CAPA Global LCC Summit

Avalon Airport CEO Justin Giddings talks about the new AirAsia X service from Kuala Lumpur and the construction of a new international terminal. A simple terminal design has been selected that enables construction in only about six months, enabling AirAsia X to move from Melbourne Tullamarine by the end of 2018. Mr Giddings discusses the possibility of the new terminal eventually accommodating other international routes from AirAsia X such as Bali as well as other foreign airlines. Avalon is also confident it can attract more domestic services, given the very high load factors on its existing services and the ease of travelling to/from the airport with the new SkyBus service.

Jetstar Group, CEO, Gareth Evans

Scoot Head of Sales and Distribution Trevor Spinks discusses the airline’s growing long haul network and the overall expansion plan for 2018. Scoot launched its first true long-haul destination, Athens, in Jun-2017 and added Honolulu in Dec-2017. Scoot is launching Berlin in Jun-2018 and is planning “a couple more” new long-haul routes. Scoot is also expanding its already extensive network China in Jul-2018 with the launch of services to Nanchang. Mr Spinks also discusses Scoot’s takeover of routes from other Singapore Airlines Group airlines and how the LCC is starting to benefit from codeshare traffic within the group.

Jetstar Group CEO Gareth Evans talks about Jetstar’s recent commitment for 18 A321neoLRs, which will be delivered from 2020 and be based in Australia. The A321neoLRs could potentially be used to open new international routes in addition to taking over existing domestic and Australia-Bali routes. The A321neoLRs will free up the 787s now used for Bali to expand in other long-haul markets that Jetstar will evaluate over the next few years. Mr Evans also discusses growth opportunities at the group’s overseas franchises in Japan, Singapore and Vietnam. In addition, there are potential expansion opportunities in China, where Jetstar has been able to establish a significant presence without having a local affiliate.

The newly resurrected World Airways aims to become the first US long haul low cost airline and commence operations in 1Q2019. Backed by a Miami-based private equity firm, World Airways plans to operate five aircraft within its first year and 20 aircraft with five years. The 787 is its target aircraft but the start-up is looking to initially launch with two A320s, potentially the new A321neoLR variant. In this interview, director of business development Adam Weiss discusses the fleet and network plan as well as branding, product positioning and the need to work with short-haul airlines to provide feed.

Jetstar Group, Group CEO, Gareth Evans

Competitive pressures on short haul routes have prompted many full service airlines to create LCC subsidiaries, but ensuring the new carrier aligns with the parent strategy poses a key challenge.

• Do LCCs created by FSCs have a competitive advantage?
• How does the LCC child operate while maintaining management independence from their parent?
• Conversely, how does the LCC work with its parent to maximise group profitability? Can the FSC avoid creating just another product line – without the lower cost base to match?
• Is it possible to introduce seamless interlining despite their different service levels, in order to maximise group network coverage?
• Should network carriers be prepared to launch Long Haul LCCs – at the expense of, or to complement, their existing operation

Moderator: Crucial Perspective, CEO, Corrine Png
Panel:

• Aviation Performance Consultants, Executive Advisor to Peach Aviation, Patrick Murphy
• DDG International, Independent Airline Executive, Patee Sarasin
• flyadeal, CEO, Con Korfiatis
• Scoot, Head of Sales & Distribution, Trevor Spinks

Allegiant has always positioned itself differently in the airline/travel space. As an integrated travel provider, the company typically uses older aircraft to operate a schedule of less than daily flights from small to mid size US cities to large tourist destinations, including Las Vegas and Orlando. The carrier also generates ancillary income from selling hotel rooms, vacation packages and rental cars – and in its latest move, the ULCC plans to build a resort in southwest Florida. This presentation will provide an overview of Allegiant’s unique business model, and the carrier’s plans for restoring cost competitiveness as it forges a new revenue stream and transitions to an all Airbus fleet.

Allegiant, VP Fleet Planning & Corporate Finance, Robert Neal

As business customers and corporate buyers increasingly seek value for money, especially for short-haul travel, and a new generation blends work and leisure when travelling, the distinction between travelling for business or personal reasons has become less relevant. This has provided LCCs with the opportunity to compete for ‘corporate’ business that may previously have not been considered a real revenue opportunity

• What is the awareness level amongst travel managers and buyers of LCCs as an alternative to traditional airlines?
• What LCCs are chasing the corporate travel dollar and how successful have they been in luring buyers away from entrenched carriers?
• What obstacles need to be overcome to persuade corporate buyers to use LCCs?
• The legacy carriers’ view of the LCC “threat”
• How do you demonstrate value beyond price?
• Can LCCs profitably realise the yield premium required to sustain a ‘premium’ hard product?

Moderator: CAPA - Centre for Aviation, Executive Chairman, Peter Harbison
Panel:

• BHP, Global Head of Travel & Expense Management, Joanne Taylor
• Carlson Wagonlit Travel, VP Sales & Program Management, Michael Valkevich
• MedAire, General Manager Asia Pacific, Harold Pradal
• Scoot, Head of Sales & Distribution, Trevor Spinks

Waltzing Matilda Aviation, CEO, John Thomas

CAPA - Centre for Aviation, Executive Chairman, Peter Harbison

Uriel Aviation Holdings Vice Chairman Andrew Cowen discusses Uriel’s portfolio and opportunities for growth. Uriel’s loyalty programme, Reward-U, has grown quickly since it was established in 2015 and now has 1.2 million members. On average 20% of HK Express passengers are now paying for their flights partially or fully with their points. Uriel intends to bring in a new strategic investor or investors for Reward-U, helping expand the programme to Chinese partners including members of the U-Fly Alliance. Mr Cowen said three new airlines have signed up to join U-Fly which will should be announced shortly.

Partnerships of one form or another are critical for enabling expansion across borders in the relatively crowded and increasingly competitive Asian market. These serve as a platform for attracting transit traffic and expanding into different markets. The cross border JV model has allowed Asia’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 Latin America and Africa. Smaller LCCs that might fall outside these major groups have established alliances of their own, such as the U-Fly Alliance, consisting of HNA-owned carriers, and the eight member Value Alliance; both groupings are powered by a technology platform linking the member airline websites, crucially enabling the ability to cross-sell all the ancillaries offered by each of the partner airlines, allowing members to grow their passenger base without increasing cost and complexity

• How effective are cross border JVs and LCC groupings in a) synergising costs b) generating revenues, especially ancillaries and c) increasing traffic
• What are the opportunities or limitations for creating brand awareness, increasing purchasing power and synergising fleets under the two partnership models?
• How to strategically manage more than one brand when there is multi brand ownership
• Can a non aligned LCC survive without being part of either a branded group or LCC alliance?
• Can the branded JV model and LCC alliance serve as examples for others to follow?

Moderator: National University of Singapore, Professor of Aviation, Alan Tan
Panel:

• flyadeal, CEO, Con Korfiatis
• Uriel Aviation Holdings, Vice Chairman, Andrew Cowen
• Vanilla Air, Senior Executive VP, Mioko Yamamuro

Air Black Box co-founder and group head of product Timothy O’Neil Dunne discusses how the technology company has evolved over the last two years. The U-Fly and Value alliances selected in 2016 ABB’s Air Connection Engine, which enables LCCs to connect and interline without the traditional complexities or cost. However, U-Fly Alliance members have not yet implemented the product and implementation by Value Alliance members has been slower than initially expected, leading to limited cross-bookings. Mr O’Neil-Dunne talks about the challenges encountered and the future opportunities, particularly at the Value Alliance as it starts to focus more on interline connections.

flyadeal CEO Con Korfiatis discusses the LCC’s expansion since it commenced operations in Sep-2017 and the expansion plans for the remainder of this year. flyadeal currently serves six domestic destinations in Saudi Arabia with a fleet of five A320s. flyadeal plans to add three more aircraft over the next three months, fulfilling its initial commitment with leasing companies for eight new A320ceos. Mr Korfiatis expects flyadeal to make a decision by Jun-2018 on an RFP with Airbus and Boeing for 30 firm aircraft plus 20 options. flyadeal aims to add two to four aircraft in 2H2018 and add eight to 10 aircraft in 2019. These aircraft could be sourced from the order it places by Jun-2018 or separately. flyadeal’s network will grow by another two domestic destinations over the next few months and international flights will begin in 2Q2018 or 3Q2018 following delivery of the eighth or ninth aircraft. flyadeal is now evaluating five or six international destinations – but will start with two – and is also evaluating airports in Saudi Arabia for a potential second base after Jeddah.

New aircraft technology like the 787, A350, and larger single aisle aircraft, as well as evolving passenger preferences and stable fuel prices are encouraging LCCs - and restructured full service airlines - to consider new growth opportunities on long, thin routes. What were previously niche city pairs are becoming increasingly mainstream as more LHLCCs come online and disrupt entrenched business models. But the low cost model relies largely for its cost advantage on higher utilisation and higher seating density, features that tend to be diluted as routes become longer.

• What are the features that distinguish long haul LCCs from their full service peers?
• Does the long haul model depend on low fuel prices for its survival?
• Can LHLCCs remain viable as stand alone entities operating point to point or do they need feed traffic from partners or parent airlines?
• In the face of intensifying competition, should traditional network carriers launch their own long haul LCC subsidiaries? What conditions do they need to be successful?
• To what extent are the new entrants competing for existing traffic, as opposed to carving new markets?
• Are there particular features of the new generation equipment might enable sustainable LHLCC growth?

Moderator: US-India Aviation Cooperation Program, Program Director, Sandeep Bahl
Panel:

• Cebu Pacific Air, Chief Operations Advisor, Rick Howell
• Scoot, Head of Sales & Distribution, Trevor Spinks
• World Airways, Director of Business Development, Adam Weiss

Cebu Pacific chief operations advisor Rick Howell discusses the upcoming launch of Melbourne and how Cebu Pacific has succeeded with long haul flights to Australia while the Middle East has struggled. Cebu Pacific cut back its long-haul network in 2017 from five to two destinations, Melbourne and Dubai, as three unprofitable routes to the Middle East were suspended. Mr Howell also discusses plans for Cebu Pacific’s future fleet of A321ceos and A321neos and the growing role of cargo. Cebu Pacific plans to receive seven A321ceos in 2018 and expects to receive the first of 32 A321neos late this year. Cebu Pacific has opted for a palletised underfloor for all its A321s.

Changing consumer expectations, new technologies, the proliferation of intermediaries and recent NDC developments, highlight LCCs’ need to differentiate, decommoditise and better “retail” their inventory and ancillary offerings. What are some of the key factors that will influence future LCC distribution strategies?

• How disruptive are new players in the current distribution landscape?
• Is technology enabling greater product differentiation?
• As LCCs expand into new markets or target business travellers, how is their relationship with the GDSs and other intermediaries evolving?
• Are LCCs exploiting digital/ automated/mobile channels effectively to distribute their product?
• Where does the direct channel stand among the new wave of travel distribution models?

Moderator: WebinTravel, Founder & MD, Siew Hoon Yeoh
Panel:

• Caravelo, Commercial Director, Jonathan Newman
• IATA, Director - New Distribution Capability Program, Yanik Hoyles
• Skyscanner, Senior Director of Strategic Partnerships, Hugh Aitken
• Travelport, Global Head of Product & Marketing, Air Commerce, Ian Heywood

Keeping pace with the changing operational requirements of airlines is complex, with LCCs in particular demanding their own unique features: low costs, simple facilities and quick turnarounds among factors. But as long haul low cost airlines start to proliferate globally and behave more like full service carriers, the need for connectivity becomes critical.

• What are LCCs looking for in establishing and growing routes?
• Low cost long haul to short haul connectivity: How do airports identify self connecting passengers and provide the infrastructure to keep them landside?
• What is virtual interlining and what are the implications for LCC-LCC connectivity?
• What role can airports play in facilitating virtual interlining?

Moderator: Waltzing Matilda Aviation, CEO, John Thomas
Panel:

• Avalon Airport Australia, CEO, Justin Giddings
• GMR Airports, Advisor, Bashir Ahmad
• Cebu Pacific Air, Chief Operations Advisor, Rick Howell

As price becomes only one of the decisive factors for customers when choosing an airline, airlines must look to differentiate their product and deliver a smooth passenger experience end to end. How are LCCs using technology and working with other players in the travel ecosystem to deliver on these expectations?

• What are the challenges of personalisation?
• How do you convert real time insights into an opportunity to personalise the traveller experience?
• How much data should be shared with ecosystem partners to aid the personalisation experience?
• Can LCCs really differentiate? What on board services and ancillaries do they offer to delight customers and avoid commoditisation?
• How are LCCs (and airports) helping to facilitate the smooth transfer of self connecting passengers on-airport?

Moderator: Airline Passenger Experience Association (APEX), CEO, Joe Leader
Panel:

• Air Black Box, Group Head of Product, Timothy O'Neil-Dunne
• Amazon Web Services, Managing Director, Nick Walton
• HK Express, Commercial Director, Jonathan Hutt
• Uriel Aviation Holdings, Vice Chairman, Andrew Cowen

LCCs, as the newer players in the industry, are competing to meet future growth needs. They can scarcely afford to stand still if they are to assert themselves in the long term – especially as newer models enter. The need to plan for fleet expansion and replacement, as well as making decisions on leasing and purchasing can make for difficult decisions. This often means that if they are to be seen as serious long term competitors, they need to make aggressive decisions on new aircraft orders. In this respect (and many others) they are very different from the traditional established airlines.

• 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?

Moderator: Korn Ferry, Senior Client Partner, Torbjorn Karlsson
Panel:

• Allegiant, VP Fleet Planning & Corporate Finance, Robert Neal
• Astro Aircraft Leasing, CEO, Johnny Lau
• Boeing Commercial Airplanes, Executive Director, Market Analysis, Wendy Sowers
• Bombardier Commercial Aircraft, Head of Marketing Asia Pacific & China, Ross McKeand
• DVB Bank SE, Senior VP Aviation Research, Albert Muntane Casanova

Embraer VP Asia Pacific Cesar Pereira discusses the outlook and market opportunities in Asia for smaller jets of up to 150 seats. The new E2-190 was in Asia for the first time in Feb-2018 for the Singapore Airshow, where feedback from potential customers was positive. Embraer recently secured certification from the FAA, EASA and Brazil’s ANAC for the E2-190, paving the way for delivery of the first aircraft to Norway’s Wideroe in Apr-2018.

HK Express Commercial Director Jonathan Hutt discusses the airline’s new commercial plan, interline strategy and opportunities for growing the network. The airline is looking at serving potential secondary airports in Japan, where HK Express already has nine destinations that account for 60% of its total traffic. HK Express’ initial interline to Phuket with Hong Kong Airlines has been successful, leading the partnership to be expanded to more HK Express destinations in Southeast Asia. HK Express also has begun interlining with Delta Air Lines and will soon begin interlining with Virgin Australia. A new partnership with Dohop will facilitate more interline partnerships.

Vanilla Air Senior EVP Mioka Yamamuro discusses the airline’s expansion plans for 2018 and expected benefits of its membership in Value Alliance. Vanilla Air is taking an additional A320, its 15th, later this month and launching service from Fukuoka to Taipei, its fourth Japan-Taiwan route. Value Alliance has generated some bookings, particularly passengers transferring from Value Alliance international to Vanilla domestic flights at Tokyo Narita, but volumes have so far been low. Ms Yamamuro expects higher interline volume as the Value Alliance website is relaunched and members start promoting their offline destinations.

Patee Sarasin was the CEO of Thailand’s Nok Air from its launch in 2004 until late 2017. He was one of the founders behind Nok and NokScoot, a joint venture long haul low cost airline with Singapore Airlines subsidiary Scoot that launched in 2015. Mr Sarasin is now working to establish a new travel company that will not be an airline but will work closely with airlines. He plans to formally launch the new company in London in Jul-2018, at which time more details about the product and positioning will be announced. Mr Sarasin also gives his views on market conditions in Thailand’s highly competitive airline sector and the future for Nok and NokScoot.

Allegiant Air VP fleet planning and corporate finance Robert Neal discusses the phase out late this year of the MD-80, which has been the backbone of Allegiant’s fleet for more than a decade. Allegiant plans to add 10 A319s and 20 A320s in 2018 as it phases out its last 37 MD-80s. While the total fleet is declining by seven aircraft, Allegiant continues to expand due to higher utilisation and the need for fewer spares as it transitions to an all A320 family fleet. The airline has no intentions of adding A321s or A321neoLRs, which would provide Allegiant the range to operate across the Atlantic. Mr Neal talks about why Allegiant plans to stick with A319s/A320s and the possibility of expanding into the international market with flights to nearby Canada, Mexico and the Caribbean.

Airline Passenger Experience Association (APEX) CEO Joe Leader talks about how LCCs in the US are at the forefront of passenger experience innovation. APEX sees opportunities for similar innovation at LCCs in Southeast Asia, which are generally behind in areas such as providing Internet connectivity. Mr Leader also talks about the fast expanding long haul low cost sector, where passenger experience is particularly important.