Low-cost: Two thirds of short-haul in 10 years?

LCC chief executives present their opinions at conference
Low-cost carriers could account for as much as third of Europe’s short-haul airlift in the next decade, the head of one of the continent’s fastest growing carriers predicts.
Speaking at the Capa Acte Global Summit in Amsterdam, Wizz Air founder and chief executive Jozsef Varadi said the low-cost sector currently accounts for more than 40% of short-haul capacity.
That this could rise to between 60% and 70% within 10 years, forcing legacy carriers to rethink their business models in order to survive.
Skuli Mogensen, founder and chief executive of Iceland’s Wow Air, agreed that any new airlines launched within the decade are unlikely to be legacy ones due to the success of the low-cost model.
AirAsia group chief executive Tony Fernandes agreed the model would continue to grow, though he argued it would polarise the market.
“The reality is, the short-haul market airlines will gravitate towards full-service or low-cost. I think without a doubt low-cost will be the demand provider in the short-haul market and low-cost will be the driving force in long-haul.”
He added: “For the first time full-service [airlines] will make money doing what they do best, which is serving premium passengers.”
However, LCCs will not find it plain sailing, Ryanair’s chief commercial officer David O’Brien warned, adding: “Small low costs won’t be around in 10 years. Quite a few around the edges, particularly in Central and Eastern Europe, are on shaky ground but the large ones, in my view, will still be there.”
One market LCCs are yet to fully corner is business travel for SMEs, Fernandes said.
“We’ll go over that market, but don’t think we would change our model to serve business customers.”
By keeping its business model, Air Asia can avoid the fate of Virgin Blue, which made itself vulnerable to its bigger local competitor Qantas when it decided to go upmarket, Fernandes added, arguing that Air Asia X had been successful as it was properly differentiated from parent company Air Asia.
“Air Asia X is Air Asia on steroids, good steroids,” he said. “We’ve taken it, pumped it up by a few degrees and put some nice seats at the front.”
TTG Digital