Swedish Airline Initial Research.

The following is a list of low cost carriers organized by home country. A low-cost carrier or low-cost airline (also known as a no-frills, discount or budget carrier or airline) is an airline that offers generally low fares in exchange for eliminating many traditional passenger services. See the low cost carrier article for more information. Regional airlines, which may compete with low-cost airlines on some routes are listed at the article 'List of regional airlines.'

http://en.wikipedia.org/wiki/List_of_low-cost_airlines

The history of Low Cost Carriers (LCC) Pacific Southwest Airlines and Southwest Airlines (former Air Southwest Inc.) in the United States could be regarded as pioneers for low cost air services. The idea was to offer flights for prices which are attractive compared to car and train and much lower than those of competing airlines. Low prices were already offered in the 1950th by Pacific Southwest and from 1967 onwards by Southwest Airlines. But Southwest could offer this service first only in Texas. The real start for nation-wide low cost air transport was the Aircraft Deregulation Act from 1978, which meant a liberation of the market for flight routes and flight prices between the states in the US. In a similar way the history of European low cost carriers began with the liberation of the flight market in the European Union. Air traffic was so far controlled by bilateral agreements between national airlines, but now it is legally permitted that airlines from other countries offer connections between two countries which are both not their home country.

1. Ryanair was the European pioneer for low cost flights. Photo: Elmar Uherek

In 1997 the Irish airline Ryanair began to offer connections from Dublin to London and several airports in continental Europe for low fares. In 2001 Ryanair and Easyjet began also to establish connections between two airports both in another country than their home country and to install parts of their aircraft fleet on key airports of their network in third countries. This was only possible due to a political decision allowing airlines to turn from more governmentally controlled transport providers to private companies on a free market.

2. Scheme A: Internationally diverse transport agreements were valid, in which a national airline can go from the home country to a foreign country and back (1. + 2.). Furthermore there were agreements to transport freight and mail between two other countries if the origin or final destination of the transport was in the home country (3.). Illustration: Elmar Uherek

3. Scheme B: After the liberalisation the airlines are free to offer connections through the home country to a third country, between to other countries and even within a foreign country. Furthermore they are free to decide about their prices. Illustration: Elmar Uherek

Definition There is not an absolutely sharp difference between the so called low cost carriers (LCC) and the traditional airlines, which are also called full cost carriers (FCC). Low cost carriers could be defined as airlines which operate on relatively short distances in a certain region without offering additional services.

Why are they successful? The concept of low cost carriers is successful for two reasons. They stimulated an additional demand in air traffic which has not been there before and they save costs wherever possible in order to offer the transport for very low rates. Low cost airlines usually pay for the available seat kilometre (ASK) about half the price than full cost carriers. This is possible for several reasons:

4. The diagram shows what the operational costs (in EUR cents) for the airlines are for offering one seat over a flight distance of 1 km. Data source: business reports of the respective airlines.

LCC pay lower prices at the airports because they often operate between remote places and achieve favourable conditions for airport services. These are sometimes indirectly sponsored by the local administration, which would like to win job opportunities for the inhabitants.   They go several times a day the same relative short route (about 900 km in average). Therefore no additional staff training for other routes is necessary, there are no additional costs for staff accommodation and the flights are more in time.   LCC carry out point-to-point flights. Consequently there are no costs for baggage administration and direction to connecting flights. Traditional airlines offer a so called hub and spoke concept which facilitates connecting flights but is more costly for the airline.

5. The costs for an ASK = available seat kilometre are defined as the fraction of all costs which can be attributed to one available seat flown over 1 km distance.

Due to the routine the time between landing and the next start is minimized.   Services are reduced to the minimum (no food, drinks, newspapers; Internet booking, etc.)   At the moment the LCC own primarily aircrafts of the newest generation. They go with higher fuel efficiency and have lower repair costs.   They often use only one type of aircraft which makes the maintenance much less costly.

The high demand allows high capacity use. The capacity use can be defined as the rate of bought revenue passenger kilometres (RPK) to available seat kilometres (ASK). It was in 2004 80.9% for Ryanair, 84.5% for easyJet, but only 74% for Lufthansa and 73% for British Airways.

6. Each seat moved for 1 km has certain operation costs (red bar) but brings also a revenue if booked. The scheme shows the numbers from Ryanair in 2004. Please click the figure in order to enlarge it! Illustration: Elmar Uherek

Costs of low cost carriers Kerosene In contrast to other airlines and depending on the concept of the airline the kerosene costs make up for a higher fraction of the total operation costs, about 30% for Ryanair, about 10% for Lufthansa. EasyJet does not follow the low cost strategies in all ways and is closer to the costs of the traditional airlines.

7. Fraction of kerosene on the total costs of the respective airline in 2004. Data source: business reports of the airlines.

Airport fees Ryanair serves nearly exclusively tertiary airports with very low fees and the potential of negociations, while easyJet addresses also a few primary airports. For example Bremen airport (secondary type airport) asks for a fee between 3000 and 5000 EUR for the clearance of a typical LCC aircraft (e.g. Boeing 737-800). This clearance includes fee for starting, landing, parking, check-in, baggage processing, aircraft check. Respectively the airport costs make up for a higher fraction of the total costs of an airline, for example for 2004: 147 million EUR for Ryanair (18% of all costs), 448 million EUR for easyJet (33.6% of all costs).

Personal costs The services of the low cost carriers are reduced to the minimum and employees are not organised in labour parties. Respectively personal costs are low and the amount of passengers transported per airline employee is high: 10,000 for Ryanair and 6,200 for easyJet in 2005/2004. http://www.atmosphere.mpg.de/enid/Information_2/Low_cost_airlines_-_development_61i.html