How Low Cost Carriers Changed the Economics of Air Travel

When low-cost airlines first appeared, flying was straightforward. Passengers paid for a seat and nothing else. Over time, airlines began selling additional services such as checked bags, meals, and seat assignments. These charges became more than just extras. They became a core part of airlines’ revenue.

Industry analysis shows that ancillary revenues have risen significantly in recent years. Globally in 2024, airlines earned about $150 billion from non-ticket sales, up roughly $32 billion from the year before. Ancillary fees now make up a notable portion of airline income. Many low-cost carriers generate a higher share of their revenue from these fees than traditional airlines do. Full data for the Asia Pacific specifically is less detailed in public reports, but LCCs worldwide are known to lean heavily on ancillary revenue.

These revenues matter. A checked bag, a meal or priority boarding can turn a barely profitable flight into a solid financial result. Airlines that depend on this model cannot treat ticket price alone as their economic foundation.

The Challenge of Selling Extras Through Third Parties

The situation becomes more complex when these services are offered through third-party sellers such as online travel agencies or travel management companies. Many traditional distribution systems move fare and schedule information efficiently, but they do not return detailed traveler behavior data to the airline. When that data is missing, airlines cannot optimize offers or personalize services. They lack insight into what travelers value most in indirect channels.

This problem is especially visible for low-cost carriers in Southeast Asia. Budget airlines tend to earn a much smaller share of ancillary revenue through indirect channels than they do overall, even if that revenue is a large part of their business. One industry analysis cited that LCCs earn an average of only 18 percent of their ancillary revenue through indirect sales, even though ancillary fees may account for 30 to 50 percent of their total revenue mix.

At the same time, the travel market in the Asia Pacific is growing. Asia Pacific carriers accounted for the highest share of global passenger traffic in 2024, with 33.5 percent of revenue passenger kilometers flown by carriers registered in the region.

When many bookings happen outside an airline’s direct channels, and distribution systems offer limited data back to the airline, carriers lose not just revenue but valuable insight into traveler intent and preferences.

How a New Distribution Model Could Help

Leaders within the travel distribution industry have begun to question whether traditional centralized systems adequately serve airlines that depend on ancillary revenue and sophisticated pricing. These systems focus on delivering basic content rather than enabling dynamic offer creation and real-time traveler insight.

One alternative approach is the Global Data Network for Flights being developed by DerbySoft. Rather than routing all transactions through a central intermediary, the GDN connects airlines directly with sellers through an open, API-first network. In this model, airlines retain control over pricing and commercial relationships while sellers access airline content directly through the network.

In practical terms, this means that a low-cost carrier can make its full inventory available to a travel agency or an online platform and still receive more complete data about how offers perform. The airline does not simply send fare data and wait to see whether a booking occurs. Instead, it participates in a shared network where data flows both ways and can inform future offers.

The GDN for Flights includes an intelligence layer that supports traveler qualification and helps determine which flight offers are forwarded to sellers based on what is most likely to convert. That capability becomes especially important as travel search continues to shift toward AI-driven assistants that return only a small set of options through chat interfaces, email, or workplace tools. In a world where travelers may be presented with just two or three choices, being broadly available is no longer enough. Airlines have to be selected. Distribution is moving away from helping travelers find flights and toward deciding which offers surface in the first place, based on context, intent, and relevance at the moment.

This approach is not intended to replace traditional distribution systems immediately but will likely continue to serve many functions, especially where standard connectivity and broad reach are priorities. But for carriers that depend on ancillary revenue and flexibility, a networked model offers a new path.

Why Low-Cost Carriers Are the First Focus

The first airline group to join DerbySoft’s Global Data Network for Flights is AirAsia. The popular airline has long been known for its focus on unbundled pricing and ancillaries. Its participation in the GDN AirAsia can connect directly with preferred partners, retain ownership of their distribution relationships, gain deeper visibility into traveler data, and over time apply AI-driven traveler qualification to improve offer relevance, operational efficiency, and conversion.

Low-cost carriers operate in a highly competitive environment. Industry reports note that some budget carriers account for roughly two-thirds of international seat capacity within the region, well above global averages. This intense competition puts pressure on fares and profitability, making ancillary revenue and smart distribution even more critical. 

In markets where mobile and third-party bookings are common, the ability to share data and tailor offers becomes a commercial necessity, not a luxury. A distribution network that allows direct airline-seller connections can help airlines capture more of the revenue they generate and better understand traveler needs.

What This Means for the Future

The shift among Southeast Asian low-cost carriers toward greater distribution control matters for the industry at large. It shows that airlines are thinking about distribution not as a commodity but as a strategic lever. For carriers that rely on ancillary revenue for a large part of their business, how and where travel offers are presented influences not just conversion but total revenue performance.

What happens next in Southeast Asia could influence global flight distribution models. If airlines find ways to improve ancillary revenue capture and better understand traveler behavior through direct connections, other carriers around the world may follow. For now, low-cost carriers in Southeast Asia are testing new approaches that align distribution with how they actually sell, and that alignment may reshape the future of flight distribution.