Don’t Beat Them, Join Them: LCC Alliances, Long Haul And Short Haul LCC And LCC-FSC Partnerships

As full service airline groups rapidly expand into the long haul low cost sector, questions on whether to include LCC subsidiaries in intercontinental JVs naturally emerge. Including an LCC subsidiary in a JV is still rare, but becoming more common. For example, Air Canada LCC subsidiary rouge and IAG’s new long haul low cost subsidiary LEVEL are now included under their respective transatlantic JVs. Asia-Pacific JVs are yet to include any LCCs, although the addition of Scoot to the Lufthansa-Singapore Airlines JV is in the works, which would simplify the Singapore flag’s current separate partnerships with both Lufthansa and Scoot. While joining a parent’s existing JV seems like a natural strategic evolution for low cost subsidiaries, independent LCCs need to consider other options if they want to expand their market presence, whether that be forming codeshares with fellow LCCs or with full service carriers, or as famously demonstrated in 2016 by the Value and U-Fly alliances, forging their own groupings to sell joint itineraries and generate cross-bookings. Meanwhile, other creative regulatory solutions exist. In Asia, the cross border JV model has allowed the region’s major LCC groups – AirAsia, Jetstar, Lion Air, and to a lesser extent VietJet – to accommodate foreign ownership restrictions by taking branded minority stakes in local airlines. Similar strategies are being pursued in the Middle East with Air Arabia, in Latin America, through the Viva group and in Africa with fastjet/Fly540.With an array of different partnership mechanisms available, airlines need to consider whether they are prepared to create additional complexity and cost before embarking on this road.