A budget airline or low-cost carrier is an airline that has the ability to offer low fares because of low operating costs. Labor wages are lower than those of traditional carriers and there are no frills. These carriers also operate from point to point rather than from spoke to hub. This minimizes connections and travel time, and allows for more flights and frequent service. In addition to low fares, the high level of customer service and the high number of on-time arrivals, budget airlines such as Southwest Airlines and JetBlue Airlines have been dominating American skies over legacy carriers such as Delta Air Lines and United Airlines.
With budget airlines doing so well in the industry, traditional airlines are forced to find ways to cut down on fares. With changing consumer purchasing preferences, many in the industry are realizing that they need to get in the game too.
Like the U.S., people in Asia are also turning to budget travel. Some rates are comparable with those of road-based transportation. In Southeast Asia, low-cost carriers account for 52% of air capacity (CAPA).
An article in the Wall Street Journal states that at least ten new budget carriers are expected in Asian skies next year, with some expanding into Taiwan and Hong Kong (Joanne Chiu & Gaurav Raghuvansh: December 17, 2013). Taiwan's China Airlines would team up with Singapore's Tiger Airways to launch Taiwan's first budget carrier.
Essentially, budget airlines are dominating the skies from one end to the other.
Personally, I think this is great. Because of these low-cost carriers, there is greater competition within the industry. Competitors will have to slash prices to stay in the competition, potentially restructuring for the better. Great news for the passengers!
Involved in the airlines business? Join us on May 15th and 16th for World Low Cost Airlines Americas in Miami!