Blending Old and New: How Low-Cost and Legacy Carriers Are Reshaping the Airline Industry

Abstract

For much of the past decade the airline industry worldwide has been in the throes of a restructuring process dominated to date by the growth in market share of new lower-cost carriers and by wage, benefit, and working conditions concessions by employees in the large legacy carriers. In the United States low-cost airlines now account for approximately 26 percent of air traffic, up from less than 10 percent only a decade ago. Low-cost carriers also continue to gain market share in Europe, increasing from 2 percent to 7 percent between 1998 and 2001 and continuing to expand since then. Two new low-cost carriers now account for over 40 percent of the market in Australia. A central question for our global airline industry project, therefore, is how the pressures of the new low-cost entrants and the responses of the legacy carriers will interact and combine to shape the future of employment relations in this industry.