Low Cost doesn't mean low thought...Insights from CAPA's Global LCC Summit

27 February, 2019

The CAPA Global LCCs Summit has wrapped up for another year here in Singapore. The Blue Swan Daily was on hand to get all the insights from key players in the LCC world. Take a look below at some of the main themes from the two day event.

On the impact of technology companies like Google and Amazon:

  • Swoop president Steven Greenway, technology companies like Google and Amazon have the potential to reduce airlines to undifferentiated service providers because they increasingly own the distribution layer and the customer relationship. Mr Greenway noted technology companies have "far, far more interactions with our customers than we do". He added that these companies could end up owning "the whole transaction until the passenger steps onto the aircraft".
  • Collins Aerospace head of sales Asia Pacific Stephen Robinson, stated LCCs could partner with technology companies, including Microsoft and Google, to "tap into the business travel market" through access to corporate calendars to anticipate travel needs.
  • London Stansted Airport chief commercial officer Aboudy Nasser, agreed with other speakers at the Summit that commoditisation presents a significant risk for the aviation industry, noting: "We are never going to know the customer as well as Google and Amazon do". Mr Nasser questioned whether the aviation industry will "go back to a charter world" because of the enormous distribution capability of these technology companies.

On LCCs leveraging IATA’s new distribution capabilities:

  • MW Travel Consultancy principal Martin Warner, stated the NDC "presents an opportunity for LCCs to respond to FSCs playing in their sand pit". Mr Warner added that the NDC is also helping to drive commercial model change between the airline and the GDS, as well as between the GDS and the travel agent.
  • IATA Industry Distribution Programs director Yanik Hoyles, stated IATA expects the NDC certification and implementation process to significantly accelerate "once more players are on board". Mr Hoyles predicts: "For the followers, access to market will be a lot easier and a lot faster" than it is at present.
  • American Express (AMEX) Global Business Travel Singapore and Thailand GM Sanghamitra Bose, stated airlines need to start thinking more about the value of content and less about the price of content, particularly LCCs. Ms Bose added "there is lots of content out there, as you add content, ask what kind of value is it driving for the end consumer?".
  • Travelport global head of air Damian Hickey, stated the aviation and travel industry is moving from the world of traditional airline distribution towards a "modern API dynamic distribution environment" and that the complexity of this transition means it will require a significant period of time to complete. Mr Hickey added that while many full service carriers are moving towards becoming pure API distribution airlines, "LCCs are already there".

On long range narrowbody aircraft opening up new routes:

  • CAPA - Centre for Aviation executive chairman Peter Harbison, stated "we do expect a sea change in network planning" driven by the induction of long range narrowbody aircraft, which will help open up a significant number of new city pairs. Mr Harbison said LCCs will lead this sea change "because of their innovation and creativity", but full service airlines are expected to adapt quickly to the long haul narrowbody niche too.
  • CAPA - Centre for Aviation South Asia director Binit Somaia, stated CAPA India continues to believe Indian LCCs will induct widebody aircraft eventually. In the meantime, Indian LCCs may explore use of long range narrowbody aircraft to operate one stop long haul services to destinations in Europe.
  • Boeing Commercial Airplanes commercial marketing director Wendy Sowers, stated long range narrowbody aircraft enable airlines to reach more city pairs, including opening up new US-Canada and trans Atlantic city pairs. Ms Sowers also noted long range narrowbodies can be utilised by airlines to continue operating routes during off peak seasons and periods of low demand, rather than suspending services during off seasons.
  • GECAS product strategy VP Damien Trottier, stated fewer routes are sustainable with the capacity of widebody aircraft than with narrowbody aircraft, including the A321. Mr Trottier said the A321 is "really a Swiss Army knife, it's very versatile".