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Why low-cost long-haul airlines will always fail

July 6, 2021

I read an article in the Guardian today about a couple who had booked a transatlantic flight with Norwegian Air. Due to Covid they were unable to go. Ultimately Norwegian cancelled the flight, but this couple unwisely accepted vouchers before this happened. Now Norwegian has withdrawn from transatlantic flghts the couple have a lot of vouchers valid only for European travel.

As the article explains, they were unwise to choose vouchers rather than wait for Norwegian to cancel the flight in which case they’d have been entitled to a full refund. But that’s not the point of my post. The point of my post is that low-cost long-haul carriers will always fail, eventually.

There are lots of previous examples. Laker’s AirTrain was the first of many. Braniff, Wow and others followed. Norwegian is just the latest.

Now Defunct WOW Airlines

You see the low-cost airline model can work for short haul. Most short-haul flights are two hours or less. And short-haul flights usually (for a full-cost carrier) take between 45 minutes and an hour to turn around for the return leg. Low-cost airlines reduce this to about 20 minutes. It can’t be any less because the aircraft brakes have to cool from the landing in order to work effectively in an emergency on take off.

But the advantage is that if your aircraft is flying, on average, 90 minute legs, and turning around in less than 30 minutes, then it can operate up to 12 legs in 24 hours. A full-service carrier flying the same route can fly only 9 legs in the same 24 hours, so the low-cost carrier can get another three plane-loads of people to pay for seats. Of course most aircraft aren’t scheduled fully for 24 hours, but the principle is clear: a low-cost carrier generally can get two extra legs a day from each aircraft it operates.

This, combined with the “no-frills” approach of minimal luggage allowances, all extras to be paid for, having the cabin crew clean the ‘plane and trying to flog lottery tickets and tickets for onward travel on board (on all of which the airline makes a margin) enables them to make the upfront advertised cost of each seat much lower than a full-service airline.

That’s how it works.

But it can’t work in long-haul. In long-haul most aircraft fly one or two legs in 24 hours. So shaving 30 minutes off each turnaround gains an hour a day – not enough to fly another long-haul leg. If airlines operate the latest generation of fuel-efficient aircraft then the no-frills savings and add-on revenues might just make a low-cost airline viable provided all flights operate close to 100% full. But this is tricky at the best of times, often requiring overbooking and then bouncing some passengers off the flight. This doesn’t endear you to your customers, so most full-service airlines aim to achieve an average of better than 80% loading. Low-cost carriers can’t afford loading this low, there just isn’t enough margin on the revenue they generate. Also full-service airlines have premium cabins (Premium Economy, Business and First Class) – this isn’t common on low-cost services, so the additional revenue from premium cabins is denied to them.

Then there’s another problem; having enough aircraft, and crews. If you’re flying short-haul around Europe and one of your ‘planes breaks, then it’s generally not a problem to find another one to rescue the passengers. It’s easier for a full-service airline as their higher revenues means they may well have a spare aircraft available and can call crews up quickly. Low-cost airlines can do it although it may take a bit longer and it may be more effective to rebook your passengers on another airline – or just abandon them, as some low-cost carriers have done in the past .

If you’re flying long-haul then it’s much harder. The larger, full-service airlines can usually find another aircraft although it may take up to 24 hours to get it where it’s needed, as I’ve experienced on a couple of occasions. But when this happened to some friends of mine who were booked to fly on Norwegian to Los Angeles for a wedding, there was no replacement aircraft. They were three days late, ended up flying on a plane chartered by Norwegian as the airline didn’t have a replacement, and they missed the wedding!

Image of a Norwegian Air Boeing Dreamliner
A Norwegian long-haul Boeing Dreamliner

Norwegian has managed to keep operating its long-haul services for longer than most of its predecessors, but that’s mainly because it had a profitable European short-haul business to subsidise the losses. but the Covid pandemic put paid to that. So it’s pulled out of transatlantic flying.

I could have told you it would. In fact I told several people right at the start when Norwegian announced it would be offering low-cost transatlantic travel that this would happen. I couldn’t predict when, but it was going to happen.

I’m reminded of Sir Richard Branson’s famous quote, “The way to make a small fortune with an airline is to start with a large fortune.” He should know. He ended up running a full-service transatlantic airline – very good it is too – but it’s not low-cost.

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