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CAPA TV | October 1, 2020

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The ULCCs Are Coming! A Future Force In The Americas

CAPA
  • On April 23, 2018

Unlike Asia and Europe, US, Canada and Latin American LCC activity has been relatively muted in recent years. Although it was the home of the breed, the US has slipped well behind as airline bankruptcies and consolidation allowed the US majors to reduce costs significantly and to dominate the market more actively.

Technically, the US has a high level of LCC activity, but much of that consists of Southwest’s presence; the once market leader of LCCs now occupies a cost base very similar to its major full service rivals. Aside from Mexico, (where two thirds of domestic seats and a quarter of international are on LCCs), and Brazil (almost 60% of domestic operations), Latin America overall has relatively low LCC penetration. That is all now about to change across the region. Canada has new LCC entrants and both major airlines have established lower cost subsidiaries.

To the south, countries like Chile, Colombia and even Argentina are now experiencing a tidal shift as ULCC groups spread across borders. But in many areas of Latin America particularly, despite the elements already being in place for effective market stimulation, a lack of adequate airport infrastructure and prohibitively high costs constitute barriers to entry faced by LCCs.

The reappearance of “ULCCs” in the US has sufficiently worried the majors to provoke them to adopt various price matching competitive strategies. And ultra-low cost groups like Indigo Partners/Frontier/Spirit are challenging the status quo, as is JetBlue in a hybridised fashion. With many medium sized airports anxious for a return of services, opportunities abound.

For the time being the LCCs and ULCCs are attacking the lower hanging fruit, but there are many opportunities that are not being fully exploited at present.

  • How fertile is the ground for expansion of ULCCs in the Americas and what are the constraints?
  • What key lessons can US majors learn from legacy carriers in other markets who have launched LCC brands? Can the same principles be applied in the Americas?
  • There are opportunities in all markets both for hybridised LCCs and ultra low cost operations; which is the better place to be?
  • How viable is the future for long haul low cost operations as new aircraft types and new airlines challenge the status quo?
  • Is Latin America too expensive and too regulated to support the growth of LCCs? What needs to be done to stimulate the market?

Moderator: Waltzing Matilda Aviation LLC, Chief Executive Officer, John Thomas
Panel:

  • Indigo Partners, Managing Partner, William Franke
  • Irelandia Aviation, Member of the Advisory Board, Tony Davis
  • Spirit Airlines, Senior Vice President & Chief Commercial Officer, Matt Klein
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