The Difference Between Full Service & Low Cost Carriers

Some differences between a full-service carrier and a low-cost carrier are obvious. Fares are cheaper on low-cost carriers, but the seats are squeezier, and you can forget about decent champagne (or meals, for that matter). On some low-cost airlines, you are flat-out getting a free cup of water. However, there are also less noticeable differences, and it’s those aspects that this article will explore.

Those less apparent differences between full-service and low-cost carriers include the airline’s strategic focus, fleet composition, operating bases, distribution channels, and revenue sources. Let’s dive into them.

Differences in strategic focus

Full-service airlines like American Airlines or Lufthansa focus on network profitability, whereas low-cost carriers focus on route profitability. What do we mean by this? American Airlines currently flies to 220 domestic destinations (some served by its branches) and 109 international destinations as of October 2023, according to data from Cirium. American has multiple hubs, including Dallas/Fort Worth, Charlotte, Los Angeles, and Chicago. They’ll often let a marginal route survive if it feeds passenger traffic through a hub and onto a highly profitable route that helps subsidize those less profitable routes.

Why would American do this? It’s all about choice, service, and frequencies – key features of a full-survive airline. Does it work? Let’s look back at what was a normal flying year (pre-pandemic). In the 2019 financial year, American Airlines had a net income of US$2.179 billion.

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With low-cost airlines, routes live and die by their own performance. Rather than focusing on hubs and connectivity, low-cost carriers focus on point-to-point connectivity and individual route profitability. Low-cost carriers generally loathe cross-subsidizing underperforming routes. For example, Frontier Airlines frequently drops (or “suspends”) routes if they do not meet expectations. On the flipside, low-cost carriers can experiment with new routes more than most full-service airlines.

Differences in fleet composition

Low-cost carrier Southwest Airlines has over 800 planes, and they are all Boeing 737 variants. Denver-based low-cost carrier Frontier Airlines has over 130 aircraft, and they are all from the Airbus A320 family. Over in Europe, Ryanair has around 293 planes, like Southwest, all 737s.

In contrast, the full-service British Airways and its subsidiaries have at least nine aircraft types in its extensive fleet. United Airlines has six different plane families across its 900+ aircraft fleet and expects to receive 800 new planes in the future years. Singapore Airlines only has 160 odd planes in its fleet but runs at least six different aircraft families (A350, A380, B737, B747, B777, and B787).

Running only one type of aircraft is cheaper. You only need maintenance facilities and employee training for a specific plane model. Across the whole organization, everything can be nicely standardized. This is critical to keeping fares down.

However, that limits the type of route a low-cost carrier can fly on because, in general, a route needs to be serviced by a suitable and capable aircraft. Full-service service carriers can easily match the right-sized planes to different routes and swap planes in and out depending on demand. It means they can offer passengers more destinations and choices. Of course, it also costs more for the airline and, therefore, the passenger.

Low-cost carriers focus on secondary airports

While not a hard and fast rule, low-cost carriers often skip big, expensive airports for secondary airports, frequently located further from the city centers of destinations they fly to. Southwest Airlines, for example, favors Love Field at Dallas over the shinier Dallas Fort Worth Airport.

Outside Melbourne, Jetstar flies to the otherwise lonely Avalon Airport. Ryanair skips Paris’ Charles de Gaulle Airport for the lesser-known Beauvais Airport, 80 kilometers from the city. Low-cost carriers favor secondary airports. Landing and ground fees cost less than the leading city airports at these facilities.

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However, big-city airports are part of the convenience package full-service airlines market. They are usually (but not always) closer to city centers and have better transport links. At the airport, the infrastructure is typically good, and terminal facilities are usually swish. There’s also a certain marketing cachet flying into leading airports that fits comfortably with the premium image many full-service airlines like to promote.

Nonetheless, using the latest award-winning passenger terminal costs money, and this is passed on to airlines and, ultimately, the passengers. Airports served are a crucial point of difference between full-service and low-cost carriers and one more reason why flying a full-service carrier costs more.

Differences in distribution channels

Another key difference between low-cost carriers and full-service carriers is how you buy a ticket. Unless you’re after a complex itinerary, many travelers buy their airline tickets online. However, if you are buying a ticket on a full-service airline, particularly in a premium cabin, you might search for a brick-and-mortar travel agent.

They’ve often got access to discounts and lurks not shown on websites. Plus, if you are ponying up a significant amount of money, there’s some comfort in dealing with a person rather than sending your MasterCard details off into the online void.

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While full-service airlines have a range of distribution channels (which is reflected in their ticket price), low-cost carriers usually sell their tickets only on their website. That not only gives them total control over fare pricing but also cuts the costs of selling a ticket. This is reflected in the lower fare.

Differences in revenue sources

Low-cost airlines rely heavily on ancillary revenue to make money. Fares are often so cheap they are loss-leaders or cost-neutral. Nonetheless, this area is where the boundaries between low-cost and full-service carriers are getting lost. In 2022, ancillary revenues in the airline industry hit $69 billion, beating 2019 levels.

Low-cost airlines have the most significant revenue shares coming from ancillary products. For instance, Ryanair’s ancillary revenues represent 35.7% of all revenue. Meanwhile, American Airlines’ percentage coming from ancillary products is only 15.7%. The $69 billion in ancillary revenue represents a lot of checked-in bags, sandwiches, and upfront seats sold.

Photo: Markus Mainka | Shutterstock.

Full-service airlines charge a flat ticket price, and theoretically, everything is included, although that’s fraying a bit around the edges at some legacy carriers. Full-service airlines generally have multiple revenue sources, including cargo businesses, frequent flyer programs, and often interests in subsidiary airlines.

It’s a portfolio approach to revenue generation designed to protect the airline should one aspect of its operations underperform over time. This year, we see cargo and frequent flyer programs continue to generate income for full-service airlines while ticket sales are not doing so well.

Conclusion

While there are noticeable differences between full-service and low-cost airlines, there are also less apparent differences. While full-service airlines have lots of bells and whistles, these cost more to offer, which is reflected in the final ticket price. Many low-cost carriers, especially those veering into ULCC territory, would charge you to use the loo if they could. Still, this economical approach is reflected in the final (low) ticket price.

Many full-service carriers have tried their hand at low-cost offerings over the years. Some have succeeded, while others quickly disappeared and were even taken on by existing low-cost carriers. Ultimately, it’s up to the person buying the fare. Like most things, you get what you pay for and need to adjust your expectations accordingly.

What do you think? What else differentiates full-service and low-cost carriers? Is cost or service more important to you when flying? Let us know what you think in the comment section.