. He was a founding member and CCO of Scoot, Singapore Airlines’ budget subsidiary , and also served as president of Swoop, a Canadian ultra-low-cost carrier that later merged with WestJet.

While the opportunities for Greenway are vast, so are the challenges. Adding huge capacity into a developing market in a short space of time can be difficult.

In the latest of our  Leaders of Travel: Skift C-Suite Series , we sit down with Greenway to find out how ambitions can translate to reality.

Which Planes Will Fuel the Expansion?

Skift: Before you joined flyadeal, there was a publicly shared goal of having around 100 planes in the fleet by the end of the decade. Is that still on the cards? 

Steven Greenway: Yes. The ambitious growth plan at flyadeal was the reason I was attracted to the airline. You’re going to see us leapfrog from 32 aircraft today to just shy of 100 in four or five years – more than tripling in size.

Our background is domestic flying and this still makes up around 80% of our capacity. Moving forward, the dynamics will change slightly because we’ll continue to grow domestically, but also branch out internationally. The airline is morphing into more of an equal blend of domestic and international flying.

We know that the additional 65 or so aircraft will be Airbus narrowbodies. Do you have any wiggle room regarding the size and variant? 

The order book is a mix of Airbus A320s and A321s. I can’t talk about what the actual mix is, but our A321s start arriving in 2026. It’s that well-worn strategy seen in other parts of the world wherever you have slot constraints where you deploy the A321 to give you extra capacity. But it’s also about enabling us to grow with what we have.

There are only so many times you can fly between Riyadh and Jeddah. We already have 22 flights a day. You can add another one every 15 minutes, you can use that slot for something else like an international service, or you can upgauge the size of the aircraft.

The mission set between the A320 and A321 is exactly the same, it’s just that we’re getting more seats. It offers flexibility in a part of the world where there’s a lot of seasonality. There are peaks and troughs in terms of demand. Of course, that’s true for a lot of markets, but particularly here in the Middle East.

Taking a look inside the plane, would you consider introducing a hybrid premium product like we’ve seen at other low-cost carriers?

I’ve worked at airlines that have done both. However, in my mind the premium cabin really only comes into play after four or five hours. We’re comfortable with the product we have. We’re constantly upgrading the seats, installing huge overhead bins, and offering in-seat power. When you consider all of these things combined, there’s enough there that people are reasonably comfortable for the mission sets that we have for the aircraft.

An Increasingly Familiar Business Model

How responsive is the Saudi market, and consumers more generally in the region, to the low-cost carrier (LCC) concept? 

Saudi Arabia is as commercialized as any country in Europe. They get what the trade-off is. You have airlines like Wizz coming into the country, Air Arabia, you have us. We all have similarly common practices with unbundled fares, so it’s nothing unfamiliar to this market. 

You have Saudia at the top offering full service, you have flynas in the middle doing a hybrid, and you have us doing a pure LCC play. People have choices in the market, which is great. They get what the proposition is, it’s not something that you have to educate them on per se. 

Are there any areas where further progress could be made?

I think the things that we need to improve are more around customer service and expectations. In some countries and regions, online check-in can be between 90-99%. It’s not here. Online check-in is not anywhere near as high as we would like, but it is progressing in the right way.

People also still carry a lot of baggage. For example, in Europe, people are able to survive with a backpack for the weekend because they want to save the money. That’s their choice. Here it’s a slightly different market, but it is adapting.

Flyadeal’s Growth Trajectory 

Flyadeal plans to operate to more than 100 destinations by 2030. What are the key markets and geographies to watch? 

The country is opening up for both domestic and inbound tourism. What you have is Saudis discovering Saudi Arabia. It’s not that they couldn’t travel around before, it’s that there simply wasn’t that mobility five or ten years ago.

I read the other day that Riyadh to Jeddah is probably going to be the busiest route in the world in the next couple of years – it’s come out of nowhere.

But there’s a lot more expansion to do within Saudi Arabia, especially when you look at the mega projects that are opening up. One good example is the Red Sea resorts. A new airport has opened there and it’s not even on our route map at the moment. It’s certainly something that we’ll be looking at over the next couple of years.

And what about your international ambitions? 

India is of incredible interest to us. The UAE and the Middle East in general are still underserved in terms of points into and out of Saudi Arabia. We also have to consider the secondary points. Everyone speaks about Riyadh and Jeddah, but what Dammam, what about Madinah? For example, we might already be operating to Dubai from Riyadh but we’re not from Madinah. So we’ll start joining the dots on that type of route as well. 

And then there’s southern and southeast Europe. We really haven’t touched on that except for some summer seasonal flying, which has been successful. But getting in there and branching into that market is a huge opportunity for us as well.

We’ve seen other low-cost airlines in the region and further afield open foreign subsidiaries. Is this of interest to you?

