Low-cost long-haul flights
All about low-cost transatlantic and long-haul flights. The past and the present. Failures and successes.
Currently, low-cost airlines, such as Ryanair, Easyjet, Vueling, Southwest, Frontier, Spring and many others, usually restrict themselves to short/medium-haul flights. The first attempts to offer low-cost scheduled flights on intercontinental routes failed completely in the second half of the 20th century. However, the situation is changing quite dramatically.
Originally, it is the long-haul market which gave birth to low-cost flights. In the 1950s, the Icelandic airline Loftleiðir offered transatlantic flights at low prices, primarily between New York and Hamburg or Luxembourg with stopover in Reykjavik. Similarly, in the second half of the 20th century, under the name of Skytrain, the British airline Laker Airways offered low-cost flights between London Gatwick and New York.
The oil crisis in the 1970s and the economic recession that followed put an end to these initiatives. Loftleiðir merged with Air Iceland to form Icelandair in 1979 while Laker Airways went bankrupt in 1982.
The success of the low-cost short/medium-haul flights.
At the end of the 20th century, the deregulation of the airline industry first in the United States and then in the rest of the world as well as, at the beginning of the 21st century, the development of the Internet however completely changed the air transport market and allowed the birth and the development of low-cost airlines in the niche of the short/medium-haul flights.
Such flights do not require a large range of aircrafts which are expensive to manage, but instead, allow a high flight rotation and therefore a reduction of the fixed costs. In addition, flights offered by low-cost carriers do not have connections to other flights. So the low-cost airlines skip the connection charges and do not require the cooperation of the major airlines that keep the international market into their hands. Last but not least, the reduction of the payroll and other overheads as well as, in many countries, the use of cheaper regional airports also made possible the decrease of the fares of those flights.
The American airline Southwest pioneered such low-cost short/medium-haul flights. The example was followed by countless other airlines. If several of them failed, many others have been able to develop successfully so that some of them are now part of the largest airlines in the world.
Among the many low-cost airlines, you find for example, Ryanair, Easyjet, Vueling, Wizz Air, Jet2.com and Iberia Express in Europe, Southwest, Spirit, Jetblue, Frontier, Virgin America, WestJet and Interjet in North America, Gol, Azul Airlines and VivaColombia in South America, Pegasus Airlines and FlyDubai in the Middle East, Air Asia X, Lion Air, Indigo, SpiceJet, Cebu Pacific and many others in Asia.
The revival of the low-cost long-haul flights.
The success of the low-cost short/medium-haul flights initiated two new trends. On the one hand, some American airlines (Spirit Airlines, Allegiant Air and Frontier) have pushed the low-cost strategy even further. They offer ultra-low-cost domestic flights with a minimum service and they charge à la carte any additional option such as checked luggage, drinks and food on board, and more.
On the other hand, the success of low-cost airlines in the short/medium-haul flights has revived the opportunity to operate long-haul flights at low-cost. After a few limited initiatives, low-cost long-haul flights attract indeed a really growing interest. While the current low-cost airlines find there an opportunity to extend their scope of activities, the legacy and flag carriers also want to take part in those low-cost flights in order to ensure their own survival.
Opportunities to reduce costs of long-haul flights are more limited than those related to short/medium-haul flights. However, some kinds of savings such as lower overheads and payroll may be implemented also in long-haul journeys. In addition, displaying very low airfares before taking into account the price of additional services - a common practice of the low-cost market - is a commercial lure, the importance of which can’t be underestimated.
Depending on the airlines, four trends feature the development of low-cost long-haul flights.
1. Diversification of low cost airlines’ business.
Some budget airlines that have offered short/medium-haul flights at low cost for some years took the initiative to extend their business to long-haul routes.
For instance, the Australian low cost Jetstar Airways offers currently low-cost flights to destinations such as Japan, Myanmar and Hawaii from Australia.
Similarly, the low cost Air Asia airline, under the name of Air Asia X, offers long-haul flights from various airports in Asia. For example from Kuala Lumpur, Air Asia provides flights to the Middle East (Iran, Saudi Arabia, and United Arab Emirates) and starts flights to Hawaii in June 2017. Air Asia however ended low-cost flights to London in 2012.
Cebu Pacific, the low cost airline of the Philippines, also offers long-haul flights particularly to the Middle East (Doha, Dubai, Kuwait and Riyadh) from Manila. Since March 2017, it has added flights to Guam (island of the Pacific belonging to the United States).
The low cost airline of Singapore, Scoot, starts long-haul flights to Athens in June 2017.
With the exception of the few airlines stated in section 2 below, the European low-cost airlines showed little interest for long-haul flights. So far, they are indeed focusing on destinations on the mainland or near it (e.g. the Canary Islands and Morocco for Ryanair, Vueling, and Easyjet, Turkey for Easyjet, Israel for Ryanair and Vueling). Vueling flies to African destinations such as Dakar and Banjul, but only from Barcelona: this is not a long-haul flight.
