Can long-haul low-cost airlines be successful?

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.

Hybrid” airlines – Generating value between low-cost and traditional

“…On the other hand, LCCs use a younger homogenous medium sized fleet which means lower fuel, lower costs for maintenance and training (Vidovic, Stimac, Vince, 2013), one single class of service with higher density of seats (Vidovic, Stimac, Vince, 2013), "no frills" (Morrell, 2008), point to point network (Vidovic, Stimac, Vince, 2013), simpler means of fare differentiation by time of booking (Morrell, 2008), alternative marketing and distribution channels, avoiding intermediaries, lower input prices (Morrell, 2008).…”

“…Moreover, the possibility of implementing the low-cost model to the long-haul market is also been examined by researchers (Morrell, 2008).…”

“…Although initially, LCCs were addressing a specific market not properly supported before (Olipra, 2012) and were perceived as "market makers" instead of "market takers" (Gillen, Morrison, 2003), their development also included taking market share from incumbent airlines " CAA, 2005(in Morrell, 2008". According to De Wit and Zuidberg (2012), LCCs engaged passengers from both full service carriers and other transport modes, by offering lower fares.…”

Low cost carriers and the changing fortunes of airports in the UK

“…Typical features of the original LCC business model included a high seating density and single class of service, no free in-flight food/drink or other frills, use of a single aircraft type, direct selling via the internet, high aircraft and crew utilisation, and point-to-point short/medium-haul routes. This created much discussion regarding how legacy or network carriers were reacting to LCCs (Dennis 2007;Franke, 2004;Windle and Dresner, 1999), including the setting up of their own subsidiaries or 'airlines within airlines' (Gillen and Gados, 2008;Morrell, 2008) and the role of leisure carriers in serving tourism demand (Beiger and Wittmer, 2006;Williams, 2011).…”

The Evolution of Low Cost Carriers in Australia

“…This model appears to be evolving due to the changing environment, and a new model is appearing, such as the new long-haul low cost model (Daft, Albers 2012;Morrell 2008;Wensveen, Leick 2009). "AirAsiaX" and "Jetstar Airways" are successful examples of this model.…”