A new level of flying as low cost long haul goes mainstream

IAG’s launch of long haul low cost brand Level earlier this month marks a major milestone on multiple fronts and highlights the evolution of business models in the dynamic airline industry. The “adapt or die” motto has never been so relevant as it is today. Business models are changing at a pace which may still seem ridiculously slow for other industries but is scary fast for most airlines.

Level is the fifteenth long haul low cost operation to be launched within the last five years. Perhaps most significantly, IAG becomes the seventh full service airline group with a long haul low cost operation. Australia’s Qantas was the first and the pioneer, launching a long haul low cost operation in 2006 under its pan Asia Pacific LCC brand Jetstar.

Malaysia’s AirAsia X, the long haul offshoot of short haul LCC group AirAsia, launched a year later and quickly expanded to become the market leader among new generation long haul LCCs. However, it was not until 2012 that the model really started to gain steam and acceptance – from both independent LCC groups and full service airline groups.

The long haul low cost sector has just surpassed 500,000 weekly seats for the first time. While this represents only 0.5% of the global market, long haul low cost operations are growing rapidly and will account for more than 1% of the global market within the next year or two.

In certain markets, the market share of long haul low cost operators has already become significant. Malaysia has the highest concentration of long haul low capacity, at approximately 7%, followed by Australia and Singapore at approximately 4% each. In the Transatlantic market long haul low cost is starting to make serious inroads. This summer it will account for approximately 6% of total seat capacity compared to approximately 3% last summer.

Norwegian is pursuing by far the fastest expansion this summer across the Atlantic launching a staggering 19 long haul low cost routes over a period of only four months (beginning of June 2017 to end of September 2017), expanding its Transatlantic network to 44 routes. In the process it will become the largest long haul low cost operator in terms of number of destinations and routes.

While the overwhelming majority of long haul LCC routes are in the five to ten hour range, the transition of the model is now seeing an increasing number of flights exceeding the ten hour envelope. Norwegian will also soon once again take the distinction of operating the longest LCC route in the world when it inaugurates its new London Gatwick – Singapore route in September 2017.

CHART – Longest Routes for Each Low Cost Long Haul Airline (September 2017) 

Norwegian previously held this position for a two-year period from June 2013 with its Bangkok – Oslo, Bangkok – Stockholm and then Copenhagen – Los Angeles routes, but Eurowings took over at the end of 2015 with its Cologne/Bonn – Bangkok and Cologne/Bonn – Phuket flights. From this month Level’s new Barcelona – Los Angeles link and soon to launch (June 14, 2017) Barcelona – Buenos Aires route will hold the longest LCC route position until Norwegian’s Singapore launch later in the year.

It could perhaps even extended the length of the longest route with sources telling The Blue Swan Daily that it could as early as later this month confirm its plans to launch London Gatwick – Buenos Aires route linking into its new South American operation under development in Argentina.

In the future Filipino carrier Cebu Pacific could extend the range of the Long haul low cost model still further as it continues to evaluate the acquisition of new generation long haul aircraft which would have the range to serve the likes of Manila – Los Angeles or the slightly shorter Manila – San Francisco and Manila – Vancouver routes. But Cebu Pacific is not planning to make a decision on new long haul aircraft until 4Q2017 or 2018 – and deliveries are not likely until at least 2019 at the earliest.

READ MORE.. Long haul low cost becomes mainstream as full service airlines gradually embrace new business models