Low Cost Carrier

What is a Low Cost Carrier?

A low cost carrier (LCC) is an airline that offers base fares at significantly lower prices than legacy or full-service network carriers by stripping the ticket price down to the flight itself. Add-on services such as checked baggage, seat assignment, inflight meals, and priority boarding are sold separately, letting the carrier keep headline fares competitive while recovering revenue through individual purchases.

The LCC model traces its modern roots to Southwest Airlines in the United States, which pioneered the point-to-point routing strategy and single-fleet concept that most budget carriers still use today. European carriers adapted and expanded the model in the 1990s, transforming short-haul travel economics across the continent. Today LCCs operate in every major region and collectively move hundreds of millions of passengers annually.

What distinguishes an LCC from other carrier types isn't only price. The operational model is distinct: a single aircraft type minimizes maintenance and training costs, secondary or less-congested airports reduce landing fees and turnaround times, and historically direct-to-consumer sales bypassed Global Distribution System (GDS) fees entirely. These structural efficiencies allow LCCs to compete on routes that full-service carriers either price at a premium or avoid.

How Do Low Cost Carriers Keep Fares Low?

The LCC cost model rests on three interconnected levers: revenue unbundling, route efficiency, and operational standardization.

Revenue unbundling means the base fare covers only the seat. Everything else (a checked bag, seat selection, early boarding, inflight food) is an ancillary service priced individually. This lets LCCs advertise low starting fares while generating meaningful incremental revenue from passengers who opt into extras.

Route efficiency relies on point-to-point service rather than hub-and-spoke networks. LCCs fly directly between cities, often using secondary airports with lower landing fees and faster gate turnarounds. A faster turnaround means each aircraft completes more flights per day, spreading fixed costs across more revenue cycles.

Fleet standardization keeps maintenance and training costs predictable. Most LCCs operate a single aircraft family, which also makes it easier to reassign aircraft between routes as demand changes.

Understanding each carrier's baggage allowance policy is essential before comparing fares. What appears as a lower base price may normalize once checked bag fees are included in the total.

Types of Low Cost Carriers

The LCC category covers a spectrum of models, each with different implications for corporate travel programs.

Standard LCC: Offers unbundled fares with optional add-ons. Typically operates short-to-medium-haul routes in single-class cabins with point-to-point scheduling.

Ultra-low-cost carrier (ULCC): Pushes unbundling further by charging for nearly every item, including carry-on bags in some cases. ULCCs target the most price-sensitive travelers and typically use secondary airports to minimize costs.

Hybrid carrier: Operates with LCC cost efficiency while adding full-service features such as assigned seating, loyalty programs, or a premium cabin option. Many carriers that started as pure LCCs have shifted toward this model as they compete for higher-yield passengers, including business travelers.

For corporate travel managers, the distinction matters. A standard LCC booking with a checked bag and seat assignment may cost only marginally less than a full-service basic economy fare once ancillaries are added, but the change fee structure and rebooking flexibility are typically more restrictive.

LCCs in Corporate Travel: Opportunity and Trade-offs

Low cost carriers have entered corporate travel programs with increasing frequency as organizations face pressure to reduce travel spend. Cost ranks as the top consideration for future business air travel decisions, cited by 46% of organizations surveyed in the UK Department for Transport's 2025 Business Travel Survey [3]. On short, direct routes where total trip cost including ancillaries remains competitive, LCCs often deliver meaningful savings compared to legacy fares on the same corridor.

The operational trade-offs are equally real. Rebooking flexibility during disruptions is typically more limited than with full-service carriers. Most LCCs operate only their own network, which constrains rerouting options when a canceled flight creates a time-sensitive itinerary problem. A change fee on a budget carrier can reduce net savings significantly on routes where schedule adjustments are likely.

Distribution is a separate consideration. Many LCCs historically sold directly through their own websites, creating visibility gaps in managed travel programs where spend tracking and policy enforcement depend on all bookings flowing through a single platform. That gap is narrowing: more budget carriers now participate in New Distribution Capability (NDC) programs or connect natively to GDS channels, making it easier for travel managers to capture LCC spend within managed programs [2].

How to Include LCCs in Your Corporate Travel Policy

A corporate travel policy that accounts for LCC bookings is more effective than a blanket approval or blanket restriction. The most practical approach defines when LCC bookings are appropriate based on route length, total cost comparison, and trip-specific needs.

