Long-Haul, Low-Cost - A Viable Endeavour?

“Many of the markets developed under the long-haul low-cost banner may prove sustainable; but the operating model seems likely to be "lower cost", rather than true low-cost.”

This quotation comes from an article analysing the current low-cost, long-haul models, and, while it shows that many airlines are already venturing into the low-cost, long-haul (LCLH) business, it also begs the question: ‘can a true low-cost-carrier (LCC) succeed in the transatlantic/long-haul market? Two years ago, I would have thought the idea extremely unlikely, however the recent arrival of a new aircraft from Airbus will, in my opinion, revolutionise the game, and I believe there is a lot of potential to be sought in the model, despite tough competition on many routes.

To begin answering the question, one must first look at the commonalities in short-haul low-cost operation. Most carriers operate a single aircraft type to reduce ground-staff training and maintenance costs, usually an Airbus A320 or Boeing 737. Then, they pack the aircraft with a single-class configuration, and only sell the customer a seat, with optional add-on luggage or entertainment for an extra fee. The absence of on-board meals significantly reduces weight and turnaround times to maximise the use of the aircraft throughout the operating day. In the case of Ryanair, the removal of seat pockets reduces cleaning time and helps get the aircraft away sooner. These tickets are sold exclusively on the internet for ease of access and to prevent travel agents taking part of the profit on ticket sales, thereby maximising the value of bottom line on the airline's balance sheet. The planes are usually then flown between smaller airports to minimise traffic congestion and hefty landing and parking fees. Using Ryanair as an example again, services to Rome land at the city's Ciampino airport in favour of the much larger and busier Fiumicino, and some of the airline's Venice flights arrive at the airport serving the nearby city of Treviso.

A similar model has been attempted on long-haul routes, notably by Norwegian, which accounted for 64% of LHLC transatlantic routes in September 2017. Operating a fleet of Boeing 787s on the majority of transatlantic services, the airline offers a two-class cabin configuration with meals as an optional add-on on all three ticket-types. This is an example of the 'lower-cost but not fully low-cost' model that the article described. First of all, the 787 requires large airports to land at, such as New York JFK and Boston Logan, incurring the unavoidable landing and ground fees. Furthermore, the sizeable aircraft require a larger turnaround time due to cleaning, baggage handling and refuelling services. On top of this, two cabin classes are offered instead of one, both with built-in entertainment and WiFi.

The term 'low-cost' does not, as many people assume, refer to the cost of the ticket - it refers to the airline's operating expenses. In my opinion, an LHLC airline could make do without the frills of Norwegian's service to the benefit of its own operating costs and hence the passenger's ticket price, and the use of a different aircraft would also be beneficial. This is where Airbus' new A321LR (Long Range) comes into play. With a capacity of 240 passengers and range of up to 4,750 nautical miles, the single-aisle aircraft could open up many new routes for a low-cost airline wanting to operate a long-haul or transatlantic service. The smaller size of the aircraft not only allows for smaller turnaround times, but the aircraft can fly to a host of destinations with a frequency that is attractive to the customer. Smaller airports in a city's metropolitan area can also be accessed, such as Teterboro for New York/New Jersey or Sharjah International for Dubai. Similarly, the lower capacity of the aircraft when compared to a Boeing 787 could allow an airline to operate it to lower-demand long-haul destinations (from the UK) such as Jacksonville in Florida, or Ahmedabad in India.

Norwegian has a similar practice in place already, with their Boeing 737s operating from Edinburgh to smaller airports in the US such as Providence, Hartford and Newburgh in New York, and the airline is already eyeing the A321LR to complement the 737 on long-range transatlantic services. However, the A321LRs extended range and 'unbeatable fuel efficiency' could see new destinations being added on the airline's route map.

This is all very well, however the routes a future LCLH carrier chooses to operate the type on must be able to fill every seat. While costs can be saved flying to smaller airports on long-haul routes, there is not an abundance of options when it comes to flying between minor airports of major cities outside of Europe. While the aircraft would no doubt prove profitable flying on well-established long-haul routes for airlines such as Norwegian or AirAsia, it may prove hard for a new, truly-low-cost carrier to break onto the scene unless its ticket prices were lower than any competition. That being said, Norwegian's long-haul routes focus purely on North and South America - LCLH routes from the UK to the Middle East and South Asia do not yet exist. An airline opening up these routes could find it a fruitful endeavour, especially considering 18% of the foreign-born population of the UK originate from Pakistan, India and Bangladesh.

In order to be able to offer the cheapest tickets, a new carrier (or existing carrier trying to adopt a truly-low-cost operation) would have to run down its costs for on-board services and amenities. On the A321LR, this would involve adopting a single-class high-density layout, perhaps with a few larger, comfier seats in the style of a short-haul business class. In-flight entertainment would take the form of a detachable tablet so that it can be a passenger's choice (a strategy implemented by low-cost carrier AirAsia X). However, passengers would have to choose before the flight so that there is no excess weight on the aircraft, save for a few replacement tablets. Similarly, food services would be an optional add-on and would have to be minimised from the three-course meal offered on Norwegian services to something more simple to reduce weight and cost (in 1997, American Airlines saved $40,000 by removing one olive from every meal). In-flight WiFi would ideally not be an option on these flights; I consider it an unnecessary expenditure for a low-cost airline and it is seldom worth the purchase for the passenger.

It goes without saying that these flights would not be tremendously comfortable, but if there is demand for a route and the ticket price is low enough, a new low-cost, long-haul carrier may see their A321LRs filling up on regular services. There is no doubt that the airline industry can be hostile and unforgiving, especially to new carriers, but I believe this new aircraft could allow a new airline to offer a never-before-seen type of service on transatlantic and long-haul routes. I would love to see an experimentation of the truly-low-cost, long-haul model with the A321LR - if it were to work it would certainly be remarkable.