Ben Baldanza is the former CEO of Spirit Airlines, a board member of JetBlue, and a former board member of transatlantic low cost carrier Wow Air. In his Airlines Confidential podcast he talked about French long haul low cost airline French Bee’s plan to outfit two new Airbus A350s they’ll take delivery of this year with 488 seats, about 50% more seats than most airlines put on the plane – and why such a plan is likely to fail.
- Cost advantage isn’t as big for long haul flying as it is for short haul. Even higher cost airlines have a long distance to amortize their seat costs over, the difference in cost per passenger mile flown isn’t nearly as great for long haul as it is for short haul. So Ryanair and easyJet can significantly undercut British Airways within Europe, but their advantages diminish if they were to fly to the U.S. or Asia.
- Long haul routes are highly seasonal, low cost carriers can’t fill so many seats at even low prices the whole year French Bee may be able to fill 488 seats in the summer, but not in the winter, and big new aircraft like an A350 incur lease payments year round (even if engine costs are on a power by the hour agreement).
- Passenger experience matters more for long haul Even American Airlines still offers seat back entertainment on its widebody aircraft, and puts ovens in the coach galleys as well. People will put up with lack of comfort and other experiential items for a 2-3 hour trip, but it becomes far more challenging on an 8 or 12 hour journey.
Baldanza previously argued Wow Air failed flying transatlantic because of rising costs in part due to an unwillingess to hire cheap labor, because Iceland is too seasonal to succeed as their hub, and because the Airbus A330 is too expensive a plane (they should have been flying narrowbodies across the Atlantic). I thought that explanation while probably true was incomplete.
Wow Air faced significant low cost competition from larger carriers offering more destinations and was unable to fill planes. It wasn’t just a cost story, but a revenue story irrespective of fares. That does reinforce, however, that they shouldn’t have been operating widebodies – too much capacity.
Wow Air, Copyright: zhukovsky / 123RF Stock Photo
In non-pandemic times full service carriers gain a mix of traffic, high yield business fares and low price leisure fares. They’re more likely to attract corporate contracts as well as regular repeat business. Low cost carriers aren’t as diversified.
Since American Airlines unveiled ‘Super Saver’ fares in the late 1970s, large full service carriers have known that they could offer both a high price and low price product on the same plane, filling marginal seats they’re flying anyway at the same price as low cost carriers offer while offering a better product along certain dimensions. As long as carriers can segment passengers so they don’t sell a fare cheaply to someone willing to pay full freight, they can compete on price.
United Airlines CEO Scott Kirby has said low cost carriers cannot be successful since United can match fares. He’s wrong, though. They can succeed flying short haul, and have done so for years. The challenge comes flying long haul.