Posted on: 12 September 2017
The 2017 Aviation Festival in London drew in some of the industry’s biggest names, and they were happy to talk about some of the biggest topics too. LARA’s Mark Thomas and Kimberley Levey report.
Amongst the hottest discussion points was one that appears to be doing the rounds at all the major events so far this year – the continuing rise of the long-haul, low-fare market.
The festival’s opening keynote interviewee, Sir Tim Clark, president of Emirates, kicked off proceedings nicely by starkly warning legacy carriers that long-haul low-cost (LH-LC) carriers are simply a “matter of time”.
Particularly well-attended at the festival was the World Low-Cost Airlines Congress, and one of its keynote panels featured speakers from SpiceJet, Qantas International/JetStar, Norwegian Air Shuttle, U-FLY Alliance and Virgin Atlantic.
SpiceJet chairman and managing director, Ajay Singh, revealed the Indian carrier is considering stepping into the LH-LC market – if the aircraft price is right. “India has 1.3 billion people, and just 30 million or so of them fly at the moment, so it’s a very under-penetrated market at present.”
With so many potential customers, the role of low-fare carriers in India is already dominant. According to Singh, approximately 80% of the Indian commercial aviation market is supplied by low-fare carriers. “Low-cost is 80% of the market. India is an extremely price-sensitive market – and we have a lot of people,” he pointed out.
Naturally, the carrier is therefore looking at giving its massive potential domestic market plenty of long-haul opportunities to tempt them to fly further. But only, Singh said, “…if we can get to a new base [price] with the B787-10s or the A350-1000s. If we can reach a price point that makes sense for us to deploy them, we will certainly do that. We are working with both aircraft makers at this time, Boeing and Airbus”.
He also pointed out that SpiceJet at present has no partners. “But as we look at long-haul, we will look to explore that.”
LH-LC pioneer Norwegian, of course, has already proven the business model. And chief financial officer, Tore Østby, was quick to dismiss one question that asked whether LH-LC was dependent on lower oil prices.
He reminded the audience that the airline’s owners “decided to launch when oil was more than $100 per barrel! We regard the airline industry as a growth industry. It’s a growth market, and we’re starting up new areas and driving the market”. He did admit, however, that it was “easier to grow it faster when the oil price is lower”.
Østby also highlighted the company’s ability to supply its own LH-LC routes, without having to rely upon alliances and partnerships. “We can feed ourselves from our own network. We can feed our own operations at Gatwick Airport, then we can look at the map and see who it is possible to co-operate with. But feeding is the way for us to fill up the last 10% of the aircraft – it’s not the basis for our business.”
Another panellist, Gareth Evans, CEO of Qantas International, also highlighted the other major Asian market emerging even larger than India – China. Evans, shortly due to become CEO of JetStar, pointed out that Qantas and JetStar can connect up to Asian networks fairly easily.
It does, for example, already fly into China from Singapore. “And we’re still working through what sort of model might work in China, so far mainly with JetStar. That model right now will work really well for us in the LH-LC perspective, but over time I’m sure it will evolve. It’s a huge market.”
Among other keynote interviewees at the aviation festival was Craig Kreeger, CEO of Virgin Atlantic, who was keen to accentuate the need for airlines to keep innovating, whether through alliances, joint ventures, new technologies or just smarter thinking.
On JVs, he highlighted benefits such as access to more customers, and the ability to give customers access to a broader network. “We’ve seen the benefits of that in our initiative with Delta, by working very closely together. And this year in particular, where the Pound has been weak, it’s meant we’ve needed more Americans to fill our airplanes. So having a really strong partner on the American side has really helped us.”
Going back a few years, Virgin was of course the first airline to introduce the economy seat-back video screen, a differentiator at the time but now a very basic element. Just days before the festival, the airline announced it would be the first European carrier to be fully Wi-Fi-enabled across its entire fleet. Virgin will use solutions from Panasonic on its Boeing 787s and Gogo on its Airbus aircraft and B747s.
Kreeger commented: “We have to continue to find ways to innovate. Our space requires us to keep moving.” He did add, however, that the days of a 400-seater aircraft having Wi-Fi capable of allowing all its passengers to be streaming at the same time as “not anywhere near yet”.
On the second day of the conference KLM’s CEO, Pieter Elbers, focused on the topic of digital investment in his opening address, discussing three key elements for the airline – where the customers are, balancing digital and human interaction, and helping employees to do what they do best.
Elbers said: “Being where customers are sounds simple but is drastically different from what we used to do.” The airline has made use of Facebook Messenger, WeChat, Twitter and WhatsApp to communicate with passengers, with Elbers calling data “an enabler for personalisation”.
Flybe CEO, Christine Ourmieres, also spoke at the event, describing the airline as an “original carrier, one of the first UK domestic airlines”. She added, however, that it is “difficult to put us in the box of low-cost carriers”, although it does need to keep costs low.
For most routes Flybe doesn’t compete with LCCs, she said. The carrier is the only turboprop operator into Heathrow because the airport adapted costs for the airline, which she believes is partly due to a “willingness from Heathrow for more regional connectivity” and partly because of pressure for Heathrow to be more connected.
On how the airline is moving forward, Ourmieres said that “for the first time we are in control of our capacity,” and that it was making sure it flies to the best possible places, and not just more routes that aren’t profitable.
Ourmieres also commented during a panel discussion that Flybe is continuing to lobby for the abolishment of APD (Air Passenger Duty), as domestic flights are essentially being taxed twice. Trains aren’t taxed, she pointed out.
Pictured: Day 1’s first World Low-Cost Congress panel session featured (left to right): Craig Kreeger, CEO Virgin Atlantic, Tore Østby, COO Norwegian, Steven Greenway, CEO U-FLY Alliance, Ajay Singh, chairman SpiceJet, and Gareth Evans, CEO Qantas International.