Are Low-Cost Carriers a Bargain?

Abstract

Low-cost carriers (LCCs) are now a worldwide phenomenon, and Southeast Asia has a significant number of rapidly growing carriers. Ticket price is the main feature that attracts public and media attention. Although the Southeast Asian LCCs declare that they offer the cheapest tickets, there is no solid evidence that their average prices are indeed the lowest. A study was done to examine whether ticket prices of these LCCs are significantly lower than those of full-service carriers (FSCs) or whether low prices are just an advertising trick. The study first looks at why passengers choose LCCs in this region, and then it collects ticket price data for three Southeast Asian LCCs, AirAsia, Jetstar, and Tiger Airways, and two FSCs, Singapore Airlines and Malaysia Airlines, that are based in the same countries. The differences in ticket prices between LCCs and FSCs are analyzed by applying the t-test. The analysis reveals that the ticket prices of the three LCCs are indeed lower than those of the two FSCs. In general, the disparity between the ticket prices of FSCs and LCCs is about US$0.166 per km. The LCC ticket price can be even lower because of competition in the routes run by both FSCs and LCCs. The study concludes that passengers who travel with LCCs because of lower ticket prices need to book earlier and must be willing to forego a number of services and conveniences.