According to legend, the phoenix was a bird of brilliant red and gold plumage whose death in a fiery blaze gave rise to a new phoenix. Like this bird, the low-cost carrier industry seems to have established its own cycle of destruction and renewal. From its very inception, the low-cost carrier industry worldwide has at the mercy of the business cycle experienced soaring profits in the upturn, rapidly falling into losses when the market turns down.

Technological innovation, globalisation and abundant venture capital began developing the economies of most nations around the 1980s and 1990s. These newly emerged economies brought a new era of prosperity, for example, the U.S. economy grew at about 4.4%; and productivity rose at an annual rate of 2.8%. For the airline industry, the boom times have always meant adding capacity through new aircraft acquisitions, opening new routes, and negotiating bigger labour contracts.

All these eventualities triggered deregulation, open skies policies and multilateral agreements, whereby competition increased at a phenomenal rate. This was the time when low-cost carriers emerged all around the world, developing their capacities and expanding their networks. Emerging low- cost carriers brought many benefits but also many drawbacks to air transportation. The major advantages of low- cost carriers are that they supplement market growths/ demands, offer quality/ variety/price of air services, and increase networks/services/routes.

The disadvantages of low- cost carriers are unprecedented; mainly, low-cost carriers enter in a head-to-head competition with flag/national/traditional/scheduled carriers, act as a harbinger of deregulation in protected markets, and distort up-market destinations dramatically.

Low-cost carriers do bring multiple advantages to the country?s market, its home-base, and its destinations. To understand these advantages, first, the low-cost carrier business is defined by three key elements:

Simple products: no meals, drinks or snacks for free;. narrow seating (greater capacity), no seat reservation; free-seating, no frequent flyer programs.

Functioning: non-business passengers, leisure traffic, price-conscious business passengers; short-haul point-to-point traffic with high frequencies; aggressive marketing; secondary airports; competition with all transportation carriers.

Low-cost operating costs: low wages, low airport fees; low-costs for maintenance, cockpit training and standby crew due to homogeneous fleet; high resource productivity: short ground waits due to simple boarding processes, no air freight, no hub services, short cleaning times; lean sales (high percentage of online sales).

All these elements when combined together bring several advantages to the low-cost carriers? markets, customers, and destinations. With low-cost carriers, networks and routes are designed or redesigned around the needs of the local passengers, thus making connections a byproduct of operations.

Low-cost carriers are able to reduce this time, thus shorter turns make their pilots, flight attendants, and other personal, much more productive; and still in compliance with safety regulations.

With targeted markets and networks, low-cost carriers nearly halve turnaround times, increase aircraft utilisation, reduce congestion, and significantly improve their productivity. In the airline business worldwide, a large portion of manpower costs is driven by how long a plane is at the gate.

But low-cost carriers are able to reduce this time, thus shorter turns make their pilots, flight attendants, baggage handlers, maintenance staff, and other personnel much more productive; and still in compliance with safety regulations. Moreover, low-cost carriers get ready to take off more quickly; enabling them as competitive airlines to schedule more flights and provide more attractive schedules for passengers. Successful business model changes in other industries, such as the automotive assembly, segments of heavy manufacturing, and financial services, show low-cost carriers can and have reduced the burdens of cost complexity.

Low-cost carriers have also simplified traveling for passengers. By implementing ?Tailored Business Streams? (TBS), low-cost carriers provide a very unique advantage - simplified ground-based operations for the majority of passengers. Basically, TBS? basic principle is to segment operations into distinct business streams: specialised processes are created to handle routine and complex activities separately, and to match the capabilities of these distinct operations with the value for which customers are willing to pay. In the case of the airline industry, self-induced and customer-driven complexity significantly and unnecessarily increases costs for both business and leisure customers. Low-cost carriers have been able to implement TBS and streamline their core processes to focus on the simple needs of passengers/customers; thus, making services more intuitive:

1. Infrequent travellers need less handholding.

2. Airports reaching a zero touch environment.

3. Passengers/customers do not need long, multiple interactions with airline staff.

4. Passengers would arrive at the airport, check in themselves and their baggage with minimal assistance from airline staff.

