Theoretical Discussion of the Characteristics of Low-Cost Airlines and the Ripple Effects on the Air Transportation Market

Air travel market has changed significantly by the emergence of a lowcost carrier (LCC). The LCCs offer lower fares and fewer frills than the traditional full service carriers (FSCs). The key competitive advantage of the LCCs is their ability to offer significantly lower fares, or at least to create the image of offering lower fares, while being able to generate profits by having low unit costs. LCCs have reshaped the competitive environment within air travel markets and have made significant impacts in the domestic passenger markets, which had previously been largely controlled by FSCs. The new demand for air travel experience through the low fares of low-cost airlines increases the likelihood of choosing not only low-cost airlines but also existing large airlines when choosing air travel. This generally equates to the intention of customers to move to more advanced products as their experience with new products increases. Therefore, the purpose of this study is to theoretically discuss the operating characteristics and market ripple effects of low-cost airlines, and to explore the theoretical implications of existing papers.