s we (hopefully) inch closer to the end of demand shock and get increasingly more people vaccinated, it’s hard not to think about what a post-COVID commercial aviation world could look like.

Heck, we’ve been guilty of it ourselves, pontificating which airlines could be best positioned to succeed.  

We’d like to return to that topic and dive a little deeper into how low-cost carriers (LCCs) will lead the demand recovery.

LCCs Have for a Long Time Been on the Rise

As the airline industry’s fastest-growing segment for more than 20 years, LCCs have continued to take an increasing share of overall passenger volumes even as total traffic has risen every year prior to 2020. Thus, each year, LCCs as a category add more passengers than other airline segments.

Global LCC (red) and FSC seats (green) within regions: 2009 to 2018. Source: CAPA - Centre for Aviation
Global LCC (blue) and FSC seats (yellow) to/from regions: 2009 to 2018 Source: CAPA – Centre for Aviation
  • Within regions, LCC capacity doubled in the preceding decade, while full-service carrier (FSC) seats increased 41%.
  • LCCs rose from 25% to 33% of available capacity.
  • Inter-region, LCCs represented only 6% of seats in 2009, but as of 2019 that share has more than doubled to 13% .
  • LCC capacity quadrupled while FSC seats grew by 61%.
  • Much of the growth has been concentrated in emerging markets that have continued to expand rapidly: Asia-Pacific, Eastern Europe, Latin America and the Middle East.

LCC Passenger Growth to Accelerate During Recovery

Not only is this trend expected to continue, but LCC passenger growth is likely to accelerate during the pandemic recovery.

Kambr proprietary projections utilizing source data and materials from CAPA, IATA and ICAO
  • The LCC segment will be responsible for the majority of traffic growth over the next five years.
  • LCC passenger share will rise from about 33% in 2019 to over 40% in 2025.
  • In addition, over the next decade business model transitions and LCC start-ups are expected to increase the share of LCCs among all passenger airlines from 21% to 28% .

LCCs are, therefore, growing quickly in absolute passenger terms, in market share and as a proportion of the total number of airlines. And it is worth noting that these figures are limited to airlines categorized as LCC or ULCC (ultra-low-cost carrier).  

Many airlines, such as Avianca as part of its restructuring, will adopt elements of the LCC model while continuing to be counted amongst the hybrid or full-service carrier segments.

LCC Competitive Advantage Breeds New Tech Needs

Ironically, the agile and digitally-driven approaches that give LCCs a competitive advantage are also creating new technological needs that are not being met by legacy software systems.  

Interestingly, despite the ongoing growth and expansion of the LCC sector, few vendors have dedicated resources to serving LCCs. And this is necessary as LCCs have numerous distinct commercial business needs when compared with the operations of other airline models.

Furthermore, this LCC pyramid of needs is underpinned by a drive to keep systems and applications simple and streamlined while maximizing returns with a minimalist approach to teams.  

Such fundamentals have served LCCs well – feeding their growth and returns – and align well with a unique approach to revenue management systems that focuses on the user, automation and modular architecture.

The structure of LCCs may not only be leading the return to demand, but also might be leading commercial aviation into a golden era of technology simply by creating a currently insatiable need in the market, which vendors will have no choice but to satisfy because the market opportunity will be too big to miss.