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Longhaul low cost airlines: World Airways to be US' first

There has been an average of three long haul low cost airlines launches per year since 2012. There are now more than 160 widebody aircraft operating scheduled long haul low cost services under 21 operator's certificates from 17 countries.

The US is an obvious white spot as the world’s largest aviation market still does not have a local long haul low cost airline. World Airways aims to fill this void, recognising that US full service airline groups are unlikely to follow their counterparts in Asia or Europe in establishing a long haul low cost subsidiary.

In 2017 a US private equity firm purchased the intellectual property of World Airways, which had suspended operations in 2014, and aims to relaunch the airline in 1Q2019 following the long haul low cost model. There is clearly an opportunity in the US for a long haul LCC, but pursuing this niche as an independent without affiliation to an existing airline could be challenging.

Summary

  • There are now 21 long haul low cost airlines based in 17 countries, but the US still does not have a single long haul low cost operator.
  • World Airways is aiming to fill this void and launch services in 2019.
  • World Airways plans to launch with narrowbody aircraft but quickly transition to widebody aircraft.
  • Over the past six years, 19 LCCs have launched widebody services.

Long haul low cost airline sector has grown rapidly since 2012

There are currently 21 long haul low cost airlines operating scheduled services with widebody aircraft. This excludes any LCC operating only narrowbody aircraft – although a few of these airlines are operating routes of five to six hours, meeting some definitions of long haul.

A remarkable 19 LCCs have launched widebody services within the past six years as the long haul low cost model has started to gain momentum and become more mainstream.

Australia’s Jetstar and Malaysia’s AirAsia X were the pioneers of the long haul low cost model, launching their widebody operations in 2006 and 2007.

Long haul low cost scheduled airlines in order of launch date

Airline Country Affiliation or parentage

Launch

year

Aircraft type

currently in use

Jetstar Australia  Qantas 2006 787-8
AirAsia X Malaysia AirAsia 2007 A330-300
Scoot Singapore Singapore Airlines 2012 787-8/9
Norwegian Air Shuttle Norway  Norwegian 2013 787-8
Air Canada rouge Canada  Air Canada 2013 767-300ER
Cebu Pacific Philippines Cebu Pacific 2013 A330-300
Norwegian Air International Ireland Norwegian  2014 787-8/9
Jin Air South Korea Korean Air 2014 777-200
Azul Brazil Azul 2014 A330-200
Thai AirAsia X Thailand AirAsia 2014 A330-300
Indonesia AirAsia X Indonesia AirAsia  2014 A330-300
NokScoot Thailand Singapore Airlines 2015 777-200
Lion Air Indonesia  Lion 2015 A330-300
WestJet Canada  WestJet 2015 767-300ER
Beijing Capital China Hainan Airlines 2015 A330-200/300
Eurowings^ Germany  Lufthansa 2015 A330-200
Wow Air Iceland Wow 2016 A330-300
French Bee France N/A 2016 A330-300/A350-900
Norwegian Air UK United Kingdom Norwegian  2017 787-9
Level* Spain  IAG 2017 A330-200
Thai Lion Air Thailand  Lion  2017  A330-300

Air Canada rouge is now the largest long haul LCC based on fleet size, operating 25 aircraft. However, AirAsia X is bigger as a group, with a fleet of 30 aircraft that includes 22 at the original subsidiary in Malaysia. Norwegian as a group has 25 787s, spread across three operator's certificates.

From a brand perspective, AirAsia X and Norwegian operate as one entity across their various AOCs.

There are currently 15 long haul low cost brands – when Scoot and NokScoot, along with Lion and Thai Lion, are also counted as single brands. The two Scoot-branded airlines have a combined widebody fleet of 20 aircraft, making it the fourth largest long haul low cost player in terms of fleet (after Air Asia X, Air Canada rouge and Norwegian), while the Lion Group has only six widebody aircraft.

