Can The Full Service Carrier And Low Cost Long Haul Model Exist In The Market Side By Side?
While LCCs are still a relatively young force they have massively disrupted air travel and the way all airlines now think about serving the public. With a nimble strategy offering point to point connectivity, industry innovations, ancillary focused activities and modern digitalisation and technological practices, they have become the new ‘normal’ in the industry, causing major headaches for the full service carriers on short haul markets. Whether low cost carriers will create a similar transformative effect in the long haul sector remains to be seen. No less than 19 LCCs have launched widebody services in the last six years, while further disruption is on the cards in the long haul narrowbody space. The new generation single aisle Boeing 737 MAX and Airbus A320neo aircraft families have brought long, thin routes into the realm of operational and financial viability for LCCs, in turn stimulating new traffic between secondary city pairs and allowing passengers to bypass traditional hubs. Yet the low cost long haul model doesn’t have the same inherent cost advantages as the short haul model, which potentially narrows the cost gap between LCCs and FSCs, and growth has come at the expense of profits for many LHLCCs. The prospects for independent low cost long haul carriers aren’t particularly promising either; it’s rare for secondary point to point markets to be large enough to operate sustainably without additional feed.Still, low cost long haul airline growth shows no signs of abating. As the average passenger profile moves towards the price sensitive end of the spectrum, outstripping growth in premium markets, it becomes harder for higher cost airlines to sustain previous expansion rates without deploying radical strategies to address the low cost long haul onslaught.
- Can the economics that make short haul low cost viable translate to the long haul sector?
- How crucial is fuel efficient aircraft in making low cost long haul sustainable?
- Does the viability of the low cost long haul model depend on continued downward pressure on fuel prices? What happens when this high-proportion input cost (inevitably) rises?
- Can independent low cost long haul carriers operate sustainably without short haul feed from a sister carrier?
- Do LCCs need to change their product and pricing structure to operate in the long haul market?
- Can FSCs survive the competitive threat of low cost long haul carriers?
- As the two models continue to adopt features of the other, will there be any true distinction between a pure full service carrier and a pure LCC?
- Avolon, Head of Strategy, Dick Forsberg
- flyadeal, CEO, Con Korfiatis
- IAG, Head of Strategy and Development, Alistair Hartley
- SMBC Aviation Capital, Head of Strategic and Market Analysis, Shane Matthews