Revolutionizing Air Travel: The Rise of Low-cost Carriers (LCCs) and the Opportunity for Online Travel Agencies (OTAs)

March 27, 2024

In the modern global aviation sector, there are many success stories about low-cost carriers (LCCs): Ireland’s Ryanair, Australia’s Jetstar, India’s Indigo, and Canada’s Flair Airlines to name a few. All these and many other LCCs have contributed to the air travel revolution of the past few decades.

The ability of LCCs to attract millions of travellers makes them a vital element of the global aviation industry. That’s why they should be on the radar of online travel agencies (OTAs) and their business heads.

The Continuing Growth of Low-Cost Carriers

In 2023, total air traffic (measured in revenue passenger kilometers) rose by 36.9% compared to 2022. LCCs have played an important role in these positive travel industry trends, accounting for 31% of all global air travel and 35% of all seats booked in global airline operations (September 2022 to August 2023). Furthermore, the size of the LCC market is forecast to surge from $196.1 billion in 2022 to $595.1 billion in 2032 at a CAGR of 12.1%.

There are two key reasons for budget airlines’ expansion: they offer low-cost travel for cost-conscious travellers and they operate on a simplified business model. This model prioritizes a “no-frills” approach to operations, aims to maximize passenger capacity, and incorporates ancillary services revenue - all of which creates opportunities for both cost minimization and revenue maximization.

The Impact of LCCs on the Travel Industry

For millions of people, flying with a legacy (“network”) airline is unaffordable due to high ticket prices. This situation is unlikely to change anytime soon, considering that prices are still increasing. By mid-2023 for example, ticket prices in the USA had gone up by 25% - easily surpassing the country’s inflation.

For cost-conscious travellers, LCCs offer a better, low-cost alternative. With LCCs, these flyers can take advantage of the convenience and speed of air travel without breaking the bank. But, for the average traveller, they can only do this if they can find the right LCCs for their itinerary based on the options provided to them on OTA marketplaces.

Opportunity for OTAs: Travel Technology + LCC Inventory to Improve Flight Offerings

For an OTA, Incorporating LCCs into their content resources by leveraging NDC, consolidator or aggregator connections is a great start to offering increased flight optionality to budget-conscious travellers. The opportunity lies in pairing LCC offerings with a travel technology partner to leverage this added content to improve flight offerings. At Trip Ninja, we find that our SmartFlights API is able to best improve the search and composition of flight itineraries with at least one relevant LCC source.  Using an AI or Machine Learning-driven travel technology provider like Trip Ninja to better curate LCC results to create optimized itineraries, OTAs can offer their travellers a high degree of customization in product offerings, help travellers to save money, while increasing revenue per search.

When comparing low-cost flight options, budget travellers appreciate a wider range of results, personalized content, and enhanced booking experiences. OTAs have a golden opportunity to satisfy these demands and boost their competitive posture by integrating both LCCs content as well as a travel technology partner to improve content performance. But doing so requires them to be flexible, agile, and enthusiastic about change. The OTAs that tick these boxes will successfully outshine competitors and capture the budget-conscious traveller’s heart, mind - and wallet.

Are you ready to make your flights content work harder? Speak with our team to learn how we can increase your revenue per search on your GDS, NDC and LCC content.

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