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Airlines

Coming of age?

Low cost long haul is back in the headlines with new players coming into the fray. Martin Rivers analyses the market to see just how far the business model is flying
 

In March 2015, after years of teasing passengers with the promise of £10 transatlantic fares, Ryanair formally ruled out moving into the low cost long haul (LCLH) marketplace.

 

According to a terse statement “[The Board] has not considered or approved any transatlantic project and does not intend to do so,” backtracking on plans announced just days earlier to connect Europe with a dozen cities in America. Chief Executive Officer Michael O’Leary insisted that the industry needs to enter a cyclical downturn before widebody aircraft become available at suitably discounted prices.

 

Ryanair’s scepticism of LCLH models has not changed over the past two years, but the once-vacant sector is now advancing leaps and bounds without it. Two rivals – Norwegian Air Shuttle and Iceland’s WOW air – have grabbed sizable chunks of the transatlantic market with their no-frills offerings. Responding to the new competition, three of Europe’s legacy carriers have since launched or promised to launch their own LCLH subsidiaries.

 

Even O’Leary is seeking exposure to the market – in a roundabout way – by pursuing interline deals that will feed Norwegian’s long haul flights with short haul Ryanair traffic. This is not necessarily a vote of confidence though, as he is holding the same talks with several full service carriers.

 

With Asia-Pacific travellers already well accustomed to low cost widebody flights – pioneered by the likes of Malaysia’s AirAsia X, Australia’s Jetstar Airways, and the Philippines’ Cebu Pacific Air – many industry figures are convinced the age of budget long haul travel has finally dawned.

 

Norwegian is rightly considered the frontrunner in Europe, having received its first Boeing 787 Dreamliner back in 2013. The airline presently deploys 13 of the aircraft from five European cities (Copenhagen, London, Oslo, Paris and Stockholm), serving six destinations in continental America (Boston, Fort Lauderdale, New York, Oakland, Orlando and Los Angeles); two in the Caribbean (San Juan, Puerto Rico; and the US Virgin Island of Saint Croix); and one in Asia (Bangkok, Thailand).

 

US lobbyists had stymied its expansion for years by campaigning against the granting of a foreign air carrier permit for Norwegian Air International (NAI), an Irish-registered subsidiary that benefits from lower costs and broader traffic rights than the Scandinavian unit. It was only in the final days of the Obama administration that NAI received its licence, with the US Department of Transportation rejecting allegations of unfair competition.

 

That regulatory green light has already precipitated a raft of new route announcements. Barcelona will become the sixth European widebody base in June 2017, while Seattle, Denver and Singapore are scheduled to join the network in September. A new subsidiary has meanwhile been registered in Argentina.

 

The latest generations of narrowbody aircraft are also playing a role in long haul growth. This summer, Norwegian will deploy long-range 737 MAXs from five UK and Irish cities (Edinburgh, Belfast, Cork, Shannon and Dublin) under its NAI licence, opening links to three secondary airports in America.

 

Outstanding orders for 108 MAXs, 26 Dreamliners and 30 long-range Airbus A321neo LRs suggest that the expansion will continue for some time.

 

 In Iceland, WOW air is taking a more nuanced approach to LCLH flying: exploiting the geography of its home base to offer budget one-stop connections across the Atlantic. Its fleet of three widebody A330s and nine narrowbody A320-family jets will grow to 24 units by the end of 2018. Nineteen spokes in Europe and 10 in North America will be served from its Reykjavik hub this summer. >>


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