So, some low cost airlines mainly from Asia and Australia do offer intercontinental flights at low prices, in addition to the short/medium-haul flights, which remain their core business. The trend is growing.
These long-haul flights are particularly cheap when passengers do not have checked baggage and/or when they do not require food on board. Otherwise, their fares remain mostly a bit lower than those of other airlines.
It may however happen that a cheaper deal all inclusive, possibly with a stopover, is available from a classical airline. This occurs particularly when the low cost airline is the only airline that offers nonstop flights to the targeted destination and thus it does not face direct competition. Therefore, even in the presence of low-cost flights, it is worth to compare all available flights before booking your air ticket.
2. Some low cost airlines specialize in long-haul routes.
A few other low cost airlines have chosen to specialize in low-cost intercontinental flights and make them a major part (or the only one) of their business.
The first attempts in that strategy failed quickly. Thus, in 2005, Oasis Hong Kong Airlines based in Hong Kong provided low cost flights between Hong Kong and London Gatwick or Vancouver. At the same time, Zoom Airlines that was based in Ottawa offered transatlantic flights to mainly the United Kingdom and France. After only a few years, both airlines ceased operations because they incurred heavy losses.
Subsequently, however, the great recession in 2009 and the following years sparked renewed interest in low cost flights. Travelers have also become more familiar with such no-frills flights. In this context, new projects to launch long-haul flights at low-cost have got much better results. Norwegian, originally a regional Norwegian airline that embarked on the low cost market in the 2000s and bought the Swedish low-cost airline FlyNordic in 2007, decided in 2012 to specialize in transatlantic flights at low cost through two subsidiaries (one of which is based in Ireland).
In addition to a Norwegian air operator's certificate (AOC), Norwegian has got an AOC both in Ireland and the United Kingdom. This enables Norwegian to operate flights from any airport in the European Union to any destination in the United States.
Today, Norwegian operates low-cost flights to many destinations in the United States (New York, Boston, Fort Lauderdale, Orlando, Las Vegas, Los Angeles, Oakland, and others) as well as Puerto Rico from various European airports such as London Gatwick, Paris-Charles De Gaulle, Oslo, Stockholm, Copenhagen, and others. In addition to these transatlantic flights, Norwegian offers low-cost long-haul flights to Bangkok and Dubai from its operating bases in Scandinavia.
Norwegian's cheap long-haul flights are expanding dramatically. In the summer 2017, Norwegian will indeed launch transatlantic flights between Barcelona and four major airports (Los Angeles, New York-Newark, Oakland, and Fort Lauderdale) in the United States as well as between Ireland (Dublin, Shannon, and Cork) or Scotland (Edinburgh) and some regional U.S. airports such as Providence in Rhode Island about 60 mi (100 km) away from Boston and Stewart International Airport in the State of New York about 60 mi (100 km) north of Manhattan. Dublin, Shannon and Edinburgh flights have U.S. preclearance, which means that U.S. customs controls occur before departure and that the flight upon arrival is considered as a domestic U.S. flight.
Apparently, Norwegian is looking for not only the most popular destinations, but also (in order to offer cheap deals) smaller airports. Moreover, Norwegian's passengers who land at Stewart International Airport can take advantage of a bus shuttle service to get to Manhattan (1 h 20) at only $ 20.
Norwegian is also planning to establish a subsidiary in South America (Argentina) and a partnership in Europe with Ryanair, which would enable passengers of an airline to continue their journey with the other airline.
By offering cheap transatlantic flights in addition to flights within Europe, the Icelandic low-cost airline WOW Air follows a similar strategy which is however limited mainly to the Icelandic market. From Keflavík Airport, WOW Air serves several U.S. cities (Boston, New York Newark, Baltimore-Washington D.C., Los Angeles, San Francisco, Miami and Pittsburgh) as well as some other intercontinental destinations such as Toronto, Montreal and Tel Aviv.
Sister company of Air Caraïbes, the new French low cost airline, French Blue, serves only two intercontinental tourist destinations at low cost (Punta Cana in the Dominican Republic, and, from June 2017, Saint Denis in the island of Reunion in the Indian ocean), both from Paris-Orly airport.
3. The flag carriers embark on low-cost long-haul flights.
Faced with growing competition from airlines such as Norwegian and the airlines of the Middle East, the European flag carriers have no choice but offer also cheap long-haul flights. Since they have lost a significant market share in the niche of the short/medium-haul flights, they would not survive a similar loss in the market of the transatlantic and long-haul flights.
