Airlines are suffering along with other businesses during the coronavirus crisis. But discount airlines may be just the remedy that the travel industry needs.
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Airlines Are Suffering, Recovery Unclear
It’s no secret that airlines are suffering as restrictions due to coronavirus limit movements from both business and leisure travelers. Boeing stated it believes that a major US carrier will go under in this environment. I had my doubts about American Airlines making it through, though that seems less likely than it did at the time.
Still, recovery is up in the air. There is no clear path that air travel will return to what it was just a few months ago.
Ryanair Adds 1,000 Flights in July
Ryanair, an LCC carrier in Europe, plans to restore 40% of its flights by July. While flag carriers have announced they will begin to add additional flights in the coming weeks and months, none are as substantial as Ryanair. Most of Ryanair’s network is comprised of short-haul, point-to-point flights across its more than 40 bases (hubs.) Its model may hold a distinct advantage over long-haul hub-and-spoke carriers.
Part of the remedy to COVID-19’s effect on travel may be a matter of flying whether demand has returned or not.
Low-Cost Carriers Positioned for This Environment
Carriers like Spirit, Ryanair, Air Asia, and Allegiant have built successful businesses operating in low-cost environments and low revenue on a per-seat basis. They all typically operate in leisure markets and utilize lower priced fares to lure customers into seats.
Ryanair offered flights for as little as a penny plus taxes and fees in the past. Spirit and Frontier also offer base fares as low as a penny from time-to-time. My family has traveled on $14 tickets and $9 tickets respectively. In both cases, the airline benefited from additional sales as a result of my family flying the routes (luggage, food, etc.)
Discount Airlines or LCCs/ULCCs (Low-cost carriers/Ultra-low-cost carriers) can create demand by offering cheap seats to desirable destinations. It’s easy to fill any airplane, even in these times, with non-stop flights to paradise for tens of dollars. Allegiant has already found a sharper recovery than others.
If LCCs can demonstrate a path forward, it may be able to cure COVID-19’s impact on the travel industry.
Business Travelers May Switch to LCCs by Default
Business travelers that, previously, chose flag carriers for direct flights from major cities may have few choices with their traditional carriers. By default, they may opt for LCCs until the larger carriers restore their flight schedules. Ryanair restoring 40% of its schedule by July will add an exorbitant number of seats and options for European travelers.
Some business travelers that have never tried Spirit may find that it’s not that different from their pre-coronavirus carrier and make the switch, at least for some routes.
What remains unknown is whether business travelers will forgo their status benefits. As a United 1K flyer, I often get upgrades to first class for domestic flights, pay no baggage fees, and earn 12x more miles than a flyer with no status. I don’t mind forgoing those perks on occasion in exchange for a cheap non-stop flight.
Will others do the same?
More than ever before, discount carriers can create demand. With flag carriers struggling, Ryanair, Spirit, and others who can create demand may win over business flyers. How many of those customers they retain is still unclear. Regardless, LCCs are better equipped for a low demand, low revenue business model, and should find ways to succeed where bigger competitors cannot.
What do you think? Can discount airlines remedy the coronavirus travel crisis? Is Ryanair’s expansion too many flights too soon? Do you think other carriers will follow the discount carrier’s model until things return normal? Can discount carriers win business travelers over?
I imagine Ryanair will gain market share during this time. Their costumers are more price sensitive than those of larger carriers. Their most important advantage is their point to point traffic. Many will try to avoid LHR, CDG or FRA in the foreseeable future. I rather fly for 2hours than BA on two separate flights with a connection in LHR. As most airlines scale back their service flights become more of a burden. Hence, most will take the fastes option to get it over.