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

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

Notes: *Level does not have its own operator's certificate; all its aircraft are currently operated under Iberia.
^Eurowings A330 fleet is operated by SunExpress Germany.
Norwegian Air International is based in Ireland but does not operate any 787 services from Ireland; it does operate trans-Atlantic services from Ireland using 737 MAX aircraft.
Lion took delivery of its A330s in late 2015; it had previously operated 747-400s but these were not operated under a long haul low cost model.
French Bee was initially known as French Blue.
Source: CAPA - Centre for Aviation.

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

Notes: *Level does not have its own operator's certificate; all its aircraft are currently operated under Iberia.
^Eurowings A330 fleet is operated by SunExpress Germany, which is also part of the Lufthansa Group.
French Bee was initially known as French Blue.
Excludes LCCs that only use widebody aircraft for charters, or only on short haul routes.
Source: CAPA - Centre for Aviation and Fleet Database.

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

Source: CAPA TV.

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

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.