For commercial reasons (such as brand image) and for cost reasons (employment of less well paid staff), major European flag carriers have chosen to offer long-haul flights at low cost through a specialized subsidiary, following in part the example of Jetstar Airways (Qantas Airways’ subsidiary).
In March 2017, the International Airlines Group (IAG), formed by the merger of British Airways and Iberia, announced the creation of Level, a low-cost airline based in Barcelona-El Prat.
As from June 2017, Level will offer low-cost flights from Barcelona to Buenos Aires in Argentina, Punta Cana in the Dominican Republic as well as to Oakland and Los Angeles in the United States. These first flights will be made by aircrafts and crews of Iberia. Level will serve additional long-haul routes, including from cities in Germany, later on.
As at Norwegian, passengers of Level have to pay supplements if they want to have checked baggage, receive a meal aboard or have access to the internet. Interesting feature: they benefit from Avios, the loyalty scheme of the group, while the low cost airlines usually have no program for frequent travelers.
Vueling, which belongs also to IAG, is based in Barcelona so that passengers can benefit from possible connections between the flights of Level and Vueling in Barcelona.
In Germany, Lufthansa implements a similar strategy by entrusting the low-cost subsidiary Eurowings with flights to Miami, Orlando and Seattle in the United States, Varadero in Cuba, Punta Cana and Puerto Plata in the Dominican Republic, Port Louis in Mauritius (Indian Ocean), Bangkok and Phuket in Thailand, and other long-haul flights. It may happen in the medium term that Brussels Airlines, which is owned by the Lufthansa Group, will operate also low-cost long-haul flights of Lufthansa.
Air France is following the same strategy by creating a new subsidiary for cheap long-haul flights, in addition to Hop and Transavia, the subsidiaries in charge of low-cost short/medium-haul flights. For this purpose, Air France has to obtain the agreement of its pilots and staff since the new subsidiary is expected to rely on a reduction of wages.
The new subsidiary will probably be called Boost (tentative name) and could start operations in the winter 2017. At first, it would offer only medium-haul flights (e.g. to Turkey). Boost would start cheap long-haul flights in the summer 2018. By 2020, Boost is expected to have 10 long-haul aircrafts and 18 medium-haul aircrafts. As for long-haul flights, the target destinations would be business (such as New York) or tourist (e.g. Mauritius) destinations, and chiefly Asian destinations (like Bangkok and Kuala Lumpur) where Boost would be more competitive than Air France vis-a-vis the airlines of the Middle East.
With Boost, Air France wants to offer long-haul flights at low prices without affecting excessively the business of its other flights. In this respect, the choice of the serviced routes and the price spread between both kinds of flights are critical factors.
4. Charter and similar airlines.
A fourth kind of airlines operate intercontinental flights at low cost: the airlines that are related to tour operators, such as TUIFly, Condor, Thomas Cook and Thomson Airways.
For example, from airports in the United Kingdom, Thomson Airways serves destinations such as Varadero in Cuba, Puerto Plata, Punta Cana and La Romana in the Dominican Republic, Cancun and Puerto Vallarta in Mexico, Orlando in the United States, Liberia in Costa Rica, Goa in India, Colombo in Sri Lanka, Phuket in Thailand, and other similar destinations.
These flights serve only holiday destinations. In many cases, their passengers have acquired the air ticket as part of a package that included other services such as accommodation. They are rarely willing to travel without checked baggage. In addition, many of these flights are provided only on a seasonal basis. The fares of these flights are also more volatile than those from other airlines.
Overall, the flights of charter and similar airlines do make up a significant share of the air transport market; however, they are aimed at a largely different clientele from that of flag carriers or low cost airlines.
The current focus on low-cost long-haul flights is not a fad, but the beginning of a radical change of the air transport market with lower average airfares, lower service quality, more services paid on a case-by-case basis on board, more flights to and from secondary airports, and much more difficult price comparisons.
It remains also to be seen whether, in the long run, travelers will be able to easily combine flights of different types and, if so, what additional changes of their behavior this could trigger.
Willgoto, March 2017.
Update April 2017
On April 6, 2017, Ryanair announced the start of connections between its flights. Travelers will be soon able to book "point to point" flights with Ryanair, i.e. a Ryanair flight to an intermediate airport followed by a Ryanair flight to the final destination without having to check-in again at the "stopover" airport. This facility will be implemented first at Rome-Fiumicino and then gradually in other hubs of Ryanair. This is new in the sector of low-cost flights in Europe.
At the same time, Ryanair confirmed it is planning partnership agreement with other airlines, especially Norwegian and Aer Lingus, in order to provide its passengers with long-haul flights, as already announced in our above article. In just one package, travelers flying with Ryanair will be able to continue their trip with a long-haul flight of Norwegian or Aer Lingus and vice versa, without check-in again at the stopover airport.