Never say never, but it’s really not on our radar. The reason is we believe in so much potential in Saudi Arabia that we don’t have to go fishing. Typically it happens when you’re a city-state, you’ve got no domestic market, you’re a pure international player – therefore you’re looking for other markets to open up. We’re not in that position.

We have a 10-year fleet plan, we know where the aircraft are going to go – obviously subject to change – and all of those are going into the Saudi market, either domestically or internationally.

The Future of Flying

Before joining flyadeal you were involved in the AI space. How much scope is there for this technology in the airline industry?

I think there’s huge potential. The question is does it replace human thinking and decision making? Or does it supplement and support and provide insight? I think there’s a lot of hype out there and that question still hasn’t been answered. I see AI as a companion to decision-making to support a whole range of factors.

Everything from call centers to network planning to operations control. We’re putting in scenarios, and we’re getting back a range of options that we can make decisions on as a business – that’s where we are experimenting as an airline. 

And finally, what are your key trends to watch for the coming year?

The continued growth, or boom, in Saudi Arabia. Watch how it manifests itself. You’ll also continue to see the Kingdom shape what its ambitions are. Keep an eye out for that because some of the things that are coming online, or to be announced, are absolutely phenomenal. I can’t speak about them, but I certainly know what’s coming and I think this is going to be a very interesting market.

This interview was edited for clarity and length.

Read more from our new  Leaders of Travel: Skift C-Suite Series   here .

Airlines Sector Stock Index Performance Year-to-Date

What am I looking at?  The performance of airline sector stocks within the  ST200 . The index includes companies publicly traded across global markets including network carriers, low-cost carriers, and other related companies.

The Skift Travel 200 (ST200)  combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number.  See more airlines sector financial performance . 

Read the full methodology behind the Skift Travel 200.

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Tags: airlines , flyadeal , low-cost carriers , middle east , saudi , saudi arabia , saudia airlines

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IndiGo’s wide-body aircraft order: What makes long-haul, low-cost air travel a tough nut to crack?

After ruling the indian skies, india’s largest airline is now attempting to make a mark globally with non-stop, long-haul and low-cost flights from indian airports. but airlines have been trying to do so for years, and most have failed the test..

After grabbing headlines last year by placing the world’s largest-ever commercial aircraft order —for 500 Airbus A320 family narrow-body jets—IndiGo again forced the aviation world to sit up and take notice recently by ordering 30 wide-body Airbus A350-900 aircraft, with deliveries slated to start in 2027. Additionally, IndiGo has purchase options for another 70 aircraft of the A350 family.

India’s largest airline, which is also among the biggest budget carriers in the world in terms of passengers flown, has now made its intentions clear with this latest order. After ruling the Indian skies, it is dreaming big to make a mark globally with non-stop, long-haul flights from Indian airports. There is one issue, though.

Even as the low-cost, short-haul model, of which IndiGo is a clear champion, has been mastered by a number of carriers globally, the same cannot be said about the long-haul, low-cost airline model. Many have tried, burnt their fingers, and even shut shop, while some continue to struggle. Numerous failures and few, if at all, relatively stable and profitable long-haul budget airlines underscore the reputation of this segment as the Ultima Thule of commercial aviation.

Wow Air, Norwegian Airlines, Thomas Cook, Air June, XL Airlines, and a number of other carriers failed at the long-haul, low-cost airline model. Some others in the segment, like AirAsia X, have been struggling. While there have been a few profitable long-haul budget operations, including Scoot, Jetstar, Cebu Pacific, Tui, and French Bee, it remains a segment replete with pitfalls and unknowns with more crashes than happy landings.

What makes this segment a largely unconquered frontier, and what can IndiGo do to plant its flag and build a successful long-haul product and network? There are no simple answers, just numerous factors, data points, and business and product philosophies. For years, airlines have been trying to develop recipes for a successful long-haul, low-cost model from these ingredients, but most have failed the taste test. Now IndiGo has its shot at perfecting the secret sauce, if there is one.

The high-cost dilemmas for low-cost carriers

The fundamental business principle of low-cost carriers (LCCs) is, at least theoretically, rather straightforward: minimise costs in order to offer low fares and fill up the aircraft, while still earning a profit. A cost escalation, on the other hand, limits the pricing power of the LCCs, thereby shrinking the gap with full-service carriers (FSCs).

One of the main factors that make it difficult to operate and sustain a low-cost, long-haul operation is the high fuel costs compared to short-haul hops. This means that airlines flying longer routes with larger aircraft have relatively less control over their costs as fuel expenses, which are determined by international oil prices, tend to have a disproportionately high share in the cost structure.

Latest wide-body aircraft like the A350 are more fuel-efficient than earlier generations of planes, but the jury is still out on whether they can really swing the needle in favour of low-cost, long-duration air travel. Operating narrow-body jets is a hallmark of major LCCs globally, but wide-body aircraft themselves are a lot more expensive. And new-generation wide-body planes even more so.

