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Low-cost carriers weigh options: old vs new aircraft

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Low-cost carriers weigh options: old vs new aircraft
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Low-cost carriers face a critical decision when choosing aircraft for their fleets. These airlines, such as Spirit Airlines, Frontier Airlines, and Southwest Airlines, focus on reducing unit costs to offer cheaper tickets compared to full-service competitors like American Airlines, Delta Air Lines, and United Airlines. Maintaining a cost advantage is crucial for these budget airlines.

Spirit Airlines recently declared bankruptcy after losing its cost advantage over full-service competitors. One of the key financial decisions for low-cost carriers is selecting the type of aircraft to operate. Most budget airlines choose to operate just one kind of plane to minimize operating expenses related to maintenance networks, pilots, and airport infrastructure.

Budget airlines often choose between older aircraft available at lower prices or newer models with better fuel efficiency. Older planes like the Airbus A330 and Boeing 737 Next Generation are cheaper but less fuel-efficient. In contrast, next-generation aircraft such as the Boeing 737 MAX and Airbus A320neo offer significant improvements in fuel efficiency despite higher purchase prices.

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The decision between older and newer aircraft affects low-cost carrier strategies today. Southwest Airlines operates the Boeing 737 family exclusively, while easyJet and Frontier Airlines rely on the Airbus A320 family. This fleet commonality allows pilots to switch easily between variants.

According to Boeing, the 737 MAX offers a 20% reduction in fuel burn compared to previous-generation jets. Similarly, the Airbus A320neo family provides an approximate 15% improvement in fuel efficiency over older models.

Low-cost carriers have significant negotiating power with manufacturers due to their large orders for next-generation models. For instance, IndiGo placed an order for 500 Airbus A320neo family aircraft in June 2023—the largest commercial aircraft order in history.

Some budget airlines still operate older-generation jets under specific circumstances. Ryanair operates a small fleet of Airbus A320-200s leased from subsidiary Lauda until 2028.

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