Low-cost car­ri­ers spread­ing their wings over the At­lantic

Ma­jor air­lines forced to serve new des­ti­na­tions, cut fares

Kuwait Times - - BUSINESS -

Low-cost air car­ri­ers are spread­ing their wings across the At­lantic, much to the cha­grin of the ma­jor air­lines now forced to serve new des­ti­na­tions and cut fares. Transat­lantic flights op­er­ated by Nor­we­gian Air, Ice­land’s Wow air, Canada’s WestJet and Morocco’s Royal Air Maroc have mul­ti­plied in re­cent years as jet fuel has grown cheaper.

Fre­quently of­fer­ing fares less than half that of ma­jor air­lines, low-cost car­ri­ers have quickly at­tracted trav­el­ers. Tra­di­tional play­ers have seen their col­lec­tive mar­ket share de­cline, drop­ping from 75 per­cent in the sum­mer of 2014 to 72 per­cent this sum­mer, ac­cord­ing to the air travel data com­pany OAG.

While low-cost car­ri­ers re­main small play­ers, larger air­lines “are look­ing over their shoul­ders,” said Ge­orge Ho­bica of air­fare­watch­dog.com. “They could be a grow­ing threat as they add more seats,” he told AFP. “Cur­rently, if you look at the per­cent­age of seats they have com­pared to ma­jor air­lines, it’s very small.”

Booked in ad­vance, a round-trip flight be­tween London and New York cur­rently runs an av­er­age of $398 on the low-cost car­ri­ers, ac­cord­ing to Ho­bica, com­pared to more than $600 with the ma­jor air­lines. WestJet even has flights link­ing Canada and London at $149 (CAN$199). Even with other costs added in, such charges for meals, lug­gage and head­phones, pas­sen­gers can get a good deal, ac­cord­ing to Ho­bica.

Aware of the threat, the larger com­pa­nies have not wasted time, of­fer­ing cheaper seats, more di­rect flights and new con­nec­tions. Bri­tish Air­ways re­cently be­gan serv­ing a route be­tween London and San Jose, Cal­i­for­nia. Delta Air Lines, United and Amer­i­can, the three largest US com­pa­nies, re­cently said they saw a drop in transat­lantic traf­fic due to Bri­tain’s vote to quit the eu­ro­zone, ter­ror­ist at­tacks in Europe and over­ca­pac­ity. Rev­enues could fall as a re­sult.

Transat­lantic flights have long been the pre­serve of ma­jor air­lines, pro­tected by the Open Skies agree­ments be­tween the United States and Europe.

The agree­ments al­lowed these com­pa­nies to form three part­ner­ships-SkyTeam, At­lantic and OneWorld-and charge what­ever rates they wanted. The first at­tempts at low-cost travel in this area were fail­ures. Laker Air­ways, a 1970s fore­run­ner, lasted less than 10 years af­ter start­ing flights across the At­lantic.

The game changed with the emer­gence of a new, more fuel-ef­fi­cient gen­er­a­tion of air­craft, such as Boe­ing’s 787 Dream­liner and 737 MAX and Air­bus’s Neo and A350.

“It is not sus­tain­able to op­er­ate a low-cost model us­ing old air­craft,” An­ders Lind­strom, com­mu­ni­ca­tions di­rec­tor for Nor­we­gian Air, said by email. The com­pany, which posted third quar­ter earn­ings of $122 mil­lion, made its first transat­lantic flight in 2013.

Cheaper fuel, cheaper tick­ets

The col­lapse of oil prices two years ago per­suaded other com­pa­nies to get in the game given that fuel is air car­ri­ers’ great­est ex­pense. WestJet spokesman Robert Palmer said by email, “Clearly there is a strong de­mand for low-cost, long-haul ser­vice in this coun­try.”

Hav­ing bat­tled for supremacy with ma­jor air­lines in the United States, JetBlue and South­west Air­lines are no longer hid­ing their am­bi­tions. The mar­ket for transat­lantic flights suf­fers from the same lack of com­pe­ti­tion that transcon­ti­nen­tal flights once did, JetBlue spokes­woman Ta­mara Young said. The com­pany has pur­chased Air­bus A321 air­craft that could link the US East Coast and Europe.

“We will con­sider op­por­tu­ni­ties in Europe against other op­por­tu­ni­ties we are look­ing at,” she said. While their at­trac­tive prices have opened doors, low-cost car­ri­ers still have to es­tab­lish their good names, said Ho­bica of air­fare­watch­dog.com.

“Are they safe? Are they re­li­able?” he said. “All they have is low fares. They don’t have a rep­u­ta­tion.” — AFP

CASABLANCA: Chief Ex­ec­u­tive Of­fi­cer of Moroc­can air­line Royal Air Maroc Driss Ben­hima in his Casablanca of­fice. Low-cost air car­ri­ers are spread­ing their wings across the At­lantic, much to the cha­grin of the ma­jor air­lines now forced to serve new des­ti­na­tions and cut fares. — AFP

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