APEX Insight: How are low-cost carriers, known for their no-frills streamlined operations and point-to-point networks, extending into long-haul operations?
AirAsia attributes the low-cost carrier (LCC) model to Rollin King and Herb Kelleher, the founders of Southwest Airlines: They advocated flying one aircraft type, keeping overheads down and aircraft turnarounds up and eliminating nonessentials such as loyalty air miles. Their thinking was, “If you get your guests to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time in doing so, people will fly your airline.”
LCCs have flourished in Europe and the Asia Pacific where population is dense and international destinations are a short flight away. But how far can an LCC fly on its no-frills business model? CAPA chief analyst Brendan Sobie says Asia, by nature of its location and demographics, has been a testing ground for the low-cost, long-haul (LCLH) model.
“Asia is a market we hope to expand further.” – Thomas Ramdahl, Norwegian
While AirAsia’s mainline operates in Southeast Asia, its long-haul subsidiary, AirAsia X, takes passengers as far as Sapporo, Japan; Tehran, Iran; and come June, Hawaii, marking the first time an Asian LCC will fly to the United States. AirAsia X has also recently announced that its roKKi in-flight entertainment system will be getting a connectivity boost from Inmarsat’s GX Aviation. The initiative will help AirAsia X transition into what its CEO, Ben Ismail, calls a “truly digital airline” – a title not restricted to legacy carriers with premium classes.
LCCs are taking passengers from Southeast Asia to Europe, too. Scoot, the low-cost subsidiary of Singapore Airlines, has introduced Athens as its first European destination. “Our guests have long requested Scoot to operate long-haul flights to Europe and beyond,” says Leslie Thng, chief commercial officer, Scoot and Tigerair. “We also saw room in the market for us to operate services between Singapore and Athens, as we will be the only airline operating direct flights between the two cities. Athens is itself an attractive destination and a convenient gateway to other attractions in Greece and the rest of Europe.” It seems the longer the flight, the more amenities and destinations are being added back to the LCC experience.
Old notions that LCCs should fly a single aircraft type to increase productivity are also being scrapped. “Once an airline gets to a certain size, it needs [other] aircraft types [to better] serve its markets,” Sobie says, alluding to the adoption of short- and long-haul aircraft. And newer aircraft are enabling LCCs to go the distance.
“We have given great thought to our product and services to elevate low-cost travel.” – Leslie Thng, Scoot
Norwegian has made inroads in the battle for transatlantic traffic, connecting Europe to the US; Oslo to Bangkok; and recently London to Singapore. Bjorn Kjos, Norwegian’s CEO, said in a statement that travel should be affordable for everyone, and Singapore opens up another destination for its passengers.
“Asia is an important market we hope to expand further,” says Norwegian’s chief commercial officer, Thomas Ramdahl. “We are able to offer low fares thanks to our lean organization and brand-new, fuel-efficient aircraft. New aircraft are a win-win for the customers, the environment and the company’s costs, and are key to offering affordable fares for all.”
Norwegian’s Boeing 787 Dreamliners, deployed on its US routes, are equipped with seatback screens. “Our passengers love this feature. It is a state-of-the-art system [with] movies and TV shows, but also games and an interactive 3-D map with travel tips for their destinations,” Ramdahl says. “In addition, the screens work as a snack bar: Passengers can order food and drinks on the screen, swipe their [credit] card and have their order delivered to their seat by our attendants.”
As an LCC in the Asia Pacific, Scoot, which boasts an all-Dreamliner fleet, sees its choice of aircraft as a competitive strategy. “Scoot has given great thought to configuring our cabin product and services to elevate and transform the low-cost travel experience, paving the way for when we finally launch long-haul flights,” Thng says. “This has been largely enabled by our state-of-the-art 787 Dreamliners with improved humidity and cabin pressurization, the largest windows of any modern jet, 20 percent less engine noise and more overhead compartment space.
These all add up to making long-haul flights more comfortable. Our in-flight Wi-Fi plans, in-seat power and ScooTV in-flight streaming entertainment service … will help customers keep themselves entertained and connected while on board.”
Canada’s WestJet, which serves mid- to long-haul routes in the Americas and Hawaii, introduced flights to Gatwick last year that are served by two-class Boeing 767 aircraft. “With our high load factors, we were seeing many leisure travelers flying to Europe for the first time from Canada,” says Bob Cummings, executive vice-president, Commercial, WestJet. “We see an opportunity for more business travel between Canada and Europe and have further plans to build our business traveler value proposition and penetration into long-haul.”
To attract those business flyers, WestJet’s LCLH model includes access to WestJet Connect, its wireless in-flight entertainment and connectivity platform, powered by Panasonic Avionics, which will be completely rolled out this year. “The system covers over 96 percent of where there’s flying on Earth,” Cummings says. “It was imperative that we offer a consistent experience across our network, which spans from the United Kingdom to Hawaii, [requiring] coverage over water. Satellite was really the only option that would provide the experience our guests would love.”
Similar to how LCLHs are adopting more than one aircraft type into their fleets, they’re also installing multiple in-flight entertainment (IFE) systems. Ramdahl says Norwegian will fit its Boeing 737 MAX aircraft with Wi-Fi and plans to do the same on its Dreamliner deliveries in the near future. On the airline’s Dreamliners, the premium cabin is popular among business travelers for its price, which, Ramdahl says, is lower than comparable airlines. “For us, it is important to give our customers the freedom of choice and make sure that their journey is as smooth and efficient as possible.”
“We see more business travel between Canada and Europe.” – Bob Cummings, WestJet
Cummings says the airline has seen an approximate 45-percent uptake of WestJet Connect, with positive customer feedback. WestJet’s premium economy cabin, Plus, has also been well received. This has given WestJet confidence that there is an underserved market for budget-conscious passengers who are willing to pay a little more for comfort on LCLH flights. Still, the airline is being cautious of its offerings so that it can remain competitive on fares and operation costs. “We will build our business product and sales approaches prudently from here, along with other elements of our long-haul plan,” Cummings says.
Scoot has plans to grow its European destinations, with synergies between Scoot and Tigerair serving as a competitive advantage. Thng says the Scoot brand is focused on meeting the needs of “the young-at-heart and value-seeking,” who are less likely to splurge on amenities that do not significantly enhance the in-flight experience.
“While macroeconomic conditions and security concerns are themes that impact the aviation industry, LCCs have enabled travel to be a part of the lifestyle of an emerging middle class, not just an entitlement of the wealthy,” Thng says. “Unlike most LCCs, Scoot has invested from the start in configuring its products and services … while maintaining a strict watch on costs to ensure we continue to deliver great value airfares.”
“Going the Distance” was originally published in the 7.3 June/July issue of APEX Experience magazine.