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CAPA: Snapshot Analysis of Budget, Full-Service Carrier Fleet Share
LCCs like Wizz Air are gaining ground in the global fleet share, but FSC’s retain the majority.
The arrival of LCCs came hand-in-hand with market liberalization and the world’s budget airlines have played a major role in the growth of air travel over the past quarter century. There is every expectation they will continue to do so.
LCCs were the drivers of the recovery from the COVID-19 pandemic, and they continue to demonstrate strong market performance in many regions, thanks to a business model centered on competitive cost reductions, high utilization, and an offer to customers that meets mass market demand.
As domestic aviation markets have progressively deregulated in many countries, and as market-oriented air services agreements have increasingly become the new international norm, LCCs have seized the opportunity to offer innovative air services that have spawned new passenger demand, especially across Europe, in Latin America and parts of Asia.
In the run-up to the pandemic, LCCs were on an upward trajectory. Their share dropped in 2020 and 2021, but rose again in 2022 and 2023, and now account for around one in three aviation seats worldwide.
The higher utilization that is a key factor in the LCC strategy means that each aircraft is worked longer and more frequently than in the established full-service model, where long-haul flying also influences the numbers.
Data from the CAPA–Centre for Aviation Fleet Database show that when you look at aircraft numbers, the LCC share of aircraft in service has followed a similar growth trajectory but with a lower penetration.
A study of aircraft fleets as of April 1 on any given year shows that at the turn of the 21st century, the LCC model was well recognized but accounted for just 3.4% of the global aircraft fleet. By 2005, this almost doubled to 6.6% and hit double digits—10.4%—just five years later.
With annual growth of between 0.4 and 1.2 percentage points through the century’s second decade, the LCC fleet share rose to 16.5% in 2019. Then came the pandemic. With aircraft grounded around the world, the LCC fleet share initially fell in early 2020 to 14.2%, before beginning its reset and rising to 15.4% in 2021 and 17.1% in 2022. In 2023 it rose to an 18.2% share, and by April 1 of this year, it grew a further 0.5 percentage points, to reach 18.7%. With significant orders booked and bumper new orders from many of the world’s LCCs, that figure will continue to rise; it is on track to surpass 20% in the coming years.
The growing number of LCCs across the world and the success of the business model has not come at the expense of the full-service carriers, however. These are the network airlines, often referred to as legacy airlines, that historically have offered passengers inflight entertainment, checked baggage, meals and beverages within the ticket price, although that this is not always the case today, with full-service carriers having adopted many of the principles of the LCC model.
An April 1 snapshot from the CAPA–Centre for Aviation Fleet Database shows that, far from being damaged, full-service carriers have boosted their share of the global aircraft fleet (see chart). From the early 1990s through the mid-2010s, as the LCC model boomed, the full-service carrier share of global aircraft hardly fluctuated from the 38.2% level recorded in 1990, although it declined during the early 2000s before growing again later that decade and into the 2010s. In 2013 and 2014 it rose above 39% for the first time since late 2001, and in 2015 it rose above 40%, hitting a 21st-century high of 41.4% in 2018.
The full-service carrier share slipped slightly in 2019 but remained above 40%. In 2020 it fell to 36.5% as the impacts of COVID-19 were felt, but it subsequently increased again, reaching 38.1% in 2021, 38.9% in 2022, 39.8% in 2023 and hitting 40.2% in early 2024.
These data show that both the full-service and the LCC models are increasingly dominating the global aviation market, and it has been largely at the expense of the regional/commuter segment.
The regional aircraft fleet has always been a small part of the industry, but one that has played a vital role supporting air access, most notably serving low-demand, point-to-point routes, feeding hubs and ensuring that remote and inaccessible locations, including island communities, are connected.
Through the 1980s and 1990s the regional aircraft share of the global fleet rose, but it was not until the arrival of the regional jet that this sector increased its penetration. By the mid-1990s, the sector had a double-digit share of the global aircraft fleet, almost double the level just 10 years earlier, and that grew to a 24.0% share at the start of the 2000s.
However, this segment has since seen its share decline, not simply in terms of aircraft numbers, but rather against the growth of both the full service and LCC sectors. By the end of the 2010s, the regional fleet share had fallen below 14% and it has since fallen to 11.5% in early 2024, its lowest level since the late 1990s.
HYBRIDIZATION
A question that has started to be asked is: Are the full-service and LCC definitions still relevant? The increasing commoditization and segmentation of air travel has meant that the once sharp differentiation between full-service airlines and LCCs has become increasingly blurred.
As the industry grapples with growing costs, slowing business travel and new premium leisure demand, it is seemingly inevitable that all airlines and their models are going to converge around the hybrid offer. But that is not a given because there are question marks over whether airlines can truly embrace low-cost thinking while still offering a distinct premium product and experience. And in the US, it is the four majors—American Airlines, Delta Air Lines, Southwest Airlines and United Airlines—that are flourishing while some of the big-name LCCs, like Spirit Airlines, are struggling.
In an industry where people like to categorize and classify everything to help simplify their understanding of trends, these definitions may become more blurred, but they will remain part of our language for a while yet.
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