The End of the Distinction Between Low-Cost and Legacy Airlines
This seems to be a fundamental trend. The models that were once so different between traditional carriers and low-cost carriers are increasingly being copied. It took almost 40 years for the two models to gradually come together, and in the future only the distinction between short-haul and long-haul flights will remain. We go back to the origins of air transport.
Long gone are the days when historical companies saw the arrival, with some condescension, not to say disdain, of new entrants who claimed to make a place for themselves in a universe that was, after all, quite closed. To do this, they had the absolute weapon: the ability to put on the market fares so low that they were impossible to achieve by traditional carriers, all with the same aircraft. The difference in product was certainly real; there were, and still are, strong constraints: increased density of cabins, the need to buy tickets well in advance, the obligation to pay, in addition to the transport itself, for almost all the often-essential extras, for example the carriage of luggage or onboard services, even the smallest ones.
The vast majority of the companies already established despised these intruders and predicted an uncertain future for them, to say the least. Except that their analysis was wrong and that, for a flight time of less than 3 hours, customers began to favour price, which was often half that of the traditional carriers. The difference was even greater for business passengers, on whom the companies made their profits. The gradual loss of this prestigious clientele, who refused to pay up to three or four times the price on the same destinations, made even the largest companies think seriously. They gradually adopted the same practices as low-cost airlines, even if these practices did not cover their costs. They then tried to group together in essentially cosmetic alliances, without necessarily having great success.
The losses accumulated in competing with low-cost airlines led many air transport giants to file for bankruptcy. It should be remembered that the three largest American carriers – United Airlines, Delta Air Lines and American Airlines – have all gone through the American-style bankruptcy filing called Chapter 11. To regain decent financial health, the major carriers had to make considerable savings. These were painful, and the staff of these companies paid the price: up to a 30% reduction in workforce across all continents. In fact, the strategy of traditional airlines was to lower their level of service and even their product offering in order to almost entirely copy low-cost airlines, all while displaying fares identical to those of their new competitors.
Only the low-cost airlines themselves had to face the demands of their customers, who began to balk at the sometimes abusive practices of their carriers. They started to invent new services to compete with the incumbent operators. This is how they opened their sales to travel agents, which they had stubbornly refused to do. They then moved into major airports, whereas their strategy had been to serve only secondary airports for reasons of cost and speed of turnaround, allowing them to make an additional rotation per day. Finally, they began to establish interline agreements with the major carriers, despite having previously been their fiercest enemies.
In short, gradually, each taking a step towards the other, the two models have been converging, at least for flights of less than 3 hours. But for long-haul flights, the situation is different. Since the end of the Covid-19 pandemic, airlines have noticed that customers are accepting fares much higher than those they were used to charging, provided they find a product superior to what had become the norm. As a result, airlines embarked on a strategy of improving their services, particularly on long-haul routes, helped by manufacturers who brought to market much more efficient aircraft capable of operating non-stop flights of unprecedented duration. They created an intermediate class, often called Premium Economy, intended to accommodate customers tired of the increasingly basic service in Economy Class.
And whether they like it or not, low-cost carriers wishing to enter the long-haul market will be forced to provide a product that is compatible with their passengers’ expectations.
Thus, we can predict that in the near future, the distinction will no longer be made between low-cost carriers and traditional airlines, but simply between short-haul and long-haul flights, each trying to differentiate itself in order to attract customers.
