Corporates want LCCs to ‘come knocking’; airlines become ‘an e-commerce platform that flies’; as industry hits peak of availability of finance – more insights from CAPA’s Global LCC Summit

The CAPA – Centre for Aviation Global LCC Summit 2018 took place in Singapore last week bringing together some of the biggest names in aviation to discuss the increasingly growing low cost carrier (LCC) market, and especially the developing long haul low cost (LHLCC) sector.

While LCCs are still a relatively young force they have massively disrupted air travel and the way all airlines now think about serving the public. With a nimble strategy offering new point to point connectivity, introducing industry innovations, developing ancilliary focused activities and embracing modern digitalisation and technological practices, they have become the new ‘normal’ in the industry.

Here’s more of the insights and observations from delegates during the event at the Capella Singapore…

BHP global head of travel to LCCs: ‘Corporates want you to come knocking’
BHP global head of travel and expense management Joanne Taylor said: “There’s always opportunities for low cost carriers” and added: “I think there’s a lot of assumptions about what a corporate wants”. Ms Taylor invited LCCs to approach corporate customers, stating: “Corporates want you to come knocking”. 

‘A lot of opportunity for LCCs’ in corporate travel: Carlson Wagonlit VP
Carlson Wagonlit Travel VP sales and programme management Michael Valkevich said there is “a lot of opportunity for LCCs in the corporate travel space” with room for competition and room for growth. Mr Valkevich reported “a willingness to try different types of carriers” among corporate customers. 

‘Investment in a low cost terminal has changed the economy’ of Malaysia
Cebu Pacific Air chief operations advisor Rick Howell said Malaysia is an example where “investment in a low cost terminal has changed the economy of a country”. Mr Howell said governments which do not focus on encouraging the growth of LCCs risk “leaving your economy in tatters”. He explained the airline’s priority in evaluating airport terminals is facilities “with flexibility”. He said the carrier seeks “the most frictionless path” for passengers to get on board aircraft, but noted that government investment in airports “tends to be biased to full service airlines”. He said: “The trend in airports, still, is generally not in support of LCCs”. 

U-FLY Alliance focused on China outbound market
Uriel Aviation Holdings vice chairman Andrew Cowen commented on the objectives of the U-FLY Alliance, stating: “The prize is all about that China outbound market”. Mr Cowen said much of the alliance’s focus is on establishing a platform in China. He said the U-FLY Alliance was created to address the “key strategic challenge” for member airlines, which was matching the size and scale of larger competitors, including the AirAsia and Jetstar groups. He commented: “We were smaller and further behind”.

Scoot wants ‘to be in the TMC side of things’
Scoot head of sales and distribution Trevor Spinks said “Of course we want to be in the TMC side of things” but added: “We’re not there yet”. He commented: “It’s time for Scoot to take that next leap”. He added the airline will “hopefully” launch WeChat Pay as a payment method in the next 30 days and noted there is “a lot of growth to come” for the airline in the coming years.

Value Alliance ‘gives more reach for the customers’
Vanilla Air senior EVP Mioko Yamamuro said the combined network of the Value Alliance “gives more reach for the customers”, enabling member airlines to compete with larger carriers, such as the AirAsia and Jetstar groups. Ms Yamamuro said the alliance has not been growing rapidly and is overcoming platform “hurdles” and working on connecting member airlines.

NokScoot may be profitable in 2018
DDG International independent airline executive Patee Sarasin said NokScoot is performing “very well” and may be profitable in 2018. Mr Sarasin expects a “phenomenal move from NokScoot” now that the ICAO ‘red flag’ safety rating for Thailand has been removed.

Twelve million Qantas FFP members provide ‘a huge head start’ on data
Jetstar Group CEO Gareth Evans said 12 million Australians are members of Qantas’ frequent flyer programme, equivalent to around half the country’s population and significantly more than half of travellers. Mr Evans said the large member base gives Qantas and Jetstar “a huge head start” on customer data, enabling the carriers to significantly leverage the information. He said Jetstar’s dual brand strategy with Qantas “makes us a pretty formidable competitor” and the carriers together account for 80% of the “profit pool” in Australia.