5.They would pass security and board the aircraft in a very short lapse of time.

Low-cost carriers have further achieved significant cost benefits from reduced check-in and gate staff. To remain competitive and customer-satisfaction oriented, another advantage provided by low-cost carriers (that traditional carriers do provide) is a dedicated processing staff.

And to minimise expenses, low-cost carriers dedicate a section of processing staff that would deal with the very small percentage of travellers who need to change itineraries, connect to a different airline, or request other special services; and who would potentially pay for them. Thus, low-cost carriers remain at the disposition of customers? extra needs, making them efficient and fully cost effective.

The disadvantages of low-cost carriers are unprecedented; mainly, low-cost carriers enter in a head-to-head competition withflag/national/traditional/scheduled carriers, act as a harbinger of deregulation in protected markets, and distort up-market destinations dramatically. The only direct competitors low-cost carriers have are traditional airlines.

Usually, every country should possess or designate a carrier to supplement its air transportation needs to other nations worldwide. But in the course of time, most of these traditional or designated carriers were made public owned and partly subsidised by their governments. This means they have to remain competitive and attract sufficient customers/ revenue traffic since their governments will not incur financial support in case of bankruptcy. Low-cost carriers absorb a significant amount of revenue traffic to the detriment of traditional carriers. There are a number of unprecedented effects accompanied by this :

1. Low-cost carriers invade markets and provide excess capacities, thus, exacerbating competition and pressure on airfares on traditional carriers.

2. Low-cost carriers increasingly bring along oligopolies on individual routes.

3. Low-cost carriers make a serious impact on rail and road transportation fares.

4. Low-cost carriers benefit subsidies to link remote areas, thus, distorting competition. If subsidies are given, they have to be permitted also to traditional carriers (level playing field).

5. Unlike traditional carriers, low-cost carriers have large batches of customers to carry between privatised airports; enabling them greater freedom in negotiations, differential pricing, and enhance their position in competition with other airports. This diverts more revenue traffic from traditional carriers.

Low-cost carriers are also responsible for deregulation and open skies policies. The most imminent example is the ?Transatlantic Aviation Open Skies Area? negotiated between European Union (EU) and the United States in October 2003. The goal of these negotiations is to reduce or eliminate the current restrictions pertaining to airline ownership, market access and traffic rights. With these restrictions waved off and accessibility granted, low-cost carriers will only trigger the bankruptcy of traditional carriers, intensify the competition with other low-cost carriers and increase cabotage drastically.

Like it or not, low-cost carriers are going to bring inappropriate customers to Mauritius that has a worldwide reputation of beng a unique up-market destination.

Instead of bringing a balance between traditional carriers and low-cost carriers, deregulation and open skies policies will just force traditional carriers to reinvent themselves as low-cost carriers. The last factor that will then ensure their survival will be cost and cost reduction. Low-cost carriers are already forcing many areas to open and in the not distant future, they will affect many traditional carriers financially and trigger a global aviation industry downturn. The only way to overcome this downturn will be alliances, mergers, partnerships, code-sharing agreements and most of all, radical business model planning.

These disadvantages are actually happening worldwide and will be happening in the future. Another detrimental effect low-cost carriers are having is on up-market destinations. There are still many destinations worldwide catering for up-market customers only.

A good example can be Mauritius, being a tropical paradise island having a multicultural society, strong traditions, and an unspoiled culture. Mauritius has a worldwide reputation of being a unique up-market destination, with its luxury 5 stars hotels and state-of-the-art infrastructures.

Like it or not, low-cost carriers are going to bring inappropriate customers to this up-market destination. The initial result will be an adverse impact on the destination itself and a devaluation of its up-market services/ facilities. Low-cost carriers can transport people to up-market destinations, but not necessarily up-market customers.

Both traditional carriers and low-cost carriers have achieved a lot in a short time. But low-cost carriers are gradually changing the entire structure of the airline industry and gaining a significant share in the market. With an unpredictable future, a strategic rethink is now necessary to prevent low-cost carriers from causing the collapse of the Mauritian aviation industry.

Kaviraj KHADUN Masters in Aviation Management Student (Australia)