Online travel agency CheapOair predicts long haul budget travel will continue to grow in 2018, and new competition in the Hawaiian market will fares falling to USD300 in some markets.
CheapOair cited the roll-out of basic economy as a growing trend in the US domestic market, and “moving into 2018, some [airlines] are expected to add these fares to international routes as well as to compete with the rise of international low cost carriers”.
Delta Air Lines and American offer the fares on some long-haul routes, and Delta has previously declared the bare bones fare would be available throughout its global network in 2018. The airline recently announced plans to charge a USD60 checked bag fee on its Basic Economy trans-Atlantic flights. Delta’s joint venture partner Air France-KLM intend to charge EUR50 for checked bags on its lowest trans-Atlantic fares.
Basic economy fares were branded as a tool for American, Delta and United to compete with ULCCs Sprit and Frontier in the US market. But the segmentation allows those airlines to up-sell to higher tier fares, which should drive higher levels of revenue.
Delta recently stated it sees a 50% upsell rate from its bare-bones basic economy offering, “and that’s how we determine the value of basic economy,” company president Glen Hauenstein recently concluded. “And so, our 50% up-sell rate on an average fare differential of USD20 to USD30 is significant”.
Mr Hauenstein also concluded even though basic economy is now roll outs broadly, “it doesn’t have a lot of broad appeal to customers”.
CheapOair also believes “Hawaii will be a destination to look out for in 2018, with fares expected to be as low as USD300 from the West Coast”. The company cited the entrance of a “new carrier” without naming Southwest Airlines directly. Southwest aims to launch service to Hawaii in 2018, but hasn’t disclosed specific routes.
The Blue Swan Daily has previously stated obvious launch points for Southwest to Hawaii include Long Beach, Orange County, Oakland, Phoenix and possibly Las Vegas. The airline is likely to spool to daily flights quickly from most of those markets, which would add 8% capacity into the market, and no doubt lower fares.
Central America will continue to be a popular travel destination, CheapOair concluded. According to the company’s booking data traveller numbers to Honduras and Nicaragua are up more than 70% over the past five years.
The US is the largest outbound market for Honduras by a wide margin, representing nearly 75% of the country’s departing ASKs, according to data from CAPA – Centre for Aviation and OAG. For Nicaragua, the US accounts for roughly 73% of its departing ASKs.
American and United should benefit the most from increased demand to Honduras. They represent 30% and 29% of seats between the US and Honduras. Delta and American both serve Managua, Nicaragua from their hubs in Atlanta and Miami and Dallas/Fort Worth.