From left, John Pepper, Brett Smith, Nacim Yala and Frank Scremin presenting with Michael Bell (far right) at Routes Americas 2025.
The operating cost gap between network carriers and LCCs is shrinking, particularly in the U.S., making it harder for LCCs to compete and differentiate themselves.
Airline and airport executives on a panel on Monday, the opening day of Routes Americas 2025 in Nassau, Bahamas, discussed the disruptions that airlines are facing and how they are dealing with them.
John Pepper, vice president for corporate development and government affairs at U.S. LCC Allegiant, noted that the rise in costs that airlines were seeing—particularly in higher labor cost—were affecting all airlines and had led to a roughly 20% increase in cost per available seat mile (CASM). He said that after the COVID pandemic, there had also been a “small but real” increase in demand for premium products that was affecting the LCCs.
“There’s been a close in the CASM gap between LCCs and other airlines,” Pepper said. “But the vast majority of customers still want to pay the lowest fare possible. What the LCCs don’t have is the ability to subsidize the way network carriers do.”
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Nacim Yala, chief commercial and strategy officer at Arajet, a Dominican Republic-based LCC, added that the LCC and network carrier models and costs have converged.
“All the variable costs are much closer,” he said. “There has been a dislocation in demand and the low end has suffered—so you see businesses like Dollar Stores shutting down because they have been weakened by things like inflation, while the middle is doing quite well and that’s driving the demand for premium.”
Brett Smith, CEO at Propeller Airports, which develops U.S. passenger terminals and co-owns and operates Seattle Paine Field terminal, said that passenger habits have changed since the pandemic and it was important to treat every passenger like a first-class customer and not just a number—from check-in, through security and to the gate. He said Paine provides full-time concierge bag checking, fireplaces, a pleasant bar and panoramic views of the airfield.
“As a private company, we can do things a lot quicker than governments can,” he said.
Yala agreed, but with a caveat. “Making travel less painful is in the interests of the entire industry. But translating that into more passengers willing to pay more for that? I’ve not seen the data for that. I still see cost as paramount.”
Frank Scremin, vice president for global operational services at Vantage Group, an airport and transportation investment and development company, also noted that understanding the customer and their expectations for each journey is important but challenging.
“We are looking at how we can get more people more quickly through the airport as quickly as possible while making the experience better,” he said. “But we need to understand who they are. For example, if you are traveling on business alone, it’s very different from when you are traveling on vacation with your family. We have to pick up on that,” Scremin said.
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