Just last year, Wow Air CEO was in Delhi stressing the concept of an ultra-cheap long haul flight. With promotion fares as good as Rs 13,499 one way ($199) from Delhi to the USA West Coast, the airline was banking on the fact that people would pay separately for bags or carry-ons, food on board this 18-hour long flight and then some. The airline ran into serious trouble at about the same time and bailed on the Indian market soon within a month after launch.
Yesterday, we heard that the Icelandic low-cost carrier has folded up, after months of trying to get new funding. They had an average age of 1.8 years for their aircraft, but how they crash-landed should be a case study for everyone who wants to do long haul low-cost airlines.
While there have been very successful low-cost airlines, think RyanAir, SouthWest and our own homegrown IndiGo, they have been successful because they do what they can do best, with many factors in control. They run single fleet operations (same kind of aircraft) and offer bare basic transport between two points with minimum hassle. Ancillary charges are high, and typically, these aircraft fly on flights between three to four hours, which means many more flights can be operated during a day, making the plane utilisation optimum.
How They Do It?
SouthWest does not even allocate seats, you get in early and catch the one that works for you best. And in exchange for keeping a lot of bells and whistles of flying out of the picture, they keep the costs low, and hence ticket prices low as well. That is the original low-cost model. Low-cost flying works very well for 3 to 4 hours of flights because passengers are alright with lesser amenities at a less cost at this time window. They can live without eating on these flights, or paying for a checked bag, for instance.
In the recent past, however, players such as Wow Air, and even IndiGo, are trying to push the envelope on the magic of low-cost flying. The promotional offers they make, such as the $199 India to the USA, are all wealth redistribution in my book. Transferring the equity/sale and leaseback premium of the aircraft/financing to bring in customers on these low-priced flights, which may not necessarily be low-cost. As a customer, I should be happy, but low-cost long haul is yet to be a proven model.
Industry disruptor Norwegian continues to be making losses over the years. They killed their ambitious London - Singapore flight last year after it failed to break even. Air Asia does not want to operate beyond short and medium-haul (flights between six to eight hours are medium haul). Joon, which was a sub-brand of Air France, recently folded up in the main carrier.
Why Isn’t Low-cost Long-haul Working?
Passengers place a certain emphasis on comfort. Hence, flying a full-service carrier on most long-haul routes makes sense. The full-service carriers are also able to keep ticket costs low in the short to medium-term to wade away the low-cost competition, and offering much more at the same price as compared to the other option. Also, at the back-end, the operations differ. Pilot rotations cause pilot costs to go up. Aircraft utilisation may be lower, due to plane sitting in a different land, and delays are hard to make up since you can’t just accommodate passengers on the next available flight when the plane goes mechanical.
And which is why, after much deliberation, even the likes of IndiGo have moved from firm plans to launch long-haul flights to London, to restricting it to Turkey for now and learning from it. After all, seven hours in a single-aisle plane with no place to stretch your legs, no entertainment, no complimentary meal service and wafer-thin seats is not an idea of a vacation for many people, and neither is it the idea of 200 people queuing up for three very small lavatories.
My personal benchmark over years of flying has been I am happy to pay $50 per hour of the flight time for my flight in economy class. At Rs 24,999 for a roundtrip to Turkey, IndiGo’ takes it to about $23, all of which I am sure is not cost savings as compared to Turkish Airlines who is their frenemy on this route (Codeshare partner, but also the only airline competing with them on this route for now). Not sure whether to look at these fares as a transfer of wealth then, or a serious push towards cracking the low-cost long-haul flying model. Airlines really need to price them right, rather than price them low to get their passengers through the door sustainably after all.
Ajay Awtaney is a business travel & aviation journalist based in Mumbai, and the founder of the Indian frequent-traveller website Live From A Lounge ( www.livefromalounge.com .) Ajay flies over 200,000 miles every year, and tweets about The Business of Travel at @LiveFromALounge .