The North Atlantic market is being transformed by long haul LCCs, wide and narrowbody

Summary

• Low Cost Carrier (LCC) seat capacity on the North Atlantic is set to grow by 60% in 2018, giving a seat share of 7.7%, from virtually zero five years ago;
• Norwegian is by far the leading North Atlantic LCC, followed by WOW air and WestJet. Eurowings and new entrants Primera Air and French Bee are also present;
• Immunised JVs are losing share on the North Atlantic and non JV seat growth is driven mainly by LCCs;
• LCC narrowbody growth on the North Atlantic, based on newer aircraft types, is especially strong. Non-LCCs focus narrowbody capacity on the Boeing 757.

Led by Norwegian, LCCs have exploited EU-US market liberalisation and new generation aircraft (although Canada's WestJet mainly uses older 767s). WOW air's Icelandic connecting model has also contributed. New entrant Primera Air, an all narrowbody operator, is following Norwegian in launching trans Atlantic routes from the UK and France, outside its Nordic home markets.
History shows that the North Atlantic can be challenging for LCCs. Today, aircraft technology and the liberalisation of traffic rights have transformed the market and North Atlantic LCCs now appear to have a strong tailwind.
LCC North Atlantic seat capacity to grow by 60% in 2018, taking a seat share of 8%
According to preliminary data from the OAG Schedules Analyser for 2018 airline schedules, LCCs will grow seat capacity in the North Atlantic by 59.9% in 2018. This compares with non LCC growth of 3.8% and total market growth of 6.6%.

NORTH ATLANTIC*: ANNUAL SEAT CAPACITY FOR NON-LCCs AND LCCs^♦

Source: CAPA - Centre for Aviation, OAG Schedules Analyser

Total LCC seats between Europe and North America will be nine times the number deployed in 2014, which was the first full year after Norwegian entered the market.
LCC seat share will be 7.7% in 2018, still quite low, but a level that is clearly visible and a very big increase compared with 0.2% just five years ago. Even as recently as 2016, LCCs had only 3% of North Atlantic seats.
Norwegian is comfortably the leading North Atlantic LCC, followed by WOW air and WestJet
The leading LCC on the North Atlantic by seat numbers is Norwegian, whose seat share of the total market will be 4.8% in 2018, based on current OAG data (this includes Norwegian Air Shuttle, Norwegian Air International and Norwegian Air UK). Its capacity in 2018 will be nearly two thirds higher than in 2017 (up by 64.1%).
Norwegian has well over half of all LCC seats in this market, putting it comfortably ahead of WOW air, whose 1.6% share places it ahead of WestJet, which has 0.6% of seats in 2018.
New entrant Primera Air will have 0.4% of North Atlantic seats (0.5% in the summer season) with its routes between Europe (London Stansted, Paris and Birmingham) and North America (New York Newark, Boston, Toronto and Washington DC) in summer 2018. It plans an all narrowbody operation.
Eurowings, with a share of 0.3%, is the only other LCC with more than 0.1% of seats. New entrant French Bee (formerly French Blue), with a new Paris Orly-San Francisco-Papeete service in summer 2018, and Jet2.com (in focused seasonal operations) are also active in this market in 2018.

