PHOTO: Lower prices that inevitably come with increased competition is a boon to travelers. (photo courtesy of Thinkstock)
IAG-owned LEVEL recently announced that it will start flying to Oakland and Los Angeles, California from Barcelona, Spain in June. LEVEL is meant to compete in the long-haul, low-cost marketplace—a space that is currently dominated by Norwegian Air.
IAG’s move signals that there is still room to grow in the long-haul, low-cost sector, but will this growth bring lasting lower fares?
Or will the promotional fares give way to prices that are not much different than those offered by legacy carriers?
The initial promotional fares for LEVEL’s flights will start at $149, one way. Offering super-low introductory fares is a common practice for transatlantic low-cost service:. Norwegian did it with its new flights from Edinburgh, Scotland and Belfast, Northern Ireland to the East Coast.
WOW Air famously offered sub-$100 fares when it first launched its routes from the US to Iceland.
These promotional fares certainly steal headlines, but actually scoring a flight at these prices is typically difficult. Though still often cheaper than legacy carrier fares, $100 or $150 fares are not the norm for long-haul, low-cost carriers once they're established.
WOW Air does offer $129 one-way fares from the US, but these only go as far as Reykjavik’s Keflavik International. Travelers need an additional flight to get to the most-desired vacation destinