can long haul low cost airlines be successful
Research in Transportation Economics, Volume 24, Issue 1,
The Economics of Low Cost Airlines, 2008, Pages 61-67
Can long-haul low-cost airlines be successful?
Dr Peter Morrell
Cranfield University, Beds MK43 0AL, UK
Phone: +44 1234 754242; Fax: +44 1234 752207
p.s.morrell@cranfield.ac.uk
Abstract
A key question is whether the very successful, largely short-haul LCC business model can work over long-haul sectors? This paper compares the cost and other advantages of LCCs and evaluates how far they might be applied to long-haul sectors.
It is estimated that cost advantages might be much lower than the 50-60% on shorthauls. Other factors such as the adoption by network airlines of some LCC features and their likely competitive response, the limited potential for market stimulation, the need for dense markets and feed traffic all combine to cast doubt on the widespread establishment of the business model for long-haul flights.
Keywords: airline operations; long-haul air services; low-cost airline viability
1
1. Introduction
The idea of a low-cost long-haul airline is not new but previous attempts have not been successful. Since their demise, however, new technologies and business processes have been developed, so that it is appropriate to re-examine the economics of these services. One of the first of such ventures was Laker Airways that in 1977 transformed its UK charter operations into a long-haul ‘no frills’ airline. Its first ‘SkyTrain’ flight was London Gatwick to New York and it subsequently added Los Angeles and Miami.
The features it had in common with today’s low-cost business model were:
Point-to-point operations, with no interlining or transfers
In flight catering available at extra cost
High density single class seating
The airline had a single aircraft type, the McDonnell Douglas DC10, with one class
345 seats, and offered an introductory fare of £32.50 compared to the lowest existing
The Economics of Low Cost Airlines, 2008, Pages 61-67
Can long-haul low-cost airlines be successful?
Dr Peter Morrell
Cranfield University, Beds MK43 0AL, UK
Phone: +44 1234 754242; Fax: +44 1234 752207
p.s.morrell@cranfield.ac.uk
Abstract
A key question is whether the very successful, largely short-haul LCC business model can work over long-haul sectors? This paper compares the cost and other advantages of LCCs and evaluates how far they might be applied to long-haul sectors.
It is estimated that cost advantages might be much lower than the 50-60% on shorthauls. Other factors such as the adoption by network airlines of some LCC features and their likely competitive response, the limited potential for market stimulation, the need for dense markets and feed traffic all combine to cast doubt on the widespread establishment of the business model for long-haul flights.
Keywords: airline operations; long-haul air services; low-cost airline viability
1
1. Introduction
The idea of a low-cost long-haul airline is not new but previous attempts have not been successful. Since their demise, however, new technologies and business processes have been developed, so that it is appropriate to re-examine the economics of these services. One of the first of such ventures was Laker Airways that in 1977 transformed its UK charter operations into a long-haul ‘no frills’ airline. Its first ‘SkyTrain’ flight was London Gatwick to New York and it subsequently added Los Angeles and Miami.
The features it had in common with today’s low-cost business model were:
Point-to-point operations, with no interlining or transfers
In flight catering available at extra cost
High density single class seating
The airline had a single aircraft type, the McDonnell Douglas DC10, with one class
345 seats, and offered an introductory fare of £32.50 compared to the lowest existing
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