A low-cost carrier (also known as a no-frills or discount carrier) is an airline that offers low fares but eliminates all unnecessary services. The typical low-cost carrier business model is based on:
- a single passenger class
- a single type of airplane (reducing training and servicing costs)
- a simple fare scheme (typically fares increase as the plane fills up, which rewards early reservations)
- free seating (which encourages passengers to board early)
- direct, point to point flights with no transfers
- flying to cheaper, less congested secondary airports
- short flights and fast turnaround times (allowing maximum utilization of planes)
The first successful low-cost carrier is generally acknowledged to be Southwest Airlines in the United States, which pioneered the concept when founded in 1971 and has been profitable every year since 1973. With the advent of aviation deregulation the model spread to Europe as well, the most notable success being the Irish Ryanair, founded in 1985. As of 2004, low cost carriers are now edging into Asia, lead by operators such as Malaysia's Air Asia.
Low-cost carriers pose a serious threat to traditional 'full service' airlines, since full-service carriers cannot compete on price and, when given a choice, most consumers will opt for low price over other amenities. From 2001 to 2003, when the aviation industry was rocked by terrorism, war and SARS, the large majority of traditional airlines suffered heavy losses while low-cost carriers generally stayed profitable.
In Canada, Air Canada has found it difficult to compete with new low-cost rivals such as Westjet and Canjet despite their previously dominant position in the Canadian market: Air Canada declared bankruptcy in 2003.
See also: List of airlines