Friday, 6 January 2012

The long-awaited European long-haul low cost revolution

Are low cost long-haul airlines finally coming to Europe (to stay)?

Well, to be fair, long-haul low cost airlines have operated in Europe before, but for a number of reasons they have never been able to consolidate.

From the early days of pioneering Laker Airways, back in the seventies, to the more recent Oasis Hong Kong (not to be mistaken for Oasis Airlines, a Spanish charter airline that ceased operations in the mid-nineties!), that flew Boeing 747s between London and Hong Kong, and Air Madrid, that collapsed in the run up to a Christmas holiday leaving thousands of passengers stranded, all attempts to establish the low cost long haul model in Europe have been met by failure so far...No wonder that with this track record Ryanair's rumored long haul expansion, expected to start with flights to New York Islip, hasn't materialized yet! And it is not only Europe, we find a similar situation in the US (I do not count transcontinential routes as long-haul).

The economics of long haul low cost aviation are certainly more challenging than those of the short haul variant: aircraft can not do multiple rotations, there are few long haul markets whose traffic is dense enough to support point-to-point operations without the support of a feeder, it is more difficult to take part of the market from alternative modes of transportation such as road or train (basically most of those that can or would fly are already doing so) and also most routes outside Europe are governed by a strict framework of bilateral agreements that provide little flexibility to new entrants.

However, there is a region og the World where long haul low cost carriers are not only well consolidated but also expanding fast. Air Asia X and Jetstar, that from their respective bases in Malaysia and Australia are currently competing to establish subsidiaries across the region. Singapore Airlines is also launching its own low cost airline, Scoot. And Australia's Strategic Airlines has also joined the fray after rebranding itself as Air Australia.

But in such a global industry, it is rare to see a trend confined to a single region and I think we are going to see long haul low cost airlines take hold in Europe really soon, with airlines from the Asia-Pacific region leading the way: Air Asia X is already at London Stansted and some more routes are being planned. Jetstar has also announced plans to enter the European market.

 Norwegian plans to go long-haul as soon as it gets its new Boeing 787s

And we are starting to see some movement among European airlines too, with Norwegian leading the way, and XL Airways in France are also pondering whether to make the move (Air Berlin is also offering long haul but I would count them more as a hybrid airline rather than low cost). Delays in the production of the Boeing 787 might be delaying some long haul plans (its, in theory, superior economics might help overcome some of the obstacles mentioned above), but looks like the long haul low cost carrier is coming soon to an airport near you!


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