CAPA Airline Boardroom Live. Strategy Session 1: How Can FSCs Regain Their Short Haul Markets From LCCs?
From the time that the penny finally dropped for full service carriers that LCCs were a fixture and were not going away, the full service airlines have sought many ways, usually without great success, to counter the erosion of their short haul operations by the new entrant, lower cost specialist point to point airlines.
The impact has been not only on their regional operations, but usually on their network overall, as the short haul services feed into their respective hubs, fattening the long haul sector loads.
This state of affairs was more or less tolerable while the competition on long haul transferring over their hub was stable and their alliances, global and bilateral, were able to protect them. Then the super “Connectors” (Gulf airlines and Turkish) came along, disturbing the comfortable equilibrium – and in turn placing renewed importance on their short haul routes; these were the markets where they could at least aspire to dominate.The experience of European carriers is mirrored in Asia , with many FSCs losing short-haul market share to numerous LCCs while their services to Europe also suffer.
A variety of responses has been attempted, from simple discounting, through partnerships, using the pull of FFPs, reducing frequency, dropping uneconomic routes, establishing subsidiaries, modifying existing entities. The Board will be asked to formulate priorities for a strategy to protect and expand the hub carrier. In doing so, it will consider such issues as:
- What models have shown the ability to respond most effectively?
- Is fundamental reshaping of their own model in order or is a different model required?
Part 1. At the coalface
1. Responding with existing/conventional tools
- Pricing, discounting
- Enhancing ancillaries
- Cost reduction
- Reformatting product, changing IF product
2. Getting buy-in from employees
- Addressing security and pay
- Explaining the plan
- airBaltic, Chief Operating Officer, Martin Sedlacky
- ANA Holdings, Special Advisor to the Chairman, Keisuke Okada
- Finnair, Chief Commercial Officer, Juha Jarvinen
- flynas, Chief Executive Officer, Paul Byrne
- Lufthansa German Airlines, VP Business Development, Daniel Roeska