Icelandic low-cost long-haul airline WOW Air ceased operations without warning on March 28th. As a matter of fact, the airline canceled all flights leaving passengers stranded on both sides of the Atlantic.
WOW Air’s business model was fairly simple. The airline offered cheap long-haul flights between Europe and North America via its hub in Keflavik, Iceland. Passengers were able to buy basic tickets at rock bottom prices. However, these tickets only allowed them to bring one personal item.
Passengers had to pay an additional fee for seat reservations, carry-on luggage and checked luggage. They were also able to upgrade their tickets for an additional charge to include various amenities like meals, priority boarding, and checked bags.
WOW Air is not the only low-cost airline to cease operations recently. Primera Air, Germania and Flybmi have also had to file for bankruptcy in recent months. It’s a tough world out there for low-cost airlines, and it seems to be even tougher for low-cost long-haul airlines.
Low-cost airlines typically operate with a very small profit margin. Indeed, rising fuel prices can wipe out any profit and mean they are operating at a loss in no time. Additionally, a high load factor is very important for low-cost airlines as well. Empty seats equal lost revenue which is something low-cost airlines cannot afford.
Major carriers are able to offer cheap economy class tickets on long-haul flights because these seats are not their actual moneymakers. These airlines make money by selling business and first-class seats at a premium price. Often, however, low-cost carriers are offering even cheaper tickets than the major carriers, without having the added income from premium seats.
Can low-cost long-haul airlines survive?
It is definitely very difficult for low-cost long-haul airlines to survive in the long run. They might have a chance as long as fuel prices are low and they are able to fly on the most popular routes to realize high load factors. Nevertheless, this also means that there is not a whole lot of room for expansion.
Additionally, it also depends on the type of aircraft they choose to operate. Undoubtedly, widebody aircraft will make it even harder for low-cost airlines to compete successfully. This is the reason why most low-cost airlines choose to operate narrowbody aircraft exclusively.
All in all, it appears that it is getting tougher and tougher for low-cost long-haul airlines to survive. They are facing increasing competition from major carriers as well as from other low-cost airlines. Accordingly, airlines might be better off serving a more diverse market including short- and medium-haul routes, rather than focusing on long-haul flights only. This will also give them more flexibility in adapting to customer demands during the offseason when there is less demand for certain routes.
Do you think that low-cost long-haul airlines can survive?