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Low-cost airlines to grow, take 50 percent of US market: report

NEW YORK, May 12 (AFP) - Low-cost airlines are likely to double their market share in the United States over the coming decade, capturing 50 percent of the domestic market, a study by corporate credit firm Standard and Poor's showed Thursday.

The discount carriers have captured about 25 percent of the market, but only two -- JetBlue and Southwest -- have been profitable over 2004 and the first quarter of 2005.

Still, the low-cost airlines -- dominated by Southwest, JetBlue, AirTran and America West -- have generally been in better shape financially than the six large traditional carriers, American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines, US Airways and United Airlines, the latter two being in bankruptcy.

The no-frills airlines "have generally been more successful" in the current economic environment, "which has enabled them to become much more entrenched than their predecessors," said S and P.

"These same factors are expected to continue to benefit LCC (low-cost carrier) growth over the next several years, with domestic market share approaching an estimated 50 percent in the next decade," it said.

Despite their relative strength, the low-cost carriers are not immune to the problems faced by other airlines, including high fuel costs, tough pricing and sluggish travel trends, S and P noted.

As a result, there could be a shakeout, it said. Some discount carriers will fail, others will merge and the traditional, or "legacy," carriers will shift their strategy to compete.

"There could be some alliances among not only LCCs, but also LCCs and legacies (both America West and US Airways have confirmed they are discussing a potential alliance); while existing weaker LCCs may not be long-term survivors," the report said.
 

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Why does this sound like survivor? The airline industry will fix itself and the low cost airliners will eventually become the big dogs. Then who knows what will happen?
 
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