Those less obvious differences between full-service and LCCs include the airline's strategic focus, fleet composition, operating bases, distribution channels, and revenue sources. Let's take a dive into them.
Differences in strategic focus
Full-service airlines like British Airways or Lufthansa focus on network profitability, whereas low-cost carriers focus on route profitability. What does it mean? British Airways still flew to 70 domestic destinations and 70 international destinations across 50 countries even during the early months of the pandemic. British Airways has multiple hubs and operators will often let a marginal route survive if it feeds passenger traffic through a hub and onto a highly profitable route that helps subsidize less profitable routes. Why would British Airways do this? It's all about choice, service, and frequencies - key features of a full service airline.
With low-cost airlines, routes live and die by their own performance. Rather than focusing on hubs and connectivity, low-cost carriers focus on point-to-point connectivity and individual route profitability. Low-cost carriers generally loathe cross-subsidizing underperforming routes. For example, Frontier Airlines frequently drops (or "suspends") routes if they do not meet expectations. On the flipside, low-cost carriers have greater ability to experiment with new routes than most full-service airlines.
The Difference
Differences in fleet composition
Low-cost carrier Southwest Airlines has over 730 planes, and they are all Boeing 737 variants. Denver-based low-cost carrier Frontier Airlines has over 110 planes, and they are all from the Airbus A320 family. Over in Europe, Ryanair has around 260 planes, all B737s.
In contrast, the full-service British Airways hand its subsidiaries have at least nine types of aircraft in its extensive fleet. United Airlines has seven different plane types across its 800+ aircraft fleet. Singapore Airlines only has 140 odd planes in its fleet but runs at least six different types of aircraft.
Running only one type of aircraft is cheaper. You only need maintenance facilities for one type of plane, and you only have to train employees for one type of plane. Across the whole organization, everything can be nicely standardized. This is critical to keeping fares down.
However, that limits the type of route a low-cost carrier can fly on because a route needs to be right-sized to the aircraft. Full-service service carriers can match right-sized planes to different routes, swap planes in and out depending on demand. It means they can offer passengers more destinations and choices. Of course, it also costs more, both for the airline and the passenger.
LCC focus on secondary airports where possible
Low-cost carriers often skip big expensive airports for secondary airports, frequently located further out from the cities they fly to. Southwest Airlines, for example, favours Love Field at Dallas over the shinier Dallas Fort Worth Airport. Outside Melbourne, Jetstar flies to an otherwise lonely Avalon Airport. Ryanair skips Paris' Charles de Gaulle Airport for the lesser-known Beauvais Airport 80 kilometers from the city. Low-cost carriers favour secondary airports. At these airports, landing and ground fees cost less than the leading city airports.
However, big-city airports are part of the convenience package full-service airlines market. They are usually (but not always) closer to city centers and have better transport links. At the airport, the infrastructure is good and terminal facilities are usually swish. There's also a certain marketing cachet flying into leading airports that sits comfortably with the premium image many full-service airlines like to promote.
Nonetheless, using the latest award-winning passenger terminal costs money, and this is passed onto airlines and ultimately the passenger. Airports served are a key point of difference between full service and low-cost carriers, and one more reason why flying a full-service carrier costs more.
Differences in distribution channels
One of the key differences between LCCs and full-service carriers is how you buy a ticket. Unless you're after a complex itinerary, many travellers buy their airline tickets online. However, if you are buying a ticket on a full-service airline, particularly in a premium cabin, you might search for a bricks-and-mortar travel agent.
They've often got access to discounts and lurks not shown on websites. Plus, if you are ponying up a significant amount of money, there's some comfort in dealing with a person rather than sending your MasterCard details off into the online void.
While full-service airlines have a range of distribution channels (which is reflected in their ticket price), low-cost carriers usually sell their tickets only on their website. That not only gives them total control over fare pricing but also cuts the costs of selling a ticket. This gets reflected in the lower fare.
Differences in revenue sources
Low-cost airlines rely heavily on ancillary revenue to make money. Fares are often so cheap they are loss-leaders or cost-neutral. But across 2019, European airlines generated US$31.5 billion from ancillary revenue - that's a lot of checked-in bags, stale cheese sandwiches, and upfront seats sold. In the United States, low-cost carriers raked in more than $100 billion from ancillary revenue in 2019.
Full-service airlines charge a flat ticket price, and theoretically, everything is included, although that's fraying a bit around the edges at some full-service airlines. Full-service airlines generally have multiple revenue sources, including cargo businesses, frequent flyer programs, and often interests in subsidiary airlines.
It's a portfolio approach to revenue generation that is designed to protect the airline should one aspect of its operations underperform across a period of time. Last year, we see cargo and frequent flyer programs continue to generate income for full-service airlines while ticket sales are in free fall.