NPD Travel Retail Logo

Welcome to NPD Travel Retail

(formerly Counter Intelligence Retail)

We specialize in global traveler statistics, data driven insight, and activating against trends for all major categories sold in duty free and travel retail.

Skip to main content
How Low Cost Carriers are unlocking passenger growth

How Low Cost Carriers are unlocking passenger growth

The first in a series of monthly articles, Insights Manager Lawrence Scott explores the meteoric growth of Low Cost Carriers; how they’re winning with tomorrow’s traveller and why it’s important for retailers and brands to focus on meeting their retail needs, rather than focusing on the trend of declining average passenger spend.

August 2018 | Lawrence Scott, Insights Manager | 5 minute read

Over 1-in-4 passengers, globally, are travelling using a Low Cost Carrier (LCC)

That’s 443Mn passengers choosing to travel using a low cost carrier in the last 12 months (MAT May ’17 to Apr ’18). The chart below shows the share of total passengers using a LCC, for example 38% of European departures during the last 12 months flew on an LCC, a figure 6.7% higher than 5 years previous.

Share of passengers handled by Low Cost Carriers and regional %growth rate (vs YTD 2014, 5 years ago).

Europe remains the heartland of Low Cost Carriers

EU regions have grown, on average, +10% in the amount of passengers handled by LCCs in the last 5 years. The prevalence of LCCs in Eastern Europe (EU)* has stormed +18% in the latest 5 years and now accounts for nearly half of all passenger journeys.

*Eastern Europe (EU) is our Business Lounge classification and includes: Poland, Romania, Bulgaria, Hungary and CZ.

Importance of LCC contribution to each sub-region with % Share and % Growth

Passenger volume is driven out of European heartland but Asia Pacific represents future opportunities as it continues with an impressive scale of growth

Low cost carrier departures from United Kingdom, Spain, Italy, Germany, France and the USA are all handling upwards of 20Mn passengers in MAT 2018; representing growth of between 4% (USA) to 11% (Germany) versus the number of low cost passengers handled 5 years previous (MAT 2014).

Whilst the European market remains significant at contributing actual volume of LCC passengers, Asia Pacific is actually more strategically important for targeting future growth. The Republic of Korea has grown (passengers departing the country using a low cost carrier) +15% in 5 years and is set to rival, and overtake, both France and USA within the next full year.

Low cost travel meets the growing desires of adventurous travellers looking to invest experientially rather than on the mode of travel itself. LCC airline models are, arguably, more engaging to the modern traveller; they accept digital in to the core of their business model – app based check in, for example, minimises their operational costs. They normally have a more personable and engaging social media presence and typically fly a modern fleet of airplanes – again, for cost efficiencies.

Travellers have started to question why they wouldn’t choose a low cost carrier in the future.

The Asian LCC opportunity is a proxy from growing international tourism, a burgeoning (local) middle class and Chinese growth

However, underpinning each of these scenarios is the changing mentality of each locale’s passengers. LCC is now a viable option for domestic, international and mid-haul travel.

“There was a lot of scepticism about budget carriers because flying overseas had always been seen as a privilege [in Korea] …but that’s changed. Budget carriers have made overseas trips more affordable to everyone” – CAPA

Korean growth is being driven directly out of the Chinese opportunity. Domestic low cost carriers; Jeju Air/Jin Air/Air Busan, are capitalising on a market that has traditionally seen Chinese low cost carriers focus more on the lucrative domestic offer than international passengers. In a bid to gain passenger favour further afield, these carriers are now accounting for 15% of all international Korean departures in 2017.

There is not a ‘one size fits all’ solution for any region globally and Asia is no different. In Japan, growth is being driven out of an understanding that low cost carriers are the vehicle of growth to facilitate foreign passengers. Whilst full-service airlines, like JAL & ANA, appease the more traditionalist Japanese traveller, Will Horton @ CAPA states.

“Japan needs a new platform to capture foreign visitors who are unlike the Japanese [who are sticky in wanting to fly a costly Japanese full service airline]”

A clear opportunity for LCC operators in the region.

Vietjet (Vietnam) and AirAsia (Thailand) are similarly driving huge growth in the low cost passenger traffic by swaying domestic travellers from their usual bus or train routes and on to flight paths. The emergence of a mobile middle class is driving this growth; almost 60% of narrow-body aircraft (favoured for domestic, shorter routes) are operated by an LCC.


Remembering that Eastern Asia (incl. China) is the lead regional driver of LCC traffic, let’s see which nationalities are contributing to the growth

(+/-) PAX handled by LCC or Regular airline: departing Eastern Asia (incl. China)

As previously highlighted, South Korea is truly the key driver in contributing passenger traffic to low cost carriers – in fact we can see there is actually cannibalisation/switching year on year – 3.9Mn less passengers chose Regular operators’ YoY whilst 3.3Mn more passengers chose a low cost carrier.

This trend is apparent when looking at the growth of both Regular and LCCs versus their PAX handled 5 years ago, as well as looking at the annual growth rates. Japan, Thailand, Vietnam and Malaysia all showed that the growth, in passengers handled, by LCCs all outweighed the growth in PAX handled by Regular operators.

The tide may also be turning within China – who may be looking jealously across Asia at the LCC short-and-mid-haul growth that’s occurring regionally. Over 1.6Mn more Chinese passengers chose an LCC departing Eastern Asia MAT 2018 than the previous year.