Air Arabia CEO sees potential in Pakistan, India, Syria, Egypt, Saudi Arabia, Russia and Africa
Air Arabia Group CEO Adel Ali said Pakistan is potentially an important future market and India remains “a very big market for us”, which will grow as the Indian economy improves. Mr Ali also expects Syria to be a potential market “if the conflict stops”. The carrier is “extremely optimistic” with its base in Egypt and Mr Ali noted tourists are returning to the country from Europe and regional markets. Mr Ali expects economic reform in Saudi Arabia to be positive in the long term and the country will be “a key market for us”. He said there is potential for Air Arabia Maroc to expand in Europe, particularly Eastern Europe, noting Russia has “good potential”. Mr Ali also described West Africa as an “underserved” region with “high potential”. He confirmed the carrier is in talks with manufacturers and intends to place make a decision on an order for new aircraft in 2018. Mr Ali noted the airline will need to replace some eight to nine year old aircraft. The airline will receive three more aircraft in 2018, completing an order for 55 aircraft. The carrier intends to add six leased aircraft in 2019.

Avalon Airport, probably the lowest cost airport in the world, sees growth in tourist traffic after approaching Chinese booking agents
Melbourne Avalon Airport CEO Justin Giddings said tourist traffic from China has “taken off” since the airport switched from directly approaching Chinese airlines to encouraging Chinese booking agents and tour operators to promote the Great Ocean Road and Melbourne. Mr Giddings noted many of the tourists are free, independent travellers. He added: “without doubt we’re the lowest cost airport, probably in the world”.

World Airways to be ‘an e-commerce platform that flies’
World Airways director of business development Adam Weiss, said the airline aims to be “an e-commerce platform that flies” and “replicate the couch experience in the sky” by exploiting existing technology. The carrier seeks to generate revenue from digital sources including shopping, gaming and social interactions. He added there are no US long haul LCCs and World Airways is “filling that white space”. He noted 64% of Americans have never travelled internationally and stated: “We see a huge latent population in the US which doesn’t travel internationally”. Mr Weiss said the airline does not expect US full service carriers to create low cost subsidiaries.

DVB Bank SVP: ‘We are at the highest point of availability of finance we have ever seen’
DVB Bank SVP aviation research Albert Muntane Casanova said “on an aggregate basis we are at the highest point of availability of finance we have ever seen”. Mr Casanova said the conditions create much more competition for financiers and margins are thinner. DVB Bank currently finances around 900 aircraft and owns another 150. Narrowbody aircraft make up 60% to 70% of DVB Bank’s portfolio.

Jetstar Group ‘working towards a global LCC franchise’ as airlines from Europe, Latin America and Africa look to put passengers on Jetstar’s network
Jetstar Group CEO Gareth Evans said the group is “working towards a global LCC franchise”. He added airlines from Europe, Latin America and Africa are “knocking on our door to put their customers on our network”.

Ancillaries ‘the bedrock of the US airline industry’
Waltzing Matilda Aviation CEO John Thomas said ancillaries have become “the bedrock of the US airline industry”.

Airlines must learn to merchandise: Travelport
Travelport global head of product and marketing air commerce Ian Heywood said airlines must learn to merchandise and should bring in experts from outside the industry.

Business travel a ‘huge opportunity’ for LCCs
IATA new distribution capability programme director Yanik Hoyles said LCCs have a “huge opportunity” to move into the business travel market. Mr Hoyles said LCCs are better at retailing than full service carriers, but FSCs are better at penetrating the business market. He expects direct and indirect distribution channels to merge and blur.

Not many airlines do personalisation well
Skyscanner senior director of strategic partnerships Hugh Aitken said “not many airlines do personalisation really well”.

Want to hear more about the growing LCC market around the world? Join us at the CAPA Low Cost Long Haul Summit 2018 on the 4th & 5th October in Seville, Spain. To register visit the CAPA Events website.