The rise of low-cost carriers

Colin C.H. Law

Chapter 13 in Research Handbook on Air Transport Management, 2026, pp 168-184 from Edward Elgar Publishing

Abstract: The introduction of low-cost airlines revolutionised air travel, making it more accessible and affordable. Pacific Southwest Airlines (PSA) in the United States pioneered this business model in the late 1940s by offering low fares for intrastate operations within California. Southwest Airlines further expanded on this concept in the 1970s, becoming a major player in the national airline industry by extending its low-cost model beyond intrastate operations. Deregulation of the air industry in 1978 allowed new airlines to enter the market and compete on a larger scale. In recent years, the low-cost airline business model has undergone significant development in response to several factors and market dynamics. While the core principle of offering affordable air travel remains intact, low-cost airlines have adapted and evolved their strategies to remain competitive and meet changing customer demands. One notable transformation has been the emergence of long-haul low-cost airlines and ultra-low-cost airlines. This chapter aims to provide a detailed analysis of the changes that have occurred in the business models of low-cost airlines. It will explore the factors that have influenced their evolution and the competitive landscape. Additionally, the implications of these transformations for the international airline industry will be examined. Understanding the transformation of low-cost airlines’ business model is crucial for industry stakeholders to adapt and thrive in the ever-changing aviation landscape.

Keywords: Low-cost airlines; Business model; Air travel; Long-haul low-cost; Ultra-low-cost (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035336272
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