Charting Trends: LCC fleet share reaches new heights, but full service share is not being eroded

LCCs now established in global aviation market

Low Cost Carriers (LCCs) have played a major role in the growth of air travel over the past quarter century, and there is every expectation that they will continue to do so.

They were the drivers of the recovery from the COVID-19 pandemic and are continuing to demonstrate strong market performance, thanks to a business model centred on competitive cost reductions, high utilisation, and an offer to customers that meets mass market demand.

The arrival of LCCs came hand-in-hand with market liberalisation.

As domestic aviation markets have been progressively deregulated in many countries, and as market-oriented air services agreements have increasingly became the new international norm, LCCs have seized the opportunity to offer innovative air services that have spawned new passenger demand.

In the run-up to the pandemic, LCCs were on an upward trajectory. Their share dropped in 2020 and 2021 - but those years are anomalies - but has risen again in 2022 and 2023, and accounts for around one in three aviation seats.

LCC fleet share back on the rise…

The higher utilisation that is a key factor in the LCC strategy means that each asset 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 shows 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.

Aircraft in service fleet, by airline business model (as at 18-Feb-2024)

Source: CAPA - Centre for Aviation Fleet Database.

A study of aircraft fleets as at 18-Feb on any given year shows that when we entered the 21^st century the LCC model was well recognised, but accounted for just 3.3% of the global aircraft fleet. In five years, this had almost doubled to 6.4% in 2005 and hit double digits at the start of the second decade (10.2% in 2010).

With annual growth of between 0.4ppts and 1.2ppts through that decade the LCC fleet share had risen to 17.3%. Then, as we all know, the industry faced its biggest ever crisis. With aircraft grounded across the world the LCC fleet share fell for the first time ever in 2021, to 15.5%, beginning its reset at 17.0% in 2022.

Last year (2023) it had returned to the growth trend, with an 18.2% share, and today (18-Feb-2024) has grown 0.3ppts to the same day last year to 18.5%. With significant order books and bumper new orders from many of the world's leading LCCs, that figure will continue to rise, and it is on track to surpass the 20% level in the coming years.

…but not at the expense of the full service airlines

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 (FSCs).

These are the network airlines - often referred to as legacy airlines - that historically offered passengers inflight entertainment, checked baggage, meals and beverages within the ticket price.

(It has to be acknowledged that this is not always the case today, with FSCs having adopted many of the principles of the LCC model and the divide between the two segments now very blurry.)

FSCs have, in fact, also boosted their share of the global aircraft fleet, according to the 18-Feb snapshot from the CAPA - Centre for Aviation Fleet Database.

From the early 1990s through to the mid-2010s, as the LCC model boomed, the FSC share of global aircraft hardly fluctuated from the 38.1% level recorded in 1990. In 2014 and 2015 it had even risen above 39% for the first time since the late 1980s, and in 2016 it rose above 40%, hitting a 21^st Century high of 41.5% in 2018.

The FSC share slipped slightly in 2019 and 2020, but remained above 40%.

In 2021 it fell to 38.1%, but has subsequently increased again in the following years, reaching 39.7% in 2023 and almost hitting the 40% milestone again in 2024 (39.9%).

It is the regional fleet that is in decline, following earlier regional jet boom

This data show that the FSC and 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 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 it had a double digit share of the global aircraft fleet - almost double the level just ten years earlier - and grew up to a 16.8% share at the start of the 2010s.

However, since then this segment has seen its share decline. Albeit this has not been down simply to aircraft numbers, but rather the growth of both the FSC and LCC divisions. As we entered the 2020s the regional fleet share had fallen to 13.5%, and has subsequently fallen to 11.4% in 2024 - its lowest level since the late 1990s.

Hybridisation - are all airlines ultimately going to meet in the middle?

A question that has started to be asked over recent years is: are the FSC and LCC definitions still relevant?

The increasing commoditisation and segmentation of air travel has meant that the once sharp differentiation between full service airlines and low cost carriers 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.

In a world where we like to categorise and classify to help organise things, objects, and ideas that exist and simplify our understanding of the world, these definitions may become less clear, but will remain part of our language - for the short term, at least!

This week's report has been produced using data available to CAPA - Centre for Aviation members. The charts are taken from the CAPA - Centre for Aviation Fleet Database using the global fleet by business model tool - available to all CAPA members, and a resource where users can customise search parameters via a variety of metrics.

To find out more about the benefits of becoming a member visit: CAPA membership