GS-Alpha the money to be made on Long Haul is in the Premium Cabins. Economy or Traveller or however you wish to brand the cheap seats is heavily subsidized by the Premium ones. Unit costs cannot be lowered to any significant degree to offset the huge loss in revenue by only selling cheap seats. Not only that but the low cost carriers cannot use the aircraft any more intensively than the legacies unlike short haul.
We know all this but it’s only to reinforce the fact that even when the economic environment (cheap fuel, low interest rates to finance new aircraft) is perfectly set up in theory to enable a LCC long haul operation, Norwegian are still only barely keeping their heads above water. What do you think will happen when another shock happens? (And it always does). I know who I’ll be betting my money on.
IAG are responding because Norwegian are taking revenue away, no doubt. Even if it is at the lower end of the market that’s still revenue that is not going into the coffers. Do you really think they’d sit and do nothing whilst that is going on? Ultimately though there is no way that they are going to cannibalize BA’s operation because the margins in LCC Long Haul are so thin and the profits are so limited.
We heard all the rumours about Vueling being the replacement for BA’s Short Haul operation at Gatwick. Still hasn’t happened. Won’t happen with Level either. I’ll say it again, they started Level because they got a fantastically low price for some end of line A330’s. That’s the only reason it works. And it’s perfect to hurt Norwegian in the short term.
Last edited by RexBanner; 25th Nov 2017 at 23:04.