Is the 'low-cost' model viable in the long-term?

[FlyingOfficerKite]

According to MOL, there will only be one, maybe two, low-cost operators still in business in the long-term. This was a statement made a few years ago.

He was, of course, referring to Ryanair and easyJet.

It seems now that in order to maintain the 'low-cost' model and at the same time provide 'low-fares' the financial limits are being lowered to a point where even fundamentals, such as decent terms and conditions for pilots, are being compromised to a level that is becoming unacceptable.

Is this out of necessity or just an attempt to try and get away with low pay and conditions?

Or is it something more sinister in that the current low-cost/low-fares market is not proving viable?

Although several low-cost airlines appear to be struggling at the moment - including the loss of GSM - what is the long-term future for the current protagonists?

Jet2 appear successful, but their cost base differs from the 'big 2' in that they operate ageing B737s. What will the future hold when the fleet requires updating and they have to compete on an equal footing to the larger carriers? Will PM have retired by then and will it matter anymore?

There seems to be a 'cracking at the seams' and I wonder if this is purely a symptom of the present rescession or something more deep-rooted?

KR

FOK

[chrisbl]

With the likely increase in taxes due to environmental concerns, the public will only pay so much to fly. Those operators who cannot respond by reducing costs and creating a pay as you use business model will find it difficult to compete.

The key will how the taxes are imposed, if fuel becomes taxed then the operators with modern aircraft and engines will have the advantage.

If it a passenger tax that will benefit the inefficient airlines.

[Two's in]

According to MOL, there will only be one, maybe two, low-cost operators still in business in the long-term. This was a statement made a few years ago.

Southwest, WestJet, JetBlue, Spirit, AirTran, Allegiant, SunCountry, 1Time, Mango, Air Asia X, Transavia, Vueling, AirBerlin, Germanwings, Wizz Air, Jet 2, Flybe, Virgin Blue, JetStar all probably have a view on the accuracy of MOL's gems of wisdom. Admittedly a lot of other airlines have gone, but there are plenty more out there other than this list, operating or about to take the plunge.

but their cost base differs from the 'big 2' in that they operate ageing B737s.

...that's French for "they no longer have massive lease payments to make".

[clunckdriver]

Twosin, West Jet low cost? You must be drinking WJ Cool Aid!

[Random Flyer]

According to MOL, there will only be one, maybe two, low-cost operators still in business in the long-term. This was a statement made a few years ago.

Southwest, WestJet, JetBlue, Spirit, AirTran, Allegiant, SunCountry, 1Time, Mango, Air Asia X, Transavia, Vueling, AirBerlin, Germanwings, Wizz Air, Jet 2, Flybe, Virgin Blue, JetStar all probably have a view on the accuracy of MOL's gems of wisdom. Admittedly a lot of other airlines have gone, but there are plenty more out there other than this list, operating or about to take the plunge.

When MOL said this, I am pretty sure he was referring to within Europe. Not worldwide.

[FlyingOfficerKite]

Random Flyer

Yes, he was - which narrows the above list down considerably.

KR

FOK

[Capetonian]

For what it's worth, I found this list. Some of these don't really fall under 'low cost' category and some have already gone under, but it does show that there are a fair number still out there.

Aegean Airlines

Aer Arann

Aer Lingus

Air Berlin

Air Italy

Air Malta

Arkefly

Avro (charter)

blu-express

Blue Air

bmibaby

BritishJet

Brussels Airlines

Cimber Sterling

Condor

Corendon

Easyjet

First Choice

Fly baboo

Flybe

flythomascook

Germania Express

Germanwings

Hifly

Iceland Express

Jet2

Meridiana

Monarch

MyAir

MyTravel Lite

Norwegian Air Shuttle

Onur Air

Pegasus Airlines

Ryanair

Sky Europe

SmartWings

SunExpress

Swedline

Thomsonfly

transavia

TUIfly

Vueling Airlines

Wind Jet

Wizz Air

[Seat62K]

I'd have thought that, generally speaking, the "low cost" airlines have a better chance of surviving than the "high cost" ones.....

[Metro man]

There will be low cost and there will be premium full service with nothing in between.

Ryan Air, Easy Jet, Cathay Pacific, Singapore Airlines and Middle Eastern airlines with government backing will survive long term. Others will come and go.

Aer Lingus, Alitalia, British Airways, Scandanavian all need major surgery.

[HZ123]

Ryanair is one word as is Easyjet. At BA we are well on our way (apart from CC issues) to gaining large cost savings?

Seasons greetings!!!!!!!!!!!!

[FL370 Officeboy]

This is a question I have asked myself several times. I look at Ryanair and personally, I don't think that is sustainable. When you consider the way they have been operating over the last few years, i.e. offer cheap seats and make money from ancillary revenue, expansion and aircraft sales then I can see stumbling blocks.

Ryanair want to charge for everything and pay for nothing. What happens when there is nothing left to charge for? In 2004 you could get a return ticket to Spain for £25. This including the honour of checking in at the airport, paying by card and having a bag in the hold. Today, checking in, paying by card and having a bag in the hold alone will cost you £50...before the price of the flight even comes into it.

