Since deregulation the low fare airlines often termed lowcos

Since deregulation, the low fare airlines, often termed low-cost-carriers, have captured significant market share from the more established network carriers in the U.S. and Europe. Discuss some economic aspects that have led to the success of low fare airlines.

Solution

Low fare or no frisk airlines have captured significant share from more established network carriers in US and europe and asia.

Low cost airlines have low overheads they do not serve food and beverage in short and medium routes and charge for food and beverages inflight .These carriers have faster turnaround and a very economical budget model.In this type of economic model both the carrier and consumer are benifitted consumer on low fares and carrier in High occupancy rate.

Also with Oil at $ 30 and 40% of cost is fuel this carriers fortunes have further improved adding to thier profit and bottomline.A profitable carrier is much better than loss making airline guzing banks and goverment money.

Low Cost carriers are here to stay for a longtime and both consumer and carrier will benifit by this economic model