CAPA will convene the world's first Longhaul Low Cost Airline Summit in Seville, Spain in Oct-2018
Other CAPA LCC Summits will also be held in Seoul: LCCs in North Asia Summit
And in Cartagena, Colombia: Latin America Aviation & LCCs Summit

Long haul low cost airlines ranked by widebody fleet size: as of 14-Mar-2018

Rank Airline

Current

fleet size

Breakdown by  type
1 Air Canada rouge 25  25 767-300ERs
2 AirAsia X 22 22 A330-300s
3 Scoot 16 10 787-8s, 6 787-9s
4 Norwegian Air UK 13  13 787-9s
5 Jetstar 11 11 787-8s
6 Cebu Pacific 8 8 A330-300s
  Norwegian Air International 8 3 787-8s, 5 787-9s
  Beijing Capital 8 6 A330-200s, 2 A330-300s
9 Eurowings^ 7 7 A330-200s
  Azul 7 7 A330-200s
11 Thai AirAsia X 6 5 A330-300s
12 Norwegian Air Shuttle 5 5 787-8s
13 NokScoot 4 4 777-200s
  WestJet 4 4 767-300ERs
  Jin Air 4 4 777-200s
16 Lion Air 3 3 A330-300s
  WOW Air 3 3 A330-300s
  Thai Lion Air 3 3 A330-300s
19 French Bee 2 1 A330-300, 1 A350-900
  LEVEL* 2 2 A330-200s
  Indonesia AirAsia X 2 2 A330-300s

Affiliation with short haul LCCs is important

Nearly half of the 21 airlines listed above were start-ups launching with widebody aircraft, while the rest were already operating narrowbody aircraft. However, nearly all of the start-ups have sister short haul LCCs, which is important, as feed has generally been viewed as a critical component of the still-evolving long haul low cost model.

A lack of feed was a factor in the demise of two early independent long haul LCCs – Oasis Hong Kong and Viva Macau. Oasis Hong Kong suspended operations in 2008 and Viva Macau suspended operations in 2010.

The number of long haul LCCs should reach 25, and potentially 30, by the end of this decade.

Joon, a new LCC launched by Air France-KLM in late 2017 with A320s, is planning to launch long haul operations in 2019 with A350s. The independent start-up World Airways is aiming to launch operations in early 2019 – it will likely start with A320 family aircraft but begin operating widebody aircraft within a year.

If it succeeds at launching, World will be only the second purely independent long haul LCC (i.e. does not have a short haul operation, and is not part of an existing airline group or is affiliated with a short haul LCC). The only current exception is French Bee, which launched services in 2016 and currently operates just one route, from Paris Orly to La Réunion, with an all-widebody fleet of two aircraft. (French Bee was initially known as French Blue, but changed its name to avoid a lawsuit with JetBlue Airways.)

World Airways director of business development Adam Weiss discusses the long haul low cost start-up's fleet and network plan, as well as branding, product positioning and the need to work with short haul airlines for feed

World Airways could become the first US-based long haul LCC

World will also be unique as it would be the first long haul LCC based in the US.

Only four long haul LCCs currently serve the mainland US – Azul, Eurowings, Norwegian and WOW. Azul and Eurowings only serve Florida, while Norwegian and WOW have a much larger trans-Atlantic operation using a mix of narrowbody and widebody aircraft.

French Bee plans to start serving the US in May-2018 with the launch of a Paris-San Francisco-Papeete route. AirAsia X, Jin and Scoot serve Hawaii but do not have any mainland US destinations.

World Airways could become the first LCC connecting the US west coast to Asia. However, it plans to start with shorter routes from the US east coast to Europe or Latin America before venturing across the Pacific

World Airways director of business development Adam Weiss told the CAPA Global LCC summit on 1-Mar-2018 that there is “a huge latent population in the US which doesn’t travel internationally”. Mr Weiss pointed out that there are no US long haul LCCs and World Airways is “filling that white space”.

