Legacy Carriers vs. Low Cost Carriers
Great article from Evan Dougherty in this week’s Blue Sky News newsletter. You can read the article below or CLICK HERE.
Which Airline Should You Choose?
By: Evan Dougherty
August 23, 2021
OK, so you’re ready to book a flight. Maybe you’re finally traveling to visit a client or planning a family vacation. Maybe you just need a quick weekend getaway.
Which airline do you book? The answers are as varied as the needs of the travelers. Looking for flexible schedules and multiple flight choices? Travel reward offerings? Low cost?
This is why the airline industry is so competitive. Carriers try to differentiate themselves through nearly every aspect of the travel experience – from policies to onboard seating, from frequent flier programs to networks.
Airlines develop different business models to succeed in the market, and that gives passengers many options for choosing what they value most in the travel experience.
Here’s a quick guide:
Airlines that cater more toward full service are often referred to as legacy carriers, or “legacies.” Many enjoy global brand recognition because of their large networks.
Legacy carriers operate out of large hubs, geographically located to maximize efficiency in serving their route maps to connect passengers from one location to another.
Having multiple hubs is advantageous to legacy carriers’ operations as it offers a wide range of options for travelers, said Dallas-based aviation consultant Rhett Morgan.
The key here is redundancy. With a variety of hubs, the legacies can offer a more robust schedule, with multiple flight options for passengers, Morgan added.
“If there is any certain operational problem or challenge, having many different itineraries allows legacies to quickly adjust to schedule disruptions and re-accommodate passengers,” he said.
Most legacies are members of airline alliances – conglomerates of carriers with varying levels of agreements in place to create an interconnected network for travelers worldwide. Alliances work to bring a consistent level of service to travelers, such as allowing the use of frequent flyer miles from one airline to another. Airport lounges can also be shared, although it usually depends on the traveller’s status with the alliance.
Legacy carriers strive to offer full service, including frequent flier programs that include upgrades and lounge access based on status. Onboard, these airlines have first and/or business class seating, Wi-Fi, in-flight entertainment and in-seat power ports to charge personal devices. Meals are offered on longer flights, although this service has been temporarily reduced due to the pandemic.
Passengers who upgrade on legacy carriers typically benefit from the additional amenities offered in those cabins. Big companies largely favor legacy carriers due to their large networks, ability to upgrade and focus on frequency. With business travel reduced during the pandemic, legacy carriers have adjusted their networks to accommodate more leisure travellers.
The Rise of Low Cost Carriers
One of the major contributors to the growth of the airline industry has been the expansion of low cost and ultra-low cost carriers.
These airlines focus on price-conscious travelers. Rather than offering first class cabins, lounges and interline agreements, low cost carriers provide low fares to those looking to save money. These carriers, known as LCCs, do offer some amenities for competitiveness, such as free drinks and snacks onboard.
Ultra-low cost carriers, or “ULCCs,” offer even lower fares. The key difference is that ULCCs offer their amenities a la carte so that passengers can choose whether to pay for such extras as choosing an assigned seat when booking, bringing a carry-on or purchasing in-flight items.
Instead of using large hubs, LCCs and ULCCs follow a “point-to-point” system that flies passengers nonstop between two cities, albeit at less frequency. In some cases, they will fly to secondary airports that are cheaper and more efficient for the carriers to operate.
Morgan points to the consolidation in the airline industry, which led to the rise of low-cost options, particularly in cities that are former hubs.
“I would say the mergers we saw where many cities – Pittsburgh being an example – lost air service created an opportunity for low cost carriers to come in and fill the gap that was left,” he said. “Naturally, consolidation drove up fares. So that also opened things up for low cost carriers to come in with lower prices and stimulate demand in markets that prior airlines couldn’t justify serving.”
While the growth of LCCs and ULCCs started before the pandemic, the rapid return of leisure travel has boosted demand. Some carriers, such as Allegiant and Spirit, plan to fly more capacity in September than the same period in 2019. LCCs and ULCCs are also appealing to small and medium size companies.
Having an existing strong presence in leisure markets is why ULCCs have benefitted greatly from the recovery in demand, said Morgan.
“Once people started traveling again, it was the leisure travelers that were going out to the beaches and mountains. Ultra-low cost carriers largely serve that segment already, so they didn’t have to make a lot of major adjustments as other carriers had to,” Morgan said. “That’s why they have succeeded during COVID-19 both in terms of financial results and level of traffic and growth.”