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Longhaul low cost airlines: Europe's LCCs see opportunities

Two factors appear to be driving the gradual emergence of partnerships between European short/medium haul LCCs and long haul operators (full service and low cost).

First of these: European LCCs are able to operate at a significantly lower unit cost on short/medium haul than most competitors with long haul networks. The provision of very cost efficient feed is an attractive idea to long haul operators, particularly as LCC networks expand to include more primary airports.

However, most LCCs, particularly the independently owned operators, are reluctant to enter into codeshares, to adapt their networks and schedules and to modify their business model in any way that might add cost and complexity in order to accommodate long haul partners.

The second factor is the emergence of European long haul low cost (LHLC) airlines. Just as with full service long haul, LHLC generally requires feed. Norwegian, Europe's leading LHLC operator, feeds itself from its own short/medium haul network, but is still open to partnerships with others (as exemplified by its participation in easyJet's 'Worldwide' connection partnership).

The CAPA Low Cost Long Haul Global Summit in Seville, Spain on 4-5 October 2018 will include panels on partnerships between LCCs and long haul operators.

Summary

  • 'Worldwide by easyJet' includes eight airline and nine airport partners for easyJet in an IT-enabled and attractive form of self-connecting.
  • Ryanair sells Air Europa long haul flights on its website and hopes to agree feeder deals with other long haul operators, possibly including Aer Lingus.
  • LCC subsidiaries of the big three groups feed fellow group airlines.

'Worldwide by easyJet': eight airline and nine airport partners for easyJet

The most developed feeder relationship involving both long haul and short/medium haul LCCs in Europe is 'Worldwide by easyJet'.

This is a booking platform to facilitate the transfer from easyJet services onto other airlines' flights and also easyJet-easyJet transfers. The initiative was launched in Sep-2018 at London Gatwick, offering connections to long haul services across the Atlantic with Norwegian and WestJet.

EasyJet is not limiting its partnerships to LCCs, nor to connecting only with other airlines' long haul flights.

Further airline partners Thomas Cook Airlines, Corsair, La Compagnie, Loganair and Neos have subsequently been added. In addition, the service has been rolled out at Milan Malpensa, Venice Marco Polo and Berlin Tegel.

Amsterdam Schiphol, Edinburgh, Inverness, Paris CDG and Paris Orly have also been announced and Aurigny Air Services is expected to become another airline partner.

EasyJet has said that it will add London Heathrow to its network if the UK's largest airport expands capacity by building a third runway and will consider extending 'Worldwide' to Heathrow.

'Worldwide by easyJet' offers connections to long haul destinations in the Caribbean, USA, Canada, Africa and the Indian Ocean, in addition to destinations in Europe. More than half of easyJet's flights, involving 53 million annual passengers, can now connect to partner services and other easyJet flights using the service.

The LCC plans to add more airlines, with Emirates and Cathay Pacific possible contenders, and to roll out the service to other airports.

CAPA will convene the world first LongHaul Low Cost Airline Summit in Seville on 4/5 October, 2018. For details, please see: LongHaul LCCs

At Gatwick, 'Worldwide by easyJet' makes use of the airport's 'GatwickConnects' product, launched in 2015 on a platform built by the Icelandic travel technology company Dohop. At Venice, Milan and Berlin, the technology provision is branded as Dohop Connect.

The main innovation is the information technology that links the schedules and pricing of different airlines, presenting customers with a single interface. The service offers a one-stop booking process, missed connection cover and – at selected airports – facilitated bag transfer and fast track security.

'Worldwide by easyJet' is an incremental change in that it uses an existing service but it is harnessing it to the airline's large European network and its highly visible website.

In its 1H2018 results statement, covering the period to the end of Mar-2018, easyJet said that it had had excellent results from 'Worldwide by easyJet'.

Bookings to date included more than 2,700 unique origin and destination routes, with Jersey, Chicago and Los Angeles the most popular origin markets. It added that partner connections made up around 55% of bookings, with easyJet to easyJet connections at primary airports accounting for the rest.

