Opinion: Low cost, long range, intensive competition
Next October, the First Global Summit of low-cost and long-range airlines will be held in Seville, organized by the CAPA consultancy and tourism office of the Spanish city. It is a new segment of the air transport industry, which is growing and whose future is still uncertain - but sounds promising.
The low-cost model was introduced by the founder Southwest. Although initially met with some skepticism within the industry, the model ended up transforming traditional aviation itself and has certainly managed to fly much more passengers than even before. The low-cost is here to stay.
But it is important to bear in mind that the model started from a very specific need and specific conditions: in the environment of radial flights (through large airport hubs that concentrated and distributed aircraft, to try cover all possible routes) there was an underlying market for point-to-point flights.
The model was based on taking advantage of all the residual infrastructure that had been left without a market, such as old airports or those located far from cities that maintained idle, but acceptable capacity.
The idea was to make short trips - between an hour and a half and two hours - where travelers would not need food or too much space for luggage. It allowed saving on weight resources, overcharges, meals on board, space between seats, etc. The biggest secret was the intensive use of aircraft that allowed efficient use of equipment, cleaning them in record time and reusing them on the next flight.
Undoubtedly, this revolutionized the airline sector and now we see traditional airlines that have mixed schemes: they offer possibilities for low-cost travelers as well as service required by traditional travelers.
Today, however, the model is bursting into the long range. Their circumstances are different, because although they do seek to take advantage of the idle infrastructure, the truth is that the scheme of use is not so clear. Traditional companies have already adopted many low-cost tactics and do not see how giving travelers the preference will create additional value.
So far, we are talking about a handful of companies, of which some 15 are subsidiaries of traditional airlines and only few were born primarily as low-cost companies. Most have double aisle aircraft - with few exceptions - and their flight times range from five and a half hours to 13:40 hours, depending on the route.
One typical example is the route Gatwick (London) - JFK (New York), designed for business travelers and operated on Boeing 787 in two times per day frequency. Nevertheless, routes like Budapest, Prague and Berlin to Stewart and Washington-London are operated on Airbus 321NEO-LR that has longer reach than B737 MAX. It is the only long-range corridor bet, which could help conquer the leadership of the Atlantic routes, held today in the hands of traditional operators.
The stars of the new segment are Norwegian, Jetstar Airways (subsidiary of Quantas), Air AsiaX, Scoot (Singapore Airlines (SIA1) (SINGY) ) and Air Canada Rouge. All of them are struggling to earn a place in this new market and their most important challenges are to demonstrate that they can be sustainable and that their bet will result in greater capacity, so that more people can fly at lower costs. We will see.
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