NORTH ATLANTIC*: WEEKLY SEAT CAPACITY FOR LCCs^♦

Source: CAPA - Centre for Aviation, OAG

Immunised JVs are losing share on the North Atlantic
LCC growth on the North Atlantic is having an impact on the market share of the antitrust immunised JVs that lie at the heart of the three branded global alliances.
Collectively, the three will have 67.8% of seats between Europe and North America in 2018, down from 69.2% in 2017, as they are growing by only 4.5% - more slowly than total market growth of 6.6%.
Adding in Virgin Atlantic's capacity, which is in a separate JV with Delta (but is now expected to join the Delta/Air France-KLM JV), the total share of seats that is in immunised JVs is 72.3% this year, down from 73.7% in 2017 and a peak of 79.8% in 2015.
The oneworld JV (British Airways, Iberia, American Airlines and Finnair) will grow by 5%, the fastest growing among the JVs, but its seat share will ease back from 20.9% in 2017 to 20.5% in 2018.
The JV within the Star Alliance (Lufthansa Group excluding Eurowings, plus United Airlines and Air Canada) will increase seat numbers by 4.2%, but its share of seats will fall from 27.9% in 2017 to 27.2% in 2018.
SkyTeam's immunised JV (Air France-KLM, Delta and Alitalia) will grow by 4.4% and its seat share will dip from 20.4% to 20%.
Total JV seat growth will be 4.6% (including Virgin Atlantic), while non-JV growth will be 12.2%.
Non-JV seat growth is driven mainly by LCCs
The strong growth in non-JV seat capacity this year is driven by LCCs, whose 59.9% expansion compares with only 0.7% growth by non-LCCs that are outside the JVs.

NORTH ATLANTIC*: ANNUAL SEAT CAPACITY FOR JVs WITH ANTITRUST IMMUNITY^♦

Source: CAPA - Centre for Aviation, OAG Schedules Analyser

Over the four years since 2014 (the first full year of Norwegian's participation in the North Atlantic market) the non LCCs outside the JVs grew by a healthy 34%, but LCCs have grown nine-fold.
LCCs account for 27.7% of non JV seat capacity in 2018, from an almost standing start five years ago.
LCC narrowbody growth on the North Atlantic is particularly strong
LCCs' North Atlantic growth is even more rapid on narrowbody aircraft. In 2018 LCCs will grow widebody seat numbers by 49%, a very significant rate, but their narrowbody capacity will leap by 89.4%.
Their narrowbody capacity is up by 60 times since 2014, while their widebody capacity is up just over six times.
Narrowbodies will account for almost one third (31.7%) of LCC capacity on the North Atlantic in 2018, compared with 26.7% in 2017 and 19% in 2016.
The 787 is the biggest contributor to LCC seat capacity on the North Atlantic, accounting for 54.8% of the total in 2018 (39% for the 787-8 and 15.8% for the 787-9), and all operated by Norwegian.
After these widebodies, the next most important LCC aircraft in this market are narrowbodies: the A321 (20.9% of LCC seats) and the 737 MAX 8 (8.6%).
LCCs have 37% of North Atlantic narrowbody seats in 2018
LCCs are now a very significant factor in long haul narrowbody operations, taking 36.6% of all narrowbody seats on the North Atlantic in 2018, according to current OAG data. As recently as 2015, this was as low as 3.9%.
Non-LCC narrowbody capacity declined from 2011 to 2013, before enjoying a modest rebound to 2015 and then falling once more. There is projected to be a 12.4% drop in non LCC narrowbody seat numbers between Europe and North America in 2018.

