Originally Posted by
NYTA
I think some of them do it because by starting a wholly owned subsidiary company the employees of the new company are subject to different work regulations and can be paid less. It makes less sense in the case of airlines like "UP" the ElAl "LCC" which has the same pilots and crew as the mainline ElAl flights.
It is almost all about saving money on crew costs. Even where it is the same union or crews there are often different pay scales, work rules or other factors which bring the costs down to the airline. And, while the history of such in the US was mostly a debacle, it turns out that those carriers have realized they can essentially mix an LCC and full service airline on the same plane in many cases.
ETA: For many of the European LCCs there are also reduced costs associated with delivering FF benefits and distribution costs.