According to research projections released last month by OAG, the overall number of scheduled flights and total seats available around the world in December 2008 will be down 7.5% over December 2007. This has drawn increased attention on the overall decline in capacity and seats that the world airline industry is facing in the last quarter of this year.

Low Cost Carriers (LCCs), also known as Low Fares Carriers, have grown to be a significant part of the world air transport industry. In fact, by 2007, they accounted for 23.7% of global seats and 21% of all departures. OAG wanted to determine exactly to what extent have LCCs reduced their flights and capacity.

OAG’s analysis found that while LCCs as a whole are also re-trenching in the fourth quarter, they are doing so at a lower rate than the legacy carriers. Seats on LCCs will be down 3.7% in December year-over-year, while the number of departures will only be down 3.0% — 4.5 points below the rate of decline for the industry as a whole.

This is good news for travelers who rely on the low fares to enable their vacations and family visits. The even better news is that LCCs in many regions of the world are increasing their capacity.

The chart below, which is based on airline home region (as opposed to route-specific), shows strong seat capacity growth among carriers in Africa, Australia, Canada, Central America and the Middle East. However, most of these regions have only one or two large airlines in the LCC category, such as WestJet in Canada or Virgin Blue and JetStar in Australia.

South America also has only one LCC, GOL Linhas Aéreas, yet that carrier will reduce capacity this December.

In regions with large LCC penetration, such as Europe and the U.S., LCC capacity is down at rates more consistent with the industry as a whole. The U.S. was most notably affected by the Chapter 11 bankruptcy filing of ATA Airlines, a large LCC that discontinued all operations and cancelled all flights in April 2008. The impact of this loss was partially offset by the emergence of Virgin America, a California-based airline that launched in August 2007.

In Europe, a number of the smaller LCCs together accounted for the decline in seats, though the largest LCC, Ryanair, will increase seat capacity an astonishing 30.7% this December over last year.

The change in LCC departures in most regions is less marked than for seat capacity, with the notable exception being Europe. Departures there will be down 9.3% versus December 2007 — compared to just a 6.9% decline in seat capacity during that same time span. It's safe to say that LCCs in Europe may have reduced their capacity, but they have not done so at the expense of schedule convenience.

The fact that as a group, LCCs have not reduced flights or capacity as much as the industry average means that, by the end of 2008, they will account for a greater share of industry supply: 24.7% of seats and 22% of departures — a full percentage point increase in both categories.

The LCC remains, therefore, a key component of the global travel picture.

Article written by David Beckerman - Vice President OAG Analytical Services
dbeckerman@oag.com

Based in Washington, DC, David Beckerman oversees OAG Analytical Services, which provides specialized aviation industry analysis and expertise to clients worldwide on projects related to air service development, airline route planning and industry forecasts.

In addition to domestic and international route forecasts, David has conducted economic benefit analyses; prepared exhibits for international route authority proceedings; benchmarked airports in terms of capacity, revenues and rates; developed strategic assessments; and prepared analyses of market catchment size and retention for airports. He has also served as an expert witness in matters related to passenger demand and revenue accounting and management.

David is also OAG’s industry spokesperson on aviation matters, and regularly provides comment for the national and international press, TV and radio. He is fluent in French and Spanish and proficient in Swedish.