Monday , March 8 2021

Will cheap transatlantic flights return?

The pandemic has ended a plucky attempt to break the stranglehold that carriers like British Airways and Delta Air Lines Inc have on the transatlantic market.
Norwegian Air Shuttle ASA’s decision to cease long-haul services to ensure its survival won’t surprise anyone familiar with its years-long struggle to make money. But this may not be the end of attempts to carry passengers cheaply between Europe and the US on modern fuel-efficient aircraft.
British Airways’ parent, IAG SA, responded to Norwegian’s rise by offering its own lower-cost long-haul unit, Level. It even briefly considered acquiring Norwegian, which shows what a threat the Nordic disruptor posed. Such competition benefited passengers, though alas not Norwegian’s bottom line.
Most will conclude Norwegian’s vision was doomed to fail: The economics of flying route lengths of more than seven hours are very different to short-haul, where Southwest Airlines Co, EasyJet Plc and Ryanair Holdings Plc long ago proved the low-cost approach can be very lucrative.
Still, I wouldn’t bet on this being the final chapter in the sorry history of bargain-fare, long-haul flying. So long as there are risk-taking entrepreneurs with access to capital and aircraft, the dream of cheap intercontinental travel will never be completely
extinguished. And though it sounds strange, the post-Covid period might be as good a time as any to start
an airline.
Ever since Freddie Laker tried to bring cheap transatlantic flights to the masses in the 1970s, airlines have tried to copy and refine this risky business model, with little success. Norwegian was the most ambitious of them all. But even before Covid-19 stopped most of us from flying, there were a string of low-cost long-haul failures, including Wow Air, Primera Air and Air Berlin. Meanwhile, AirAsia Group Bhd’s long-haul no-frills unit, AirAsia X, is in the midst of a restructuring. (It flies from Kuala Lumpur to Honolulu, via Osaka.)
These carriers were always destined to struggle. Some of the advantages of the low-cost, short-haul model don’t work as well with intercontinental flying: Speedy turnarounds between flights aren’t much of an advantage when the majority of travel time is spent in the air and passengers aren’t as willing to be crammed in like sardines for such long periods.
“There is no such thing as long-haul, low-cost; just long-haul, low-price,” quips Bernstein Research’s Daniel Roeska. Long-haul passengers prize the ability to connect to short-haul services via the main carriers’ hubs. By filling the pricey business and first-class cabins, legacy carriers are better able to fund large planes and crews, as well as to manage volatile fuel costs.
—Bloomberg

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