Can the full service carrier and the low cost long haul model exist in the market side by side?

5 September, 2018

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.

A recent insight report from respected aviation intelligence provider CAPA - Centre for Aviation revealed that Europe has 47 aircraft that are currently deployed on long haul low cost routes. Not surprisingly, the majority of these aircraft are widebodies, but there are now also four narrowbodies with low cost airlines based in Europe that are operating trans-Atlantic routes.

Next month, aviation and travel professionals from around the world will convene in the Spanish city of Seville for the CAPA – Centre for Aviation Low Cost Long Haul Global Summit, the first ever event dedicated to these development market segment, where a number of questions confronting the industry will be answered.

These include:

  • 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?

It’s hardly a secret that the airline industry is facing myriad challenges, notably in the marketing and distribution areas, as companies with personalised data, and the analytics and artificial intelligence to go with it, become greater threats to the stability of the traditional airline model. Understanding aviation markets is CAPA’s great strength and passion and the event agenda in Seville includes a variety of topics sure to generate interest.

This high-level aviation event, hosted at the Barceló Sevilla Renacimiento hotel in Seville, Spain, is a forum for debate and discussion of strategic issues facing both full service and low cost carriers with the emergence of increasing Low Cost Long Haul operations and it is attracting delegate interest from across the globe.

Alongside keynotes from Air Canada and others and a high-level airline panel on the continued blurring of the divide between full service and low cost carriers, topics under discussion include:

  • Can the full service carrier and the low cost long haul model exist in the market side by side?
  • Networking long haul operations: combining with short haul partners at each end
  • Don’t beat them, join them: LCC alliances, long haul and short haul LCC and LCC-FSC partnerships
  • Aircraft, engines and operations – enabling new generations of LCLH services
  • Financing and funding growth: Managing risk with large aircraft orders
  • The evolving airport-airline relationship: What do airports and LCCs need from each other?
  • LCCs working as part of a full service/low cost group: secrets for success
  • Know thy customer: Marketing and distribution initiatives for low cost long haul carriers
  • Generating non-ticket revenue streams - Leveraging retailing and ancillary initiatives
  • Can low cost long haul airlines cater to corporate and business travellers?

FIND OUT MORE… visit the CAPA Low Cost Long Haul Global Summit homepage to find out more about this not-to-be-missed opportunity to discuss relevant issues impacting the aviation sector and learn meaningful insights from your industry peers