The Impact of Low Cost Airlines to Airline Industry: An Experience of Thailand

The deregulation of airline industry of Thailand has allowed three lowcost airlines (LCAs) to operate in domestic routes. This study exploredthe impact of LCAs to three stakeholders in airline industry, full-serviceairlines, airports and passengers. The main question was who gained orlostfrom LCAs. In answering the question, the demandfor airline industrywas estimated. The change in revenue of airlines and airports wereconsidered as private benefits. The change in consumer ssurplus, amountofmoney that passengers were willing to payfor the airfare but did notpay, was regarded as the social benefit. Comparison ofbenefits betweenthe expansion and recession periods ofthe airline industry were examined.Moreover; the change in traveling pattern from Thailand to Laos wasalso investigated. This study proved that, in the expansion period, icAs were not harmful to full-service airlines. In turn, they were important tothe growth of the industry. However in the recession period, LCAs weregrowing at the expense offull-service airlines. For passengers, consumer ssurplus was increased in the expansion period but decreased in therecession period due to higher airfare. Airports gained in both expansionand recession period. I.e-As encouraged tourists to change their travelingpattern from Thailand to Laos via an indirect route, Bangkok - UdornThani - Nongkai - the Friendship Bridge instead ofthe direct routefromBangkok to Vientiane.