World Airways is reborn again as a long haul low cost airline. So what happens now?

The latest rejuvenation of World Airways has obviously generated ample amount of hype and curiousity, but there’s little substance behind its bold declarations of operating long haul, low cost flights to Latin America and Asia from Miami and Los Angeles.

World is being revived by a US investment firm 777 Partners, and industry veteran Ed Wegel is CEO of the the airline.

“We are proud to begin preparations to launch scheduled operations from the US to Asia and Latin America. We will be partnering with low cost, short haul carriers in the US and in the regions we serve to provide connecting traffic to and from our initial planned gateways. We plan to announce our new brand look and feel within the next few weeks,” the company says.

World is in talks with Boeing to order up to 10 Boeing 787 widebody aircraft for low cost service from two relatively high cost airports that do not have a pronounced low cost airline presence. For example, according to The Pittsburgh Tribune Miami International Airport charged USD10.76 per departing passenger in 2016 compared with USD3.94 at nearby Fort Lauderdale, which is roughly 47km from Miami. Low cost hybrid airline jetBlue is the largest operator at Fort Lauderdale (measured by ASKs), and ULCC Spirit Airlines is the second largest carrier.

CHART – Miami International Airport has little low cost representation; Frontier offers service from the airport, but represents a fraction of weekly ASKs as schedules for week commencing 13-Nov-2017 illustratesSource: CAPA – Centre for Aviation and OAG

As World prepares to offer more details about its planned low cost operation, the company has stated it plans to partner with low cost, short haul airlines in regions it is serving. Partnerships among low cost airlines are in their infancy. easyJet, Norwegian and WestJet have unveiled a partnership for connecting flights at London Gatwick, but passengers still have to collect their own bags for transfer, and minimum connection times could reach two and a half hours.

CHART – The US majors domninate at Los Angeles International Airport, but Southwest Airlines does also offer a strong presence for the low cost sectorSource: CAPA – Centre for Aviation and OAG 

Until World discloses its route network, it is tough to determine the airline’s potential partners, but most low cost airlines in Latin America – Azul and Gol – partner with full service airlines, and partnerships in Asia would take some time to crystallise.

There is little penetration of the low cost, long haul model among North American airlines. The region’s large global network airlines are shunning the idea of creating lower cost long haul subsidiaries, and instead believe they’re capable of competing with new low cost upstarts with their branded fare families. The exception is Air Canada with its low cost subsidiary rouge, which has been fairly successful in allowing Air Canada to target lower yielding leisure passengers in a cost effective manner. However, a larger mix of leisure customers has pressured Air Canada’s unit revenues during the last three years.

Air Canada’s rival WestJet has also ordered 10 787s for long haul service after launching trans-Atlantic flights with older 767s to London Gatwick from several Canadian destinations in 2016. It had a shaky start with the flights due to operational issues with the older widebodies, but during the last year WestJet has consistently stated service to Gatwick has meet its expectations of being accretive during the first year of operations.

The jury is still out on the viability of long-haul, low cost service to the Americas. Norwegian has generated the most attention during the last few years with its operations of Boeing 787s and now 737 MAX jets to secondary US cities. But that expansion has come at a high price. As Norwegian built up its fleet, its debt levels also , which resulted in capex exceeding cash flow from operations since 2008. As previously reported by CAPA – Centre for Aviation, Norwegian is likely to post an operating loss in 2017.

Although World Airways has made a splash with its intentions to join the list of airlines using 787s for long-haul, low cost service, the reality is it faces a tough, uphill climb in proving its staying power at a time when full service airlines pledge to compete fiercely with low cost upstarts and fuel prices start to move in the wrong direction.