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LCC VS FSC: This is just the Beginning

LCC VS FSC: This is just the Beginning

    業界動向 | INDUSTRY TRENDS    


LCC VS FSC: This is just the Beginning
Asia Pacific Plant Management Magazine JUNE-JuLY 2016 Issue 100

The match between LCC which stands for Low Cost Carrier and FSC which is a short version of Full Service Carrier is getting even more intense in this couple of years. At first, it seem like an unfair fight since the LCC is much cheaper than FSC. Money comes first when talking about choosing an airline. The situation is now changing when FSC starts to rely that their strongest hook is actually right there in front of them, their full service and hospitality. They are now using it to bring back their customers while LCC is now dealing with a bad reputation about the hidden add-on cost in their ticket price. This is going to be one interesting competition.

The Era of LCC

According to Boeing’s long term market outlook for 2015-2031, strategic planning for airline business is a forever on-going process. These days, people tend to develop unique needs for each purpose when choosing a flight. For example, business travelers are sensitive to flight times and expect a high level of service. Short-haul business travelers tend to be more sensitive to ticket prices than long-haul business travelers. Leisure travelers are more sensitive to price but less demanding about service levels. For a domestic rough, it seem like a clear winning for low cost airline. Travelers are much less sensitive to in-flight service such as meal or on-board entainment since it just a couple of hours away. LCC business grows tremendously in these past two decades, their business model is to cut-off as many unnecessary cost as possible. Simple, if passenger want more luxuries, they have to pay for it. The processes include operating at the secondary airport, keep labor cost low, no more in-flight meals, add more seats, smaller airplane, operating only popular rout anything but the safety system. By doing so, they manage to reduce the overall cost by 20-40% comparing to a standard airline and their popularity is going off the roof.

China has the largest metalworking industry in the world and is apparent from the machine tool consumption in the country. In the past, countries such as France, Germany, Italy, Japan, South Korea and the US had been the top machine tool consumers. Rall noted that three years ago, China was the top machine tool consumer in the world and the following ten countries combined did not match China’s consumption alone.

FSC Bounce Back

LCC-VS-FSC-2Some traditional airline decided to take the easy way to compete this challenge by trim down their cost aggressively so they can compete with the price which LCC offer. Unfortunately the tactic is now backfire. They force themselves to jump in the price battle which dominate by LCC and they are going on an unfavorable terms. Some may falls such as Air Jamaica and Maxicana.

Partnership is one effective way to consider as a way out of the pickle for FSC. Strong partner can both compliment their service and adding more variety to the flight schedule. Bringing profit to both companies. The most common type of partnership is code sharing which growing 8% in this past decade. According to Boeing, the three major alliances (Star Alliance, SkyTeam, and Oneworld) now provide more than 60% of global capacity. Many airlines have also entered joint ventures, some with antitrust immunity that allows them to operate more closely on applicable routes. Partial acquisitions, full mergers, and cobranded subsidiaries are typical examples. This joint venture is good for entering new market, obtaining new traffic, and rationalizing costs. Airline mergers have catalyzed industry consolidation and enabled participants to remain competitive. Creating subsidiaries has allowed airlines to expand their brands to foreign countries and to stay within foreign-ownership regulation limits. All of these tactics have contributed to the profitable growth of the industry.


Another great way to bring back customers is what FSC already has in it, all the service and hospitality. In the long haul flight people are considering comfortable as one of the main criteria in choosing an airline. Since passengers have to spend 8 or even more than 10 hours on the plan they don’t mind spending some money for extra luxuries. Low cost airline has a habit of sneaking up on customer and add on some extra charges which customers not really consider that they come with a price such as checking in or on board amenities. This sometime make it hard to distinguish FSC from LCC so it is a must to strengthen their strongest point of full service airline which is their service. Great meals, soft pillow, full entertainment experience, tour guide, pre-checking and another additional service make FSC strong. As long as people still craving for comfort during flight, LCC still got an upper hand. Eventhough this might opposite the cost reduction strategies but this is what passenger consider these airline as a premium and luxurious way to fly.













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