Guy Johnson, Journalist and aviation expert from Bloomberg hosted the kick-off session of this year`s World Low Cost Conference in London exclusive keynote interviews with prominent leaders of the LCC-industry. In the center of interest were the challenges and opportunities of Low Cost Airlines, as the industry faces slowing growth rates and Full Service Carriers are intensifying their approach to the low-cost-model. The consequence:
“Everybody is operating in the same field; everybody is in the middle now, but changes in the extremes of the business models can be observed as well. As the future is not set in stone, where are the opportunities in the next 5 years?”
Christoph Müller (CEO Air Lingus): The basic rules didn`t really change, the lowest seat cost gives flexibility not only in short haul markets, but also on long haul routes. At the moment Air Lingus has a 2,2% market share on the atlantic route from Dublin – a doubling up to 5% is possible with more than 5 million people in this catchment area.
Bjorn Kjos (CEO Norwegian Airlines): “It`s a crazy, but great industry!” LCCs on long haul will come for sure and this kind of business is reality in Asia for years, the expansion into the west is a matter of traffic rights and a political issue. The differences LCC-short haul and long haul aren`t that big, both need short turnarounds. The new Boeing787 is built for high speed and 90 minutes turnaround times. The new generation of aircraft is very fuel efficient; the cost difference is about $ 10 mio/per year.
Kenny Jacobs (CMO Ryanair): At the moment Ryanair can double up in size without leaving the EU! Today 60% of all flights out of GB are done by LCCs and Ryanair has an EU-market share of around 13%; -> compare: Southwest has 25% within the US, so a doubling up to 160 mio people is possible for Ryanair. With improved service quality and a move to more centralized airports, 25% of Ryanair`s customers are business travelers already today, they made very positive experiences without blue curtains & free breakfast! We all can learn from ALDI and 4000 bookings per day confirm that it is still the most important thing to stay the airline with the best prices!
Vitaly Savelyev (CEO Aeroflot): In Russia is an increased interest for low-cost-services and several Airlines like Air Arabia, EasyJet and Air Dubai offer the Low Cost product today. Aeroflot has its focus on developing flying with an international reliable quality product in Russia, a region where geography requires long and short haul routes as well. We are cost-conscious but still customer-centric. We organized several product combinations and merchandise our in-flight services which offers huge possibilities. Our market grew more than 16% within six months in 2013/14 and with 31 mio. passengers. We are already Nr. 4 in Europe. Turnaround times of 35 minutes are reality for Aeroflot.
In the open discussion is mutual consent that the LCC-subsidies of Air France (Transavia) and Lufthansa (Wings) are not in the sense of their shareholders. Producing overcapacity by going into a corner where cannot be earned enough is critical. “Why should that transformation work when it did not work so far?” Their fixed cost base is independent from actual demand and still too high. Labour agreements can be difficult and Unions have the power to block some decisions. Modern technology and creativity enable ancillaries and bring additional profits and improved customer experience only with a real low cost base.
About the author: Harry Schnuderl from Vienna University