Are Long-Haul Budget Airlines Going Extinct?
Jennifer Billock October 12, 2018
Smaller airlines offering low-cost, long-haul routes are suffering in today’s climate of ever-increasing oil prices, as evidenced by the recent demise of Primera Air – which left travelers stranded and confused at airports around the world – and others from the recent past like Air Berlin, SkyWork, and VLM.
On October 1, ticket holders for Primera Air flights faced a major issue: the airline had abruptly declared bankruptcy and no aircraft would be coming for travelers with booked flights. Primera was offering long-haul flights at a low cost, something many airlines are attempting to do these days. But will that business model ever work?
More and more budget airlines have been declaring bankruptcy or restructuring lately, even as they attempt to add longer routes. It’s a problem of fuel: oil prices are just too high. Up to 22 percent of a fare is fuel costs, and jet fuel prices have increased 50 percent in just the last year. Every airline, large or small, is struggling to keep up with the cost.
Plus, budget airlines aren’t getting the benefits of the corporate market.
“The bet they are taking is that they can make up for that corporate market revenue by filling the plane with more passengers and getting passengers to buy additional services,” ICF Aviation’s aviation economics expert and senior vice president Samuel Engel told Vox.
Having only a small fleet of planes can have a negative effect as well.
“It adds to your risk,” Engel told Vox. “You have less capacity to absorb the ups and downs of the business.”
Right now, Norwegian and Wow Air are the only two low-cost airlines successfully running long-haul flights.
long haul low cost is not new. Canada 3000, Air Transat were doing it in 1990s. Canada 3000 only fell over due to SEP11, otherwise they would be huge right now.
In reply to the above comment: A) That’s not true at all! BA flew 45.2 million last year and 44.3 million 2016 >99% to and from London. Norwegian flew 33 million last year and just under 30 million the year before across their whole network (not from London). B) Number of passengers carried and loads means nothing. It’s yield that is important in terms of profit. Personally I don’t see the long haul budget model lasting long. So many airlines have failed in the past. I have looked at long haul budget options before and the savings are usually minimal and therefore not worth it.
Air Berlin wasn't a low cost airline.
What sort of nonsense statement is it that fuel is "up to 22%" of a fare? If an airline gives a promotion fare of $5, the fuel cost is obviously over 100% of the fare! This "up to 22%" of a fare makes absolutely no sense, the fuel cost is not proportional to the fare cost.
I use long haul budget airlines (Cebu Pacific, Air Asia X, Scoot) as much as legacy carriers (QF, CX, SQ). As far as economy comfort is concerned for long haul, it is only a difference of a subway sandwich and a pillow, both of which are easy to carry on board. The savings can be considerable and more than covers the opportunity cost of not getting miles. This said, when a budget airline goes mechanical or has a schedule change, it can wreak havoc on travel plans so I almost always overnight between flights if on different tickets. I think the airlines are still trying to work out how to be profitable for the long haul routes due to fuel and staffing costs. In my experience, SCOOT airlines which fly's parallel schedules with Singapore Airlines often cancel the SCOOT flight and move the passengers over to SQ when loads are not optimal. This tactic consolidates passengers from two aircraft into one without upsetting too many people. Some markets do not have a huge business class market and as such LCC's makes a lot of sense. Cebu Pacific long haul flights to Australia and Dubai from Manila come to mind. Great staff on new aircraft with service operating on days that Qantas do not. I often fly Qantas out and Cebu Pacific back. While I love Qantas economy, Cebu Pacific economy is fine as well when you see the price paid. Long Haul LCC routes that are successful are ones that operate between large metropolitan areas (Manila / Melbourne) with large groups of economy passengers who are not complainers, by airlines that use modern aircraft designed for low cost long haul use (787) and by airlines that utilise fleet efficiency by having similar cockpit certifications (A320 to A330 as in Cebu Pacific). Not dead just turning over!