Key elements to address:

• Permitted routes: Define which trip types allow LCC bookings. Short-haul domestic routes are typically the best fit. Long-haul international routes may not be appropriate due to limited LCC network coverage.
• Total cost comparison: Require that LCC bookings be evaluated on total trip cost — including checked baggage and seat selection — not base fare alone, before comparing to a full-service option on the same route.
• Baggage reimbursement rules: Specify whether checked baggage fees are reimbursable and whether a per-trip limit applies.
• Flexibility threshold: Define when a fully flexible or refundable fare is required, particularly for trips that may be canceled or rescheduled.
• Duty-of-care requirements: Confirm that your booking tool captures LCC itineraries for traveler tracking, especially for routes where the carrier doesn't connect to your travel management company's servicing workflows.

Finance teams that write LCC policy in terms of total trip cost rather than cabin class or carrier type tend to see stronger compliance. Employees can make cost-effective choices without requesting exception approvals, and travel managers get cleaner data for benchmarking spend across the program.

Related Terms

Airline alliances: Partnerships between full-service carriers that allow code-sharing, reciprocal loyalty earning, and coordinated scheduling across networks. LCCs typically operate outside major alliance structures.

Air policy: The specific guidelines within a corporate travel program governing which fare classes, cabin types, and booking windows employees can use for flights. LCC bookings often require dedicated air policy language to cover unbundled fees.

PNR (Passenger Name Record): The booking record that ties a traveler's identity to a specific itinerary. LCC ticketing systems may handle PNR data differently from GDS-based full-service bookings, which can affect servicing and duty-of-care tracking.

Frequent flyer number: A traveler's unique loyalty program identifier. LCCs operate their own loyalty programs independent of major alliance schemes, which affects how frequent flyers accumulate and redeem miles on budget carriers.

Sources

[1] Skift Research, "Global Airline Sector Market Estimates 2025," 2025. https://research.skift.com/reports/global-airline-sector-market-estimates-2025/

[2] IATA, "Global Outlook for Air Transport, June 2025," 2025. https://www.iata.org/en/iata-repository/publications/economic-reports/global-outlook-for-air-transport-june-2025

[3] UK Department for Transport, "Business Travel Survey 2025," 2025. https://assets.publishing.service.gov.uk/media/68be9759536d629f9c82abbf/business-travel-survey-2025.pdf

Frequently Asked Questions About Low Cost Carriers

What is a low cost carrier (LCC)?

A low cost carrier is an airline that offers base fares at lower prices than full-service carriers by charging separately for add-on services like checked baggage, seat selection, and meals. Rather than a single all-inclusive ticket price, travelers pay for only the elements they need beyond the seat itself.

What is the difference between a low cost carrier and a full-service carrier?

Full-service carriers include amenities such as checked baggage, meals, and seat assignments in the base ticket price, typically flying hub-and-spoke networks with connections to partner airlines. LCCs charge for each add-on individually, focus on point-to-point routes, and generally offer less flexibility for changes and rebooking.

What is an ultra-low-cost carrier (ULCC)?

An ultra-low-cost carrier takes unbundling further than standard LCCs by charging for nearly every item, including carry-on bags in many cases. ULCCs maintain the lowest base fares by targeting price-sensitive travelers on high-volume routes and frequently operate from secondary airports to minimize overhead costs.

Can employees book low cost carriers for business travel?

Whether LCC bookings are permitted depends on your corporate travel policy. Many companies allow LCC bookings on short-haul domestic routes where total cost including ancillaries is competitive, but require flexible fares for trips that may be rescheduled. Navan's travel policy engine applies these rules automatically across both LCC and legacy carrier bookings.

What hidden costs should travel managers watch for with LCC bookings?

The most common LCC cost surprises are checked baggage fees, seat assignment charges, and change or cancellation fees. A base fare that appears less expensive than a legacy option may cost more once ancillaries are added. Evaluating total trip cost rather than base fare alone gives an accurate comparison before approving bookings.

How do LCC fares appear in managed corporate travel programs?

LCC fares historically bypassed GDS channels and were sold directly to consumers, making them hard to track in managed travel programs. That gap is closing as more LCCs adopt NDC or connect natively to GDS platforms. Navan captures LCC bookings within its managed travel program so travel managers maintain spend visibility and policy enforcement across all carrier types.