'Worldwide by easyJet': airports and airline partners

Airport

Airline partners

London Gatwick

Norwegian, Thomas Cook Airlines, WestJet, Aurigny

Venice

To be announced

Paris CDG

Norwegian

Paris Orly

Corsair, La Compagnie, Norwegian

Milan Malpensa

Neos, Norwegian

Berlin Tegel

To be announced

Amsterdam Schiphol

Norwegian

Edinburgh

Loganair, Norwegian

Inverness

Loganair

Ryanair sells Air Europa's long haul flights

In May-2017, Ryanair and Air Europa announced a commercial partnership allowing Ryanair passengers from 15 European cities to Madrid to book Air Europa long haul flights in 16 countries in the Americas, including Argentina, Brazil, Cuba, Mexico and the United States on Ryanair's website.

In a second phase, the cooperation will allow Ryanair passengers to connect onto Air Europa long haul flights via Madrid.

Ryanair and Aer Lingus may be close to a feeder deal

Ryanair has had discussions with a number of other long haul airlines on potential feeder partnerships.

Earlier in 2018 it was widely reported that Ryanair and Aer Lingus had reached an agreement. This would entail Ryanair feeding passengers from some of its European routes onto Aer Lingus flights to North America and vice versa.

However, the Ryanair/Aer Lingus partnership has not yet been consummated

Aer Lingus Chief Executive Stephen Kavanagh told The Sunday Times in Mar-2018 that the two airlines would "trial it in the marketplace". He added: "If it’s successful, we will live with the problems of success. If not, we will learn the lessons and move on”.

A sticking point for Ryanair in discussions with potential partners about feeding their long haul flights has been the question of who takes responsibility (and provides compensation) for missed connections. Ryanair does not want this burden. This problem led to the end of talks between Ryanair and Norwegian in 2017.

If Ryanair and Aer Lingus do move ahead with a deal, it is likely that the connecting service may be managed by a third party that could also offer insurance to cover missed onward flights.

Ryanair's willingness to enter into discussions strongly suggests that there will be progress in this area. The potential stakes are so high - with potential win-wins for all concerned - that it is surely only a matter of time before a compromise solution emerges.

LCC subsidiaries of the big three groups feed fellow group airlines

Although Europe's leading independent LCCs tend to eschew formal arrangements such as codeshares, the codeshare approach is more common among the low cost airline subsidiaries of Europe's big three legacy groups.

As with the independent LCCs, the 'in-house' LCCs mainly focus on point-to-point operations. However, they also provide some feed to the long haul services of fellow group companies, both under codeshare arrangements and in less formal ways.

IAG's Vueling has codeshare arrangements with its sister airlines British Airways and Iberia (and also with their oneworld partners Qatar Airways and LAN Airlines, in addition to China Airlines).

Vueling also provides feed to long haul low cost flights operated under the LEVEL brand from Barcelona. Although there is no formal arrangement in place, IAG's choice of Barcelona as LEVEL's first base was driven to no small extent by the fact that Vueling is the biggest airline there.

Lufthansa Group's Eurowings, a brand that offers both short haul and long haul services, codeshares with fellow group companies Lufthansa, Austrian, SWISS and Brussels Airlines (and with their Star Alliance partners Air Canada, ANA, Singapore Airlines and United).

Air France-KLM's Transavia, in its Dutch variant, codeshares with its parent KLM (and with KLM's SkyTeam partner Delta). Transavia France codeshares with its Air France, although its Orly base focuses on point-to-point operations and it does not serve its parent's CDG hub.

Air France's newest subsidiary, Joon, does serve the CDG hub and provides feed to the Air France network. However, Joon is not a low cost airline, but styled as 'lower cost'. Moreover, although it operates under its own brand and livery, Joon flies under the AF code.

Partnerships between LCCs and long haul airlines will increase

For most of the bigger European LCCs, the focus remains on point-to-point operations and on their own networks.

Nevertheless, they are starting to find ways to embrace partnerships without straying too far from their core focus.

Ryanair is acting as an online portal for Air Europa long haul flights. EasyJet's approach to connections avoids the possible pitfalls of codeshares, or even of interlining. It is a 'souped-up' form of self-connection, and this avoids potential difficulties between partner airlines such as the division of fares and responsibility for transferred bags and missed connections.

The mechanisms are still emerging. Nevertheless, what does seem increasingly likely is that the economics of low cost feed into long haul networks will lead to growth in partnerships between LCCs and long haul airlines.

This of course in turn, will facilitate the expansion of the long haul low cost model. Network feed is now well recognised as a vital part of the success of long haul LCC operations and, after several stumbles, it does appear that feeder solutions are now becoming much more likely.

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