For several years now, the largest
U.S. airlines have been increasing the percentage of their flights
devoted to international service. Delta, which had been trailing
the pack, now is speeding to catch up. It has been doing this
because the airline faces almost no competition from low-cost
carriers on international service, aside from service to Canada and
the Caribbean and parts of Latin America, giving Delta a better
chance to raise fares and make money on those routes.
That strategy will
take a big hit, however, if a low-cost carrier decides to give
trans-oceanic service a try.
Will that happen, and
can it be done successfully? I put that question to airlines and
experts at the World Low Cost Carrier Congress-Americas Congress,
held in Miami at the end of June. I did not find a
consensus.
Martin Copeland,
senior vice president for aviation at InterVistas consulting, said
he believes it is inevitable.
Copeland acknowledged
that a low-cost carrier would lose some of its cost advantage on
such long flights. Those carriers save money on domestic flights by
getting planes back in the air quickly after they land and unload
passengers, which means more flights per day. On long international
routes, a carrier can use the aircraft only once per day. Out and
back.
Furthermore,
international flights create complexity, which increases costs and
consumes time. Even on relatively short international flights,
passengers must clear customs and aircraft must undergo security
checks. Also, passengers expect amenities on long flights,
including meals and entertainment.
Nonetheless, Copeland
said that a low-cost carrier could maintain enough of a cost
advantage to make transoceanic service work with cheaper labor and
other cost advantages. He predicted it will happen within the next
10 years.
But other experts and
low-cost airlines themselves were doubtful. Anthony Tangorra,
executive partner for Latitude Transport Advisory, said a low-cost
carrier gets a lot of its cost advantage from density, with a lot
of flights and frequencies, so they are not paying for airport
counters and gates that sit idle for long stretches. That cost
advantage, he noted, goes away with low-frequency, long-haul
flights.
Spirit is aiming to
become the leading low-cost carrier to the Caribbean and Latin
America. But its bosses are skeptical about the ability of a
low-cost carrier to operate profitably across the Atlantic or
Pacific.
Ben Baldanza and
Barry Biffle, Spirits CEO and chief marketing officer,
respectively, said that network carriers already operate at low
cost across the ocean, so it will be tough to create a big enough
cost advantage. They should know, as both are former US Airways
executives. Baldanza said US Airways operated Philadelphia-Europe
service at 4 cents per available seat mile.
Any competitor,
Biffle said, would be flying the same type of aircraft, burning
just as much fuel. At most, Biffle said, a low-cost carrier would
have a 5% to 7% cost advantage -- not enough, he believes.
There are efforts,
but they are limited. Aer Lingus, having slashed its costs on
domestic service, is trying to position itself as a low-fare
alternative to Europe. But its international service isnt really
low-cost. Australias Jetstar is poised to enter the international
market, but it is owned by Qantas.
Emirates has noted
the possibility that some airline could offer low-fare service with
the new Airbus A380 aircraft, which could hold more than 800
passengers in an all-coach configuration, but thats just
speculation.
However, there is at
least one entrepreneur pushing for the creation of a low-cost
carrier that could fly across the Atlantic.
Christopher Lund, a
former Atlantic Southeast Airlines pilot with degrees in aviation
economics and aeronautical service from Embry Riddle Aeronautical
University, is in the second stage of raising funds for a low-cost
carrier that would begin with service from the U.S. to northeastern
Brazil. It has plans to expand to other markets, such as
India.
Lund said he would
not skimp on amenities. But he said his airline would not be
burdened with an expensive and costly labyrinth of domestic
services, and he believes a simple route structure would provide
one of the cost advantages.
Previous low-cost,
transoceanic efforts ended in failure: Laker Airways in the 1970s
and People Express in the 1980s. Patrick Murphy, former Ryanair
chairman, noted this and said he had consulted many airlines that
have considered the possibility, and all of them decided against
it.
The aviation
industry, however, is full of optimists like Lund. That doesnt mean
a low-cost, low-fare carrier will succeed across the ocean, but its
a sure bet someone else is going to try.