Growing LCC market passes 1.5 billion seat milestone with more than one in every four global seats now flown by a LCC

The number of low cost carrier (LCC) seats on sale in 2017 exceeded 1.5 billion for the first time ever as the global seat capacity of the world’s LCCs grew 11.0%, a third successive year over double-digit growth. In fact LCC capacity has been growing at an average annual rate of 10.2% over the last ten years almost tripling in size from 575 million seats in 2007. This has seen the LCC share of the growing air transport market increase from 16.5% in 2007 to 28.7% last year.


Summary:

  • The number of system seats being flown by low cost carriers (LCCs) exceeded 1.5 billion for the first time in 2017 after a 11.0% year over year growth.
  • One in every four global seats is flown by a LCC and that is expected to rise to one in every three early in the next decade as the LCC model continues to evolve.
  • USA, India, Indonesia, Spain and the United Kingdom are the largest country markets for LCC operations.

The United States of America (USA), India, Indonesia, Spain and the United Kingdom (UK) remained the five largest LCC markets across the globe, albeit Spain did jump above the UK into fourth position. The rest of the top ten comprises China, Brazil, Italy, Thailand and Germany.

It is no surprise to learn that China was the fastest growing of these markets in 2017 (up +25.1% versus 2016 and up from 18th position at the start of the decade to 6th position in 2017 and likely to overtake both Spain and the UK in the coming years. Together these ten country markets account for a 62.5% share of the total LCC market and were responsible for almost 95 million of the 150 million additional seats added in 2017.

The LCC revolution now spreads to 159 different countries with Mozambique and Uzbekistan both welcoming their first low cost operations in 2017. However, the two new arrivals into the club were offset by the loss of service to Burundi, Christmas Island, Faroe Islands, Malawi, Rwanda, the Seychelles and the Solomon Islands meaning the overall total has fallen from 164 countries.

Away of the major LCC markets, significant year over year capacity growth was recorded by Ghana (+276.6%), Montenegro (+150.2%), Albania (+144.1%), Northern Mariana Islands (+143.0%), Cuba (+133.2%), Luxembourg (+122.5%), Armenia (+115.3%) and Venezuela (+113.9%).

CHART – The number of global seats flown by low cost carriers continues to rise strongly with an average annual growth in double digits over the past ten yearsSource: The Blue Swan Daily and OAG

Since LCCs became widely established over the course of the 21st century, in Europe, then in Asia and Latin America, the model and style has proliferated and evolved enormously. The basic form, of the no frills, ultra low cost airline has in most cases morphed into often unrecognisable shapes. Eschewing basic principles has become standard practice, to the extent that the product is indistinguishable from the legacy model it has disrupted.

Inevitably, in the quest for higher yield and greater diversity of opportunity, legacy features have been adopted; long haul operations, with network connections, business class seating, codesharing and connectivity, distribution through GDSs and much more. With very large order books, in some cases some LCCs have also established leasing companies to dilute risk.

The legacy features have also been adapted, often to generate ancillary revenue for services which historically were part of the bundled product. And at the same time, full service airlines have rushed to adopt many of the practices of the LCCs – to the extent that baggage and rebooking charges accounted for almost all the profit of the highly profitable US majors.

At CAPA’s Global LCC Summit, LCC CEOs and experts from every continent will meet to discuss the key directions the industry is taking. This is a new event for CAPA, complementing its existing suite of global strategic industry forums held in key markets across the world, highlighting the increasing importance of the LCC sector in the global aviation market.

The conference will take place at the Capella Singapore on March 1/2, 2018. You can view the full agenda, already registered speakers and register on the Global LCC Summit landing page.

Key discussion points will include:

  • The LCC Air Finance Outlook: The perspectives from airline and lessor CEOs
  • Can LCCs be effective in establishing their own leasing companies? (Masterclass)
  • Are pure LCCs a dying breed? The development of ancillary revenues
  • Is the long haul low cost model sustainable in the long term? Independent and group subsidiaries
  • The role of LCC subsidiaries in FSC airline groups
  • How LCC distribution strategies are evolving
  • The evolution of the airline-airport interface; how can airports cater most effectively for LCCs
  • Leveraging digital solutions to deliver a personalised customer experience; using data more effectively
  • How LCCs can compete more effectively in the corporate travel space (Masterclass)