Low Cost Carriers’ Growth: Market- or Subsidies-Driven?

16 Pages Posted: 29 Nov 2017

See all articles by Maya G. Ivanova

Maya G. Ivanova

Zangador Ltd.; Varna University of Management (VUM)

Date Written: October 19, 2017

Abstract

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

Ivanova, Maya G., Low Cost Carriers’ Growth: Market- or Subsidies-Driven? (October 19, 2017). Available at SSRN: https://ssrn.com/abstract=3077016 or http://dx.doi.org/10.2139/ssrn.3077016

Maya G. Ivanova (Contact Author)

Zangador Ltd. ( email )

Varna, 9010
Bulgaria

Varna University of Management (VUM) ( email )

13A Oborishte Street
Varna, 9000
Bulgaria

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