Then there are more costs associated with operating wide-body planes as they require additional manpower—cockpit and cabin crews—due to the sheer lengths of the journey, and rest and fatigue management requirements. Budget carriers thrive on rapid turnaround times and high capacity utilisation levels, and achieving these on a sustained basis in long-haul operations can be challenging. Additionally, maintenance and repair costs for wide-body aircraft tend to be higher and the timelines longer.

Networking skills

Apart from cost efficiency, network planning is the big differentiator when it comes to success and failure in commercial aviation. While it is often an airline’s product and pricing that get the most attention in the public eye, its network strategy and development are fundamental to how it fares operationally and financially. In the case of low-cost, long-haul airlines, the importance of the network design is further accentuated.

An airline’s network design is shaped by a number of factors, including demand and competition, so there is no one winning formula. And while there will be some unique features or peculiarities with every airline’s network, aviation sector experts point to a few common elements in the network designs of some of the relatively successful long-haul, low-cost carriers.

As in the case of successful short-haul LCCs, these elements broadly include operating more routes with few or no competing airlines and with low overall flight frequencies, instead of trying to break into competition-heavy, high-frequency routes. Operating from multiple hubs or points instead of one major hub might be a better network design for LCC operations even in the long-haul segment.

In other words, the global experience with successful LCCs has shown that they tend to perform better financially with point-to-point networks and a focus on serving latent demand and even stimulating it on the not-so-busy routes. And often, they try to fly to and from secondary airports that are cheaper to operate from than large airports.

Of course, there would be exceptions due to factors like demand levels in source markets, fleet strengths, geographical spread of the airline’s home country, airport infrastructure, and domestic and regional aviation markets and regulations, among others.

L ow-cost with some frills

The positioning of the low-cost product also matters. A barebones, no-frills product without much comfort and amenities might do the job for shorter flights. But when it comes to long-duration flights, flyers may be reluctant to choose such a product. And sprucing up the aircraft with more amenities, be it charging sockets, more comfortable seats, in-flight entertainment (IFE), and ovens to enable hot meal service, among others, certainly adds to the costs.

Different airlines are applying different solutions and innovations, some of which are not exactly in line with what low-cost airline products have traditionally represented. Many in the industry now term these as hybrid products, which offer a mix of LCC and FSC features.

There are carriers that have introduced dual-class cabins, offering business class or premium economy-like seats and services for a higher price. Some are also offering amenities like in-flight entertainment, power outlets, and hot meals to economy-class passengers either as part of the standard offering or on demand for an additional price.

Some of these airlines are even offering the option of all-inclusive bundled fares, in addition to the standard LCC practice of unbundled fares that require passengers to pay extra for everything from seat selection to luggage allowance to food and drinks on board.

IndiGo’s long-haul flight path

IndiGo has so far not commented on the potential routes on which the A350s will be deployed, their cabin configuration, and the amenities that the airline might offer on its wide-body product. In a recent investor call, IndiGo’s chief executive officer Pieter Elbers said that all options are open and the decisions will be taken in due course based on the evolving requirements of the Indian flyers and the country’s aviation landscape.

With the deliveries of the A350s slated to start in 2027, IndiGo still has time to finalise its network strategy and design, and the long-haul product it wants to offer. While the airline has not divulged details on both counts but there are indications of the broad direction it might take.

On the product front, there are signals that IndiGo could go for a dual-class cabin configuration, something that other successful long-haul LCCs have also done. With some premium economy or business class-like seats complete with a few bundled services—sold for a notably higher price than the regular economy class seats—airlines can earn additional revenue that helps them in offering lower fares to fill up the rest of the cabin. IndiGo currently offers an all-economy cabin on almost all its flights.

With regard to IFE, the airline is already running a trial on the bring-you-own-device (BYOD) basis on the Delhi- Goa route. It would be interesting to see if it will graduate to seat-back screens on its A350s, like Paris-based long-haul LCC French Bee. Will there be charging points on board and will IndiGo finally start offering hot meals? These are among the questions that the airline will perhaps answer closer to its induction of the A350s.

Coming to IndiGo’s plan for its network design, Elbers said that IndiGo would be looking to offer direct international flights from multiple points in India, and not just the top airports of Delhi and Mumbai . This plan appears to be in line with the multi-hub network designs of most of the successful long-haul LCCs. Given the growing demand for international travel and IndiGo’s strong domestic and short-haul international network, this model could serve the airline well in long-haul operations with strong potential for domestic-to-international and even international-to-international connections.

