Low Cost Carriers’ Growth: Market- or Subsidies-Driven?
16 Pages Posted: 29 Nov 2017
Date Written: October 19, 2017
Low-cost carriers (LCCs) have revolutionized the world of passenger air transport changing dramatically the aviation market, tourist behaviour and the way destinations are developing. Current paper deals with this phenomenal growth and explores the most important aspects, shaping their progress. Apart from the ordinary factors like business model, cost-centered strategy and marketing, cited as main drivers for the LCCs success, the study goes further by investigating the local destination contribution to the LCCs expansion.
The undisputed benefits that LCCs bring to the destinations have urged certain destination governance institutions to purposely attract such airlines to start operations in exchange for partially covering their business risk by establishment of regional funds or any similar type of subsidies. In this regard, the aim of current paper is to examine the drivers influencing LCCs’ growth by making a deep overview of their business model, strategy and various stimuli provided by the local destinations. The analysis reveals that LCCs are predominantly driven by the destination market potential, but still rely on the support of the local institutions.
Keywords: low-cost carriers, LCC, funding, air transport, subsidy, air route fund, Ryanair
JEL Classification: R42, Z32
Suggested Citation: Suggested Citation