Interestingly, when departing Eastern Asia, European nationalities remain loyal to Regular operators – the polar opposite of how these nationalities would act when they are departing European destinations. This may suggest that trust, confidence and an international reputation is still required to improve the fortunes of regional LCC operators to an increasingly global market.


The saturation point – the number of LCCs able to operate profitably – is highest in Asia Pacific than any other region globally

Of the top 25 largest airlines departing Eastern Asia, in terms of PAX carried, only 6 are classified as a low cost operator. Whilst this may not sound an overwhelming success, when we look at which operators have grown exponentially YoY then 5 of the top 6 operators are LCC. TWay Air, Air Busan, EASTAR Jet, Jeju Air and Jin Air are all experiencing growth >30% YoY.

Over the coming years CiR predicts that the below chart will continue to be shaped by LCC growth/volume; the explosion of providers within Japan (Peach aviation and the as-yet-unnamed JAL venture) will carry many international visitors to the Tokyo Olympics in 2022 and the rise of Thai Lion, VietJet and Air Asia will surely only increase.

Asian airlines are also operating above their assumed saturation point. South Korea has 6 national LCC carriers, Thailand a similar number. However, the organic growth of the region – in its tourism industry, mobile middle classes, emerging destinations – means the sky is truly the limits for LCC opportunity in the region.

Top 25 airline performance (based on PAX handled) departing Eastern Asia (incl. China)

The European market behaves very differently from what we’ve seen in Eastern Asia

Culturally the LCC model has been accepted, in Europe, by all demographics of travellers. Their preference for experiential travel is fuelled through no-frills airlines, servicing less mainstream locations (where rents are cheaper and, thus, better serviced by LCCs). It’s a reciprocal relationship between service provider and end-user.

Unlike Asia, where LCC growth will continue to welcome new carriers in to the crowded marketplace, 2018 was earmarked as a year of contraction within the European LCC operator base becoming more like the American market which has a big 4 operator chain that commands c.85% of LCC share.

The European LCC market did show some vulnerability in 2017; Monarch, Air Berlin and Niki were made insolvent and a growing turbulence with weather conditions, on-board costs and pilot issues dampened the outlook for LCCs. In actuality, the main operators have only been bolstered by these market conditions; EasyJet has enjoyed organic growth by assuming some of the Air Berlin routes/docks and Ryanair continues to service emerging Eastern European destinations. With Norwegian Air garnering a bidding war between Lufthansa and IAG, all signs point to continued growth in the European LCC market.

The maturation of LCCs – beyond short haul flights to now servicing transatlantic routes – will see almost 50% of all European departures facilitated by an LCC operator in the next 5 years. Carry-on luggage, allocated seating, incremental on-board purchases and the lack of any entertainment is no longer a barrier to engagement.

Socially, culturally and financially, low cost carriers make sense…especially so to their European passenger.

(+/-) PAX handled by LCC or Regular airline: departing Eastern Europe (EU)

Nearly every departing nationality has seen higher growth of passengers departing on LCC operators than Regular operators. In the last 5 years the Romanian, UK, Bulgarian and Italian market have grown impressively and the Bulgarian market shows the most pronounced LCC growth YoY.

How long will we continue to see LCC growth usurp that of Regular operators is yet to be seen. Will we start to see a similar situation as that shown earlier within Eastern Asia, where LCC starts to cannibalise and encourage switching out of Regular operators and in to low cost carriers.


LCCs deliver both scale (PAX volume) and %growth in the European market

Wizz Air is the starlet in the LCC market and its success has been attributed to a simplistic operating model:

  • Focus on underserved but emerging European cities mostly concentrated within the Eastern Bloc
  • Understand the purchase motivators of your consumer base – namely digitally adept younger travellers, and
  • Be visible and create an exciting identity (Wizz Air website claims to be the 6th most visited, airline, page globally and their app is available in 13 languages)

The simplification of an operating model perfectly mimics the simplicity required by its passengers. If an airline ticket costs more than the low cost accommodation or low cost activities at the destination itself then surely it (the operator) is doomed to fail to meet its customers’ expectations. Achieving 19% growth YoY and handling +2.5Mn more passengers than Ryanair (in MAT 2018) is surely proof enough that this strategy is reaping dividends.

In conclusion

Low cost travellers will only continue to proliferate travel retail and define the retail space of the future. Retailers and Brands alike must not be pre-occupied by diminished average spend but focus on meeting the needs of a genuinely different attitude to consumerism.

“low cost has seen a significant increase in passengers, so we need to really deliver what these passengers are expecting. We have different commercial concepts that will accelerate sales based on low cost passengers…. maybe the average spend per passenger will drop but we believe these passengers will be a big contributor to the company’s sales” – Julian Diaz, CEO, Dufry

Companies need a specific LCC strategy to attract a passenger that, historically, is much less likely to spend big in a single transaction. Their value, however, comes in being specifically targeted with promotional campaigns or innovative means to dive incremental spend. For example, Japanese LCC passengers over index their spend by $154 versus their average spend on Regular operators.

It is imperative for airline retailers and brands to understand the nuances of motivators to purchase and meet these needs.

Counter Intelligence Retail Travel Retail State of the Nation 2018

This article supplements CiR’s Travel Retail: State of the Nation 2018 – an essential 100 page report exploring the trends and issues playing out on the terminal and shop floor. Contact Lawrence Scott, Insight Manager at for more details.

View sample pages

All data is obtained from Counter Intelligence Retail's Business Lounge. To discuss what Business Lounge can do for your business contact Simon Best, Commercial Manager at

To download this article as a pdf, please click here