A low-cost carrier or low-cost airline is an airline that offers generally low fares in exchange for eliminating many traditional passenger services. The concept originated in the United States before spreading to Europe in the early 1990s and subsequently to much of the rest of the world. The term originated within the airline industry referring to airlines with a lower operating cost structure than their competitors. While the term is often applied to any carrier with low ticket prices and limited services, regardless of their operating models, low-cost carriers should not be confused with regional airlines that operate short flights without service, or with full-service airlines offering some reduced fares. The price policy of the low cost carriers is usually very dynamic, with discounts and tickets in promotion. Even if the advertised price may be very low, sometimes it does not include charges & taxes. The budget airlines frequently offer flights at low prices – often flights are advertised as free Perhaps as many as ten percent of the seats on any flight are offered at the lowest price, and are the first to sell.
India’s first low-cost airline, Air Deccan started service on August 25, 2003. Cheap air tickets fares for the Delhi-Bangalore route were 30% less than those offered by its rivals such as Indian Airlines, Air Sahara and Jet Airways on the same route. The success of Air Deccan under cheap flights booking has spurred the entry of more than a dozen cheap airlines in India. Air Deccan now faces stiff competition from other low-cost Indian carriers such as Jetlite, SpiceJet, GoAir and Paramount Airways. IndiGo Airlines recently placed an order for 100 Airbus A320s worth 6 billion USD during the Paris Air Show, the highest by any India domestic carrier. After a year of operation, in 2006, Kingfisher Airlines changed its business model from low-cost to value airlines. Deccan was acquired by Kingfisher and renamed Kingfisher Red.
The first airline offering no-frills transatlantic service was Freddie Laker’s Laker Airways, which operated its famous “Skytrain” service between London and New York City during the late 1970s. The service was suspended after Laker’s competitors, British Airways and Pan Am, were able to price Skytrain out of the market. In April 2006, the industry magazine Airline Business analysed the potential for cheap flights tickets, low-cost long-haul service and concluded that a number of Asian carriers, including AirAsia, were closest to making such a model work. On November 2, 2007, AirAsia X, a subsidiary of AirAsia and Virgin Group flew its inaugural flight from Kuala Lumpur, Malaysia to Gold Coast, Australia. AirAsia X claims that it is the first true low-cost long-haul carrier with cheap air tickets since the end of Sir Freddie Laker era. In August 2006, Zoom Airlines announced that it was to establish a UK subsidiary, probably based at Gatwick Airport, to offer low-cost long-haul flights to the USA and India. The company suspended all its operations from 28 August 2008 due to financial problems related to the high fuel price.