Impact of Low-cost Carriers on Tourism Market

Running head: LOW-COST CARRIERS 1
Low-cost Carriers
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LOW-COST CARRIERS 2
The development of low-cost carriers(LCC) raises the question as to whether the
development of airlines that are cheap have an impact on tourism market (Olipra, 2012). The
primary segmentation of air travel demand identifies two main segments that are business and
leisure.it is approximated that the division between these two categories is identical to the flag
carriers. According to researchers, they are of the opinion that the LCCs allow more individuals
to fly encouraging and motivating social inclusion (Air Asia, 2018). The researchers claim that
though there is little evidence of any primary change, particularly in the leisure segment, in the
category of people flying compared to the mid-90s (Shlumberger & Weisskopf, 2015).Despite
the substantial increase in the number of individuals flying, it the middle and high-income
groups that fly frequently than in the previous years and take on shorter trips.
Policy changes in air transport following deregulation have been the underlying factor
responsible for the travel democratization (UNWTO, 2017). Also, technological transformation
in development of fuel-efficient carriers that can travel for many hours without making stop-
overs has facilitated and contributed to enhancing better connectivity. The innovations and
policy changes began in America and Europe but now have spread to Asia.
Reports indicate that there have been substantial reductions in the price of fairs now
common in South East Asia and passengers are now enjoying fares that are competitive (Hoon,
2016). People considering traveling across nations in East Asian consider the fares cheap and
affordable. According to the report generated by Asiantime, it stated that airlines based in
Singapore such as Valuair Ltd forced other airlines such as Cathay Pacific and Singapore
Airlines to reduce fairs by more than 50%. Valuair started using Airbus A320s that carried on
board 160 passengers in a trip from Changi airport in Singapore to Bangkok and a return ticket
was retailing at $80 at a promotional rate. In the start of 2015, a new budget airline was

LOW-COST CARRIERS 3
introduced in Singapore, Tiger Airways and offered lower rates than Valuair as tickets on
promotional rates were sold at $72 for the same return trip from Singapore to Bangkok.
Conversely, flights from Singapore Airlines charge $106 exclusive of adults plying the same
route giving two days stay condition in Bangkok. Thai Airways is far much expensive than
Singapore Airlines. Currently, quotes from several airlines have fallen as an Economy class
flight from Singapore to Bangkok charges as low as $36.5 (Air Asia, 2018).
The rise of low-cost carriers in home markets has had a significant impact. For instance,
in Indonesia, an economy that has more than 200 million passengers with the development of
budget airlines has led to low and affordable airfares (Essays, 2015). As opposed to the past
where only five airlines were operational in the domestic market and the five airlines fixed
airfares through their associations and customers were unable to challenge such exorbitant fares.
However, such malpractices ended when Indonesia introduced competition law that stifled
collusion that saw the airfare drop.
More people are now traveling due to low fares charged by LCCs. Asia and Pacific rank
second after Europe as the most visited areas in the world. In 2016, the region recorded a 9%
growth in the number of international visitors and was highest in the world as it reached an all
high of about 300 million international visitors (UNWTO, 2017). In South-East Asia, countries
such as Thailand and Malaysia account for most of the arrivals in the region. Thailand was
ranked as the 9th in the global ranking of international tourists whereas Malaysia was 12th
(UNWTO, 2017).Such figures indicate that the number of visitors has grown over the past few
years due to the availability of low-cost carriers that charge low prices in the region making it
convenient for visitors to tour such regions.