Effect of Economic Crisis on the Changes of Low-Cost Carriers Business Models

Abstract

Deregulation of air traffic market erased the administrative barriers for airlines in European Union and enabled the airlines to strive for new markets. The balance on European sky was additionally disturbed by low-cost air carriers, which by low ticket prices opened a new era in air traffic. With intention to conquer as big as possible portion of the market, the low-cost carriers came into direct conflict with traditional carriers, trying to take their part of the market as well, especially in the segment of regional and middle-route air traffic. Using disproportions between prices of air tickets of traditional air carriers and average paying power of passengers in times of economic crisis, the low-cost carriers tried to change market conditions and offered the passengers a product adjusted to their needs at much lower prices. With aim to take over the market, they (LCC) introduced additional benefits to their business model: business-class, seat reservations, passenger and baggage check-in for transfer flights and acceptance of goods for transport. Such additional offers significantly differ from the original idea of low-cost air transport. The economic crisis affected the business models of traditional and low-cost carriers, they turned into completely new hybrid model of business which is most often applied to regional routes.

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