NORTH ATLANTIC*: ANNUAL SEAT CAPACITY OUTSIDE THE JVs^♦

Source: CAPA - Centre for Aviation, OAG Schedules Analyser

NORTH ATLANTIC*: ANNUAL LCC SEAT CAPACITY DIVIDED BETWEEN WIDEBODY AND NARROWBODY AIRCRAFT^♦

Source: CAPA - Centre for Aviation, OAG Schedules Analyser

LCC narrowbody growth on the North Atlantic is led by A321 and 737 MAX aircraft
The sharp growth in LCC narrowbody capacity on the North Atlantic since 2014 was driven first by A321 aircraft and, from 2017, also by 737 MAX 8 aircraft.
These two aircraft types are projected to account for 93% of LCC narrowbody seats in this market in 2018.
The better fuel efficiency of the MAX and the A321neo and, in particular, the additional range of the A321LR enable new city pairs that are not big enough to sustain widebody operations to become economically viable.
WOW air was the sole LCC operator of A321s on the North Atlantic from 2015 to 2017, but is joined in 2018 by Primera Air. This has mainly been through A321ceo aircraft, of which WOW air had 11 by the end of 2017.
The Icelandic LCC took delivery of one A321neo in Jun-2017 and will take two more in summer 2018 (one in Apr-2018 and one in Jun-2018).
Primera Air is due to take delivery of eight A321neos from Apr-2018 to Oct-2018 and two A321LRs in Nov-2018 and Dec-2018. In order to fulfil its summer schedule, Primera Air is to lease 757 aircraft for services from Stansted to Boston and Newark between Apr-2018 and Aug-2018.
Norwegian introduced the 737 MAX 8 onto the North Atlantic in 2017 and is expanding its use of the type in 2018. It will be joined by WestJet in the deployment of the MAX on the North Atlantic in 2018 (although the Canadian LCC mainly operates ageing 767s in this market).
Norwegian also has 30 A321LRs on order for long haul use, and JetBlue is considering trans Atlantic operations for at least some of the 60 that it has ordered.
Non-LCC narrowbody capacity on the North Atlantic is dominated by 757 variants
Among non-LCC operators on the North Atlantic, narrowbody aircraft remain a very small part of their operations, accounting for just 4.6% of seats. Moreover, 757 variants remain the dominant narrowbody aircraft choice for these operators, accounting for 93% of non-LCC narrowbody seats on the North Atlantic.
However, this may be starting to change, as LCC interest in newer narrowbody types for long haul operations has nudged some legacy airlines in the same direction.
SATA International (operating as Azores Airlines) is launching three A321neo trans-Atlantic services in summer 2018, from the Azores to Boston and Toronto. In addition, TAP Portugal has 10 A321LRs on order and Aer Lingus has eight A321LR aircraft on order, and both plan to deploy the variant on the Atlantic.

NORTH ATLANTIC*: ANNUAL NARROWBODY SEAT CAPACITY FOR NON-LCCs AND LCCs^♦

Source: CAPA - Centre for Aviation, OAG Schedules Analyser

NORTH ATLANTIC*: ANNUAL NARROWBODY LCC SEAT CAPACITY BY AIRCRAFT TYPE^♦

Source: CAPA - Centre for Aviation, OAG Schedules Analyser

The Canadian leisure airline Air Transat also plans to re-enter the narrowbody trans Atlantic segment with A321LR routes to Europe from 2019.
Air Canada and Icelandair are both operating 737 MAX 8 equipment between Europe and North America in 2018.
LCCs' growth in seat share on the North Atlantic seems set to continue
Led by Norwegian, LCCs have become a noticeable feature of the North Atlantic aviation market over the past five years and their presence continues to grow.
The growth of LCCs in this market has been built on the development of new, more cost efficient, aircraft types (first the widebody 787 and now narrowbodies such as the A321neo and 737 MAX).
It has been facilitated considerably by the market liberalisation allowed by the EU-US open skies agreement, permitting airlines such as Norwegian and Primera Air the freedom to operate outside their home markets, and from the UK in particular (something that may potentially be questioned after Brexit).
The Icelandic connecting model operated by WOW air has also made a significant contribution.
Legacy airlines have responded in various ways. These include following LCCs on some routes (for example, British Airways' launch of London Gatwick-Oakland in competition with Norwegian's earlier launch of that route), offering simplified fares with hand luggage only and establishing new low cost long haul operations (such as IAG's Level and the long haul part of Lufthansa's Eurowings).
Eurowings is not part of the North Atlantic joint venture within the Star Alliance, but it does codeshare with Lufthansa on Cologne/Bonn-Miami service and will codeshare with Lufthansa and United on Duesseldorf-New York service from Apr-2018.
Legacy airlines are also starting to follow the LCCs in acquiring newer narrowbody aircraft types to open up new North Atlantic routes.
LCC growth in this long haul market has come at a cost. The largest participant, Norwegian, made a loss in 2017 and has struggled with sustaining its profitability since entering the North Atlantic in 2013.
Nevertheless, and in spite of the legacy response, LCCs' growth in seat share on the North Atlantic seems set to continue.