CAPA TV

LCCs are constantly looking at finessing their retailing and merchandising strategies – whether it’s during the booking phase, pre flight or onboard, with relevant, timely offers that are easily accessible (preferably via mobile) and easy to pay for. This is especially important in today’s digitalised environment, where onboard connectivity is virtually a must have and almost as critical for the traveller as getting to the destination. 

The question remains, who will win the greatest wallet share over the next five years? Airports, or airlines – or someone else? Who is poised to win the greatest share of the travel retail market?

Low cost long haul operators are establishing partnerships with short haul low cost airlines as a means of expanding their network breadth and supporting their growth aspirations. For long haul operators, connecting traffic is critical in scaling sustainably, especially as very few long haul destinations generate enough demand to justify year round capacity, while their partners benefit from additional traffic growth in short haul markets. Legacy carriers, who have long ceded competitive ground to short haul LCCs, could see history repeating itself as long haul-short haul LCC partnerships gain more momentum and disrupt full service carriers’ long haul networks. 

• Does the group strategy lend itself best to delivering connecting traffic?
• How do long haul-short haul partnerships enable growth and scale?
• Are these new partnership arrangements set to disrupt network carriers’ long haul operations?
• How seamless are self connecting platforms and virtual interlining? What role can airports play in enabling connectivity?
• In which markets do long haul-short haul LCC partnerships proliferate?
• Can long haul low cost carrier operate as stand alone entities without short haul partners?

Harry Hohmeister, Member of the Executive Board and CCO Network Airlines, Lufthansa Group

Mike Rock, Head of Europe, Air Partners, Travelport

Peter Harbison, Chairman Emeritus, CAPA – Centre for Aviation

Asia Pacific has been a pioneer in the development of the low cost long haul model, having had such flights for 12 years, or seven years longer than any other region. Nearly 40% of low cost long haul routes touch Southeast Asia and nearly 15% touch Australia, making them the world’s largest low cost long haul markets.

However, LCC growth in the Middle East has fuelled speculation this region could tap into the long haul low cost market and completely redefine Asia to Europe long haul. Flydubai has grown the fastest of the Middle Eastern carriers, expanding its fleet from 35 aircraft in Apr-2014 to 47 aircraft in Apr-2019 (or 58 aircraft when its 11 737MAX 8s are included). Air Arabia has added nine aircraft over the past five years, from 31 A320s in Apr-2014 to 40 A320s in Apr-2019 (according to the CAPA Fleet Database). Flynas’ fleet has been flat over the past five years but the airline is planning to resume expansion over the next few years as it takes delivery of new A320neos.

• What long haul Asia and Middle East markets are poised for LCLH growth?
• Are the Middle East LCCs targeting long haul routes?
• What impact will Middle East routes have on Asia?

Long haul low cost international operations are becoming a feature of the US-Europe market, introducing a new dynamic into the equation. Until now, the market has been the territory of foreign airlines, but with airlines like the mid-cost/mid-frills JetBlue Airways now about to embark on trans-Atlantic operations, a new era of competition could be in the wind. 

There can be no doubt that new aircraft technology and new business models have contributed to the expansion of the trans-Atlantic market. LCCs have been significant agents of this change on the North Atlantic, led by Norwegian.

Norwegian is slowing its group-wide growth, WOW air and Primera Air have gone out of business. Nevertheless, LCCs will continue to play an important part in this market.

• What does the future of low cost long haul look like between these regions?
• Is there room for further low cost long haul growth across the Atlantic?

LCCs, as the newer players in the industry, are competing to meet future growth needs. Long haul low cost is an emerging market and with this comes the need for new and improved aircraft.

• Finding the funding – debt and equity – to support LCC expansion. Is the money there?
• What special features need to be considered in funding new and established LCCs? 
• Which funding models are most attractive to LCCS? 
• What roles have the OEMs played in LCC expansion? 
• Are markets large enough to support all the new orders? 
• What is the risk profile of an independent LCC vs a subsidiary? 
• Should airlines lease or purchase outright from the OEM? 
• Should LCCs with large order books establish their own leasing companies? 
• What skills are necessary for an LCC to be successful in this very different venture – while maintaining the airline operation?

Shane Matthews, Head of Strategic and Market Analysis, SMBC Aviation Capital, Moderator

Steve Udvar-Hazy, Executive Chairman, Air Lease Corporation, Panelist

Robert Martin, Managing Director & CEO, BOC Aviation, Panelist

Wendy Sowers, Director, Market Analysis, Boeing Commercial Airplanes, Panelist

Tony Davis, Managing Director, Gramercy Associates

Low Cost Long Haul narrowbody is an emerging segment of the market with huge growth opportunities in virtually every region. Although most LCLH narrowbody operations have so far focused on the trans Atlantic market, there is now some movement in Asia Pacific and the Middle East.

Air Arabia is the first LCC from the Middle East to operate the A321neoLR. The first three operators in Asia Pacific – Australia-based Jetstar Airways, Jetstar Japan and Japan’s Peach – all plan to start taking A321neoLRs in 2020. Several more Asian LCCs, including AirAsia X and VietJet, are considering acquiring the new type.

The economical nature of this segment will undoubtedly allow for new and emerging markets around the world, previous left only to connections via major hubs, to be opened up.

• What new markets are being opened by the Low Cost Long Haul segment?
• How can key destinations and airports attract new Low Cost Long Haul airlines?
• What trends in the leisure market are signs for new route opportunities?
• What do airlines look for in new market opportunities?

Whilst geographic position plays a large part in an airline’s decision whether or not to fly to a particular destination, the airport also holds an influential role in the decision making process. LCCs and low cost long haul LCCs in particular have unique requirements compared with their FSC counterparts; so it follows that those airports that are able to offer the right facilities and services for their airline customers stand to gain. But additionally, there is huge untapped potential for airports to share data and co-operate commercially with airlines for mutual benefit; this could prove a key factor in attracting and retaining carriers assessing the viability of a new route. 

• How do needs vary between full service and low cost airlines? 
• How can airports help airlines develop a business case for establishing or expanding a new route? 
• The importance of self connect for low cost long haul traffic. What do airports need to do to enable the smooth transfer of self connecting passengers? 
• What constitutes the ideal base for a low cost long haul airline?
• How do airports and airlines view the passenger journey? What kinds of data sharing initiatives exist between airports and airlines, and how much cooperation is there in retail and merchandising?