Over the past couple of years, IndiGo has been pushing its international network expansion to the extent it can with its narrow-body fleet. But instead of entering high-competition and busy routes, the airline has focussed on identifying under-served routes and those with latent demand, while also stimulating demand on certain others. This, again, is a strategy that has worked well for a number of LCCs in their long-haul operations, and there are clear indications that IndiGo may persist with it in designing its long-haul network.

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Sukalp Sharma is a Senior Assistant Editor with The Indian Express and writes on a host of subjects and sectors, notably energy and aviation. He has over 13 years of experience in journalism with a body of work spanning areas like politics, development, equity markets, corporates, trade, and economic policy. Before joining The Indian Express, Sukalp had long and enriching stints at financial newswire Informist and the Express Group’s pink paper The Financial Express. He considers himself an above-average photographer, which goes well with his love for travel. ... Read More

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5 Easy Ways to Score Cheap Business-Class Flights in 2024

T he business-class experience can be incredible, especially when you compare it to economy. Goodbye cramped, uncomfortable seating where you need to battle for the armrest. In business class, the seats are spacious -- they may even turn into beds -- and the in-flight meal service is a giant step up.

A premium experience also normally comes with a premium price tag. If you want to book a business-class ticket on an international flight, it could cost $3,000 or more each way.

Some people see those hefty ticket prices and decide to stick to economy. But there are several easy hacks that savvy travelers use to book business class at a fraction of its typical cost.

1. Start earning credit card travel rewards

The best way to save on business class is with travel credit cards . You can use these cards to earn points or miles, and then use those rewards to pay for business-class airfare.

If you always fly with the same airline, you could open one of its airline credit cards . When you use an airline card, you earn miles that you can redeem with that airline. But if you're not loyal to one airline, a better option is a travel card with transferable rewards. These are travel cards that let you transfer your rewards to airline partners.

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Instead of having miles that you can only use with one airline, you'll be able to transfer your rewards to any of your card issuer's partner airlines. This gives you far more options for booking business class.

2. Fly to an affordable destination

Airfare tends to be much cheaper when you fly to places with a lower cost of living. That's true with economy and business-class seats. So if you're hoping to have a better travel experience, without shelling out thousands of dollars for a flight, try looking for more affordable destinations.

Latin America is a popular choice because it has a low cost of living and it's not far from the United States. I've often found business-class tickets for $500 to $700 traveling to and around Latin America. If you're interested in going to Europe, Portugal and Spain are two of the less expensive options.

3. Go where the deals are

If you're the adventurous type, another way to save is an open-ended flight search. Many flight booking tools, including Google Flights and Skyscanner, let you explore destinations this way. Here's how:

• Choose your departure airport.
• Select the option to search for business-class flights.
• Enter your desired travel dates.
• In the destination field, choose the "anywhere" option.

You'll get a list of places you can visit, with prices for business-class airfare. Open-ended flight searches have become popular -- Skyscanner reports that 1 in 2 travelers start their searches without a destination in mind.

4. Compare prices on different travel dates

When you're trying to get cheap flights, being flexible makes it much easier. Flights sometimes cost half as much, or less, depending on the travel dates you choose. This is true when you're paying in cash or credit card miles.

The cheapest days to fly are Tuesdays and Wednesdays, according to research by CheapAir.com, so you may want to start your search there. With most airlines and online travel portals, you can quickly jump from day to day and see which have the lowest prices. Many airlines also have low-fare calendars where you can quickly check prices for an entire month at a time.

5. Upgrade your way into business class

Can't find a deal on the flight you want? You could book an economy ticket, and then see if it's possible to upgrade it later, space permitting. This is more of a gamble, so only do it if you wouldn't mind flying economy.

The upgrade process will depend on the flight and the airline. Some airlines give you the option to pay a flat fee for an immediate upgrade. Others use bidding systems, where you bid the amount you're willing to pay, and the airline later lets you know if your bid was accepted.

You don't need to stretch your travel budget to the limit for a business-class flight. If you shop around for deals, are flexible about when you travel, and use credit cards that earn travel rewards, you can fly this way at a reasonable cost.

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The Possible Collapse of the U.S. Home Insurance System

A times investigation found climate change may now be a concern for every homeowner in the country..

Hosted by Sabrina Tavernise

Featuring Christopher Flavelle

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Across the United States, more frequent extreme weather is starting to cause the home insurance market to buckle, even for those who have paid their premiums dutifully year after year.

Christopher Flavelle, a climate reporter, discusses a Times investigation into one of the most consequential effects of the changes.

On today’s episode

Christopher Flavelle , a climate change reporter for The New York Times.

Background reading

As American insurers bleed cash from climate shocks , homeowners lose.

See how the home insurance crunch affects the market in each state .

Here are four takeaways from The Times’s investigation.

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We aim to make transcripts available the next workday after an episode’s publication. You can find them at the top of the page.

Christopher Flavelle contributed reporting.

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