The new airline, operating under a venerable old brand (one of its many roles, as a charter operator, would be familiar to US troops travelling abroad), has substantial financial backing.

World Airways has substantial financiers behind it

In Nov-2017, a US based investment firm, 777 Partners, acquired the intellectual property of World Airways, Inc., and announced plans to relaunch the World Airways brand "as a low cost, long haul airline flying state of the art Boeing 787 Dreamliner aircraft". It stated at the time that "initial funding for certification and aircraft acquisitions is being provided by 777 Partners" and also announced that "discussions are underway with Boeing for an initial order for up to 10 787 aircraft".

777 Partners describe themselves as "a Miami based investment firm focused on a broad spectrum of specialty finance businesses, asset originators and financial technology and services providers".

At that time 777 Partners said they were making "preparations to launch scheduled operations from the US to Asia and Latin America". As a necessary part of the airline's strategy, the firm stated: "We will be partnering with low cost, short haul carriers in the US and in the regions we serve to provide connecting traffic to and from our initial planned gateways."

World Airways may start with long haul narrowbody aircraft

Those earlier plans may be transitioning. Mr Weiss said during a CAPA TV interview at the CAPA Global LCC Summit that World Airways is now looking to launch of operations with narrowbody aircraft, potentially A321neoLRs.

World Airways is aiming to start operating services in 1Q2019 and to have five aircraft in service by the end of its first year. Mr Weiss said World Airways expects to operate a fleet of 20 aircraft, consisting mainly of 787s, within five years.

Mr Weiss said the airline “is really being opportunistic about our route network and the equipment that we use. We recognise that there are some underserved markets, particularly in the US, with latent demographics that haven't been activated. Being an ultra low cost US flag carrier, we think that we have the opportunity to provide connectivity and access to parts of the world where people previously didn't fly to.”

North America represents almost half of the profitability in the airlines over the past year, but a lot of that is just domestic travel”, he added. “Americans instinctively don't think to travel internationally and we think our name sort of evokes the aspiration of travel, which is really a redeemable aspiration, and we’re using our name to sort of market to those passengers to activate them and sort of message to them that they can see other parts of the world they haven't previously been to.”

World Airways believes it has a solution to the feed challenge

Independent long haul LCCs have historically struggled because they lacked short haul feed. World Airways is working with Air Black Box, which provides an alternative technology platform facilitating LCC interlines.

“We recognise feed is essential for us”, Mr Weiss said. “We need it on both ends and that's what Air Black Box provides. They give us the opportunity to gain access to the Value Alliance in Asia if that's where we choose to fly. They give us the platform to form other JVs around the world.”

Even if World Airways is able to secure some feed, competing in the US long haul market could be challenging, as existing players will likely respond aggressively. US network airlines could dump prices and capacity on any competing route. While US majors are not likely to follow airline groups from Europe and Asia in launching long haul LCC subsidiaries, they have the size to outmuscle any new long haul competitor. Meanwhile, existing US LCCs may become more pressured to expand into the long haul segment if World Airways launches.

Stimulation opportunities in most long haul international markets from the US are also now limited, because yields are already very low due to intense competition from foreign airlines. World Airways plans to differentiate its product by operating from secondary airports in the US, but attracting sufficient traffic year-round to fill up large aircraft in smaller markets may not be easy.

Long haul low cost model is here to stay

Clearly there are ample expansion opportunities for long haul low cost airlines. With only 163 widebody aircraft currently operating scheduled low cost services, the long haul low cost model is only just starting to scratch the surface.  

There will inevitably be significant expansion over the next several years – both in terms of the number of LCCs with long haul or widebody operations and through rapid growth by the existing players.

However, it is unlikely there will be a significant number of independent long haul LCCs – if any. The existing short haul LCCs or full service airline groups establishing a long haul low cost operation is generally a more viable long term proposition.

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