Low Cost Airlines Review
The battle of the skies Sally Gethin reports from the Low Cost Airlines Congress in London
Low cost airlines (LCCs) are becoming more aggressive and predatory, according to speakers at this year’s World Low Cost Airlines Congress. The three-day event at Heathrow, organised by Terrapinn, attracted 372 delegates from LCCs around the world. Topics covered included routes, markets, AR, partnerships, mergers, profitability, web sales strategies, brand loyalty and frequent flyer programmes. Analyst Ralph Anker commented on a growing head-to-head competition between dominant LCCs and full service carriers in specific regions: Asia: AirAsia, Cebu Pacific, GoAir, IndiGo, Jetstar, Lion Air, Spicejet, Tiger Airways Europe: airberlin, easyJet, , germanwings, Jet2. com, Monarch, Norwegian, Pegasus, Ryanair,
Transavia.com, Vueling, Wizz Air Middle East: Air Arabia, flydubai North America: Allegiant Air, JetBlue, Southwest, Spirit Airlines, WestJet Sth America: GOL, Interjet, vivaaerobus, Volaris. The battle of the skies and at airports is intensifying as LCCs attack major flag carriers at hub airports. easyJet’s policy is to operate
airberlin is just one of the European LCCs taking on full service carriers
increasingly at major airports due to demand from its Business passengers. This is also the case in India where there is aggressive LCC competition. In the US, Southwest launched 29 routes and Spirit Airlines, 28.
On a regional basis, competition is marked by: Spirit Airlines taking on American Airlines at Dallas Fort Worth and Chicago; Southwest taking on Delta in Atlanta; Interjet taking on Aeromexico at Mexico City; easyJet competing with Air France, Iberia and TAP Portugal across Europe; and Norwegian taking on SAS, Blue1 and airBaltic in Scandinavia.
In Asia, LCCs are creating stark rivals to full service legacy carriers. In Singapore, Scoot is tapping into under-served markets. Scoot’s main business model targets a higher seat density: at 40% more than legacy carriers; asset efficiency: 20% higher aircraft utilisation; weight: seven per cent less than a legacy carrier. The airline also targets ‘dis-aggregation’; providing only what passengers will explicitly pay for; simplification: no interlining of baggage/misconnection risk; low overheads; internet-based distribution, outsourced services, no lounges, small administrative staff cohort.
Ironically, LCCs are turning into the very airline
type that they originally competed against. Some are providing more frills than they used to such as a choice of meals, seat allocation, and increased baggage allowance. However, keeping their costs down and operating better and more efficient aircraft with streamlined internal processes helps yield more profit.
Southwest Airlines and Norwegian are entering the long haul markets, previously reserved for legacy carriers. Southwest is already facing new challenges such as carrying more products and longer turnaround times.
F&B at airports are ‘common interests’ between LCCs and airports as they maximise ‘dwell times’. One way to offer high quality F&B is by citing high-end airport restaurants near the LCC gates, enabling Business or connecting passengers to buy and carry onboard premium food and beverage products. Copenhagen Airport has introduced a LCC pier which has proved successful.
The cycle of routes is affected by peak and off-peak demand and seasonality is a growing concern due to fuel prices. The future of LCCs will be focused inward as there will be more overlap in emerging markets, not only with legacy carriers, but also increasingly with other LCCs.
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