Longhaul and Low-Cost Bottom Line

Low-cost carriers have come to stay in every part of the world. From the pioneers at LCC travel at Southwest, to the budget options of Ryanair and AirAsia, this method of air travel has captured the attention of a large portion of the flying population. The most recent development in this field has been transatlantic and long-haul LCCs. WOWair, Norwegian and Westjet are a few of the airlines that fly into the US. In Asia, Scoot, Jetstar and AirAsiaX are all strong competitors.

For the longest time, legacy carriers, such as American and Air France have shied away from this phenomenon. This began to change a few years back with Delta Airlines introducing “Basic Economy” in order to compete with the likes of Spirit and Frontier. The bare-bones economy fares offer very little for the passenger. No checked luggage, no seat assignment, and in some cases, no elite miles, come at the expense of a better ticket. American and United followed suit. Across the border, Air Canada launched their hybrid model of Air Canada Rouge. Rouge is a mix between a leisure airline (such as Air Transat) and long-haul LCC. These airlines have seen success in their LCC-Esque endeavors and their competition has noticed.

British Airway’s Parent IAG to Start Transatlantic Low-Cost Carrier

One of the groups that have noticed is IAG, the parent of Oneworld carriers Iberia and British Airways. They are no strangers to the LCC market, given that they own a majority of Vueling. Vueling is a Barcelona-based LCC, with bases throughout Western Europe. The airline operates a successful business model, and IAG believes they can use that to their advantage.

Basing their new carrier at Barcelona would have logical advantages. IAG believes that they can use Vueling to feed passengers into their new venture. The airline group is looking into a variety of possible destinations. These destinations range from Los Angeles to Buenos Aires, to Tokyo.

IAG has not mentioned which aircraft they would use, and where would they source them. I believe, however, they will use aircraft from British Airways, given the downturn after Brexit. I can also see them purchasing second-hand aircraft cheaply, and repurposing them for long-haul flights.

Not a New Phenomenon

The trend of long-haul LCCs is not new. Even some ten years ago, there were carriers such as ZOOM from Canada. ZOOM offered a low-cost model similar to WestJet. History had them fold because of the economic crisis of the late 2000s. With the development of aircraft like the 787, this concept became popular again. Most LH-LCCs use new 787s or A330s. Norwegian Longhaul has been expanding aggressively since they began to have their 787s delivered. They offer operating bases in Copenhagen, Stockholm, Oslo, London, and Barcelona. Even Lufthansa has started taking a look into LH-LCCs. Their subsidiary Eurowings has started international flights. Although most of these work to supplement Lufthansa’s network, they are modeled after the LCC concept.

Landing Thoughts

As LCCs continue to push into the long-haul market, I foresee fares continue to drop. Delta already has their Basic Economy product on international flights. I expect to see this trend pass to United and American. We may see JetBlue expand into long-haul operations with their Mint-equipped aircraft. Premium cabins will continue to become a competitive marketplace, with the expansion of United’s Polaris product, as well as Delta’s new business class.

In terms of IAG’s new LH-LCC, I expect it to have strong codesharing agreements with Vueling. It will be interconnected with Vueling’s network, and even keep the Vueling name. I expect the airline to impact Iberia and Iberia Express’s performance, but not by much. It will probably stay separate from the Oneworld alliance, just like Vueling.

The long-haul market has been invaded by the LCCs, and I believe that they will stay. The phenomenon has great appeal, and will probably gain traction as more and more people get to travel. The next step is for US-based carriers to start launching LH-LCCs. Maybe JetBlue will be the first, but airlines such as Spirit and Frontier could also be on the lookout for the opportunity. Only time will tell how many of these survive. Hopefully, airlines will adapt to offer customers more choices.

What do you think? Are you a fan of Longhaul LCCs? Should IAG launch their own LH-LCC? Let us know in the comments section!