InterVISTAS Consulting Update
InterVISTAS Consulting executive consultant Kenneith Currie offers insight into fare segmentation in the US marketplace, possible ULCC consolidation in the US and dynamics hopeful ULCCs in Canada face.
Transcript
Kenneth CurrieIn the United States, we've been through a lot since deregulation in 1978. We had a bunch of different airlines all trying to do the same thing. Now we've got an industry where the airlines are all doing what they're really good at. We have three network carriers. We've got three low cost carriers. We've got three ultra low cost carriers, or something along those lines. I'm oversimplifying, of course, but what we've seen is the unbundling of the product. Everybody is selling both bundled and unbundled products. The unbundled products are very, very inexpensive, especially at the opening price with additional services that you can add on later. I would say that's a permanent change in the industry for the better, because people can actually choose what they want and pay for what they want and not pay for what they don't want.
I would say there could be. We don't ... unlike the low cost carriers and the network carriers, the ultra low cost carriers are a little bit earlier in their growth period, so they're not necessarily covering the entire nation the way the other carriers are. I think to the extent that consolidation would facilitate a national footprint, we will see consolidation.
Well, I mean, I think the ultra low cost carrier is a key component to air travel anywhere. I think it will be successful in Canada. Canada's a little bit different than other markets, because it is more of a linear market rather than a hub and spoke market that we might in the United States or other countries. The competition that they face is different, but there are always plenty of people who want to travel. It's just a matter of what price they're able to pay. Having somebody at the ultra low cost level is key.
Certainly in the United States, several airlines, including Delta and United, have done what's called airline within an airline and had a low cost subsidiary. Unfortunately, I don't think it's worked, because those airlines really haven't lowered their costs. They were just not allocating some of their costs to certain ones of their airplanes allocated to the low cost subsidiary.
I think that the way pricing is done right now, where the network carriers offer a basic economy fare and experience, that's like having an ultra low cost series of seats in your existing cabin, in your existing aircraft, that replace the need to have a dedicated fleet allocated to ultra low cost activity.
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