Going low-cost on long-haul was going to be the next big thing for many in the airline industry. After all, should it not be possible to at least partially
replicate LCCs in the short-haul sector and gain a
share of lucrative long-haul markets? The model was
tested in Asia-Pacific first and has spread to Europe.
But after several years of trying to prove the concept, doubts about the business model have grown.
Te doubts are fed by the losses incurred by and
subsequent survival fights of two relative newcomers
in Europe—Norwegian and Iceland-based WOW
Air. Steep expansion plans and, in Norwegian’s case,
legal and regulatory battles to overcome US major
airline opposition to it serving the North American
market, have been problems.
But these cases also seem to validate some basic
premises of what does and does not work for LCCs.
“You need a premium cabin, you need feed and you
need cargo,” said Daniel Roeska, a London-based air-
line analyst at Bernstein Research. Finding the right
balance between yields and costs, and between com-
plexity and efficiency, are complicated equations.
Te long-haul LCC model is most developed in the
Asia-Pacific region, with several of these airlines operating fleets consisting entirely or partly of widebodies. Given the distances between major destinations
within the region and the high air traffic demand
growth rates in emerging markets, it was an obvious
place to start. However, some of these carriers are still
financially fragile. Another industry downturn or a
sharp rise in oil prices would place more pressure on
their business models.
While these LCCs are grouped in the long-haul
category because they operate widebodies, they have
relatively few true long-haul routes and only a small
percentage of those extend outside of Asia-Pacific.
“Te economics are tough” for LCCs operating
THE NEXT BIG THING?
The track record of long-haul
LCCs demonstrates how difficult
it is to make money. BY JENS FLOTTAU
AND ADRIAN SCHOFIELD