Airports (for example Manchester) are starting to get wise to MOL and have told him enough is enough. They wont prostitute themselves to him anymore. He's almost got nothing left to charge the passengers extra for. Fares will have to go up. The speculative traveller who only flies FR because it is so cheap will be lost.

Time will tell I'm sure.

[CentreFix25]

You can look at it two ways..

Low fares is there such a thing anymore, nothing like the low fares of 3 - 4 years ago. I personally think low fares are gone forever with the increasing taxes and charges. Ryanair/Easyjet prices are increasing, but is there anyone else offering cheaper fares on a regular basis? - big percentage of pax will always go for the cheapest seat.

Low Cost Model Given the current economic climate, the low-cost model is performing the best and there is no reason to think it wont continue. One type fleet, screw your suppliers to the floor, demand cheapest charges, most businesses outside aviation will do the same to keep costs low - it's common sense.

[Seat62K]

FL370 Officeboy,

For your information, the average cost of my last 20 bookings from the UK to Spain and return with Ryanair is around £13.

Admittedly, I am very flexible when it comes to dates/times but my point is that the £50 minimum you quote is misleading.

Some people pay high fares on Ryanair, but not everyone.

[FL370 Officeboy]

Seat 62K

Did you check bags in? Were these trips taken since the compulsory £5 per sector check in fee was introduced? Were these trips taken since the card fees (including Elcetron) were whacked up.

As the privilege of checking for a return trip is now a minimum of £10, the price of checking a bag for a return trip is £30 and card fees are the best part of £10 I struggle to see how my statement of...

In 2004 you could get a return ticket to Spain for £25. This including the honour of checking in at the airport, paying by card and having a bag in the hold. Today, checking in, paying by card and having a bag in the hold alone will cost you £50...before the price of the flight even comes into it.

...is remotely misleading?? I compared how much the above would have cost in 2004 to how much it would cost TODAY. I fail to see how you can argue with my figures.

[Seat62K]

Your statement is most definitely misleading.

I never pay a card charge; nor do I pay to check in.

That's £20 to remove from the £50 you say is the minimum.

The bookings I refer to were all made after the introduction of the check in fee for non-promotional flights.

As far as card fees are concerned, I shall simply switch from Visa Electron to prepaid MasterCard on 1 January to maintain the status quo.

Remember, too, that UK APD has risen from £5 to £11 over the years.

[CentreFix25]

The simple way to resolve this discussion would be to book one of the said flights (without going all of the way).

Then posting the date and route of the £13 fare to Spain - thus discussion closed.

[rmac]

I travel often from Vienna and use Air Berlin & Niki combination. They are much more competitive than the legacy airlines, fly as good as or maybe a better variety of routes, have no MOL style sales gimmicks, are very flexible and helpful when changes are required, as well as being reasonable to the costs of the change, allow you to check in a decent amount of baggage and take more than one bag on board and finally do it all with good humour and unfailing politeness.

MOL and Ryan air, study and learn something that might help you in the future, from an airline that you didn't even mention...

Which by the way, since they bought LTU, now does long haul scheduled low cost with a business/premium economy style cabin option.

Way ahead of you Irish Mike, way way ahead of you.....

[al446]

My answer to the OP, FOK, is NO it is not sustainable. Reason - the inherant greed of those such as RYR & EZY that I think drives down standards across the board that will very soon see safety take 2nd place to bottom line.

To a certain extent this is already happening, I suspect. When decisions as to whether to anti-ice aprons or not with severe wx predicted and incoming a/c expected rest on the strain it will put on budget, as I think happened at LPL on 22/12/09 (EZY7008) leaving a full A319 sat for almost 2 hours as handlers rightly would not risk their limbs in those conditions, then we are almost there.

Also on FD, when pilots are treated worse than bus drivers and paid so (see BRK contracts at RYR and latest from EZY's recruitment practices) then pilot's self-steem dives and so does FD performance.

Add to that the airports that RYR etc have been screwing seeing the light and telling them to beggar off, the increasing likelihood of fuel taxes, improvements in surface transport and the general hassle these days of air travel like the bozos at security then I think loco will be dead within 10 years. A pity as it has served me well but I'll adapt.

[MUFC_fan]

I think the phrase 'low-cost' airlines has moved on a bit since five years ago where Ryanair et al would charge 1p for the flight and the only extra would be skiing equipment or a credit card fee.

Now that they have so many extra charges, the cost is only 'low-cost' if you chose to avoid them and BA have been proving that on their website.

I think it is always best to search around for the best fares including ALL costs.

[racedo]

Of course it is sustainable in the long term.

People work on the assumption that LCC will still offer the same service in 5 years time which is a nonsense. Funny how people forget how Legacys were 5 years ago and the dimunition in quality that has occurred, its a two way street where the LCC's move up the quality ladder. Anybody who feels it is impossible then have a look at Skoda once you changed people at the Top or Tesco 25 years ago.

FR's Michael O'Leary accepts he is not the person to be running the airline when it stops its aggressive growth phase circa 2012 and needs someone else in charge.

FR and others have shown that there is no need for an airline to have thousands of staff to do everything when you buy in services that you need or seek to minimise their costs.

Coming out of recession I expect fares to rise BUT there will still be £1 fares off peak on certain routes at certain times.