The Viability of Long-Haul, Low Cost Business Models

Abstract

Recent events have confirmed the concerns that many within the aviation industry have held about the viability of the low cost business model for long-haul operations. This paper begins by reviewing the operating cost differences between low cost carriers (LCC) and legacy airlines in different regions of the world. This is followed by a summary of the various cost advantages of low cost carriers operating in short-haul markets. The main focus of the work, however, is a cost simulation involving the use of a Boeing 767-300 by both a LCC and a legacy carrier under varying operating assumptions. The research demonstrates that in none of the cases cited is the LCC cost advantage greater than 10%.