Abstract

Direct competition between full service airlines and no-frills carriers is intensifying across the world. US and European full service airlines have lost a significant proportion of their passengers to low cost carriers, the experience now being repeated in the domestic markets of Asia. This paper attempts to provide answers to a number of critical questions: What are the key drivers of each type of airline’s business model? Is there a difference in passengers’ perceptions between low cost carriers and full service incumbents in a mature European market and in a rapidly developing Asian economy? What are the principle reasons why a passenger chooses a particular airline model? How could a legacy carrier encourage passengers to return and so regain their domestic market share? These questions are addressed using information obtained in passenger surveys that were recently conducted in Europe and Asia.