Amadeus Column: A Constantly Evolving Model

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When you consider the most disruptive changes to have affected specific industries in the last 40 years, it’s hard to think of many that have had more impact than the low-cost business model has had on the airline industry.

Low-cost airlines have proliferated and thrived since Southwest Airlines first pioneered the model at its inception back in 1967. The same airline is an example of the impact the model has had on the industry, as Southwest Airlines is now the largest airline in the domestic US market, serving over 100 million customers each year.

New analysis from research conducted by Amadeus has revealed that low-cost carriers (LCCs) across the globe continue to show significant confidence in their potential, with an overall global increase in seat capacity of 6.8% in the first six months of 2013 compared with the same period in 2012. The analysis paints a picture of strong capacity growth across Asia and the Middle East, with only modest increases across Europe and North America.

In Africa, we are witnessing perhaps the most interesting period of change in the low-cost business model yet. A maturing of the low-cost leisure market is taking effect and our analysis shows a 13% increase in seat capacity over the first six months of 2013 compared with 2012. The question now is, how do low-cost carriers continue to grow? And what is the next phase of business model innovation?

Business travel is a largely untapped market for low-cost carriers, which have traditionally been ignored by this segment. A widely-held belief was that business travel would remain the main market for the full-service airlines, which offer a more comprehensive product and flexibility, and participate in the GDS, which is the preferred booking method for travel management firms that organise and book the vast bulk of the world’s business travel. Today, though, some low-cost carriers are evolving, with their sights firmly set on this market.

It’s certainly a time of great change, and customers will no doubt have more choice in travel options soon, which will obviously be beneficial to the consumer.

Santiago Jimenez
Director, Sub-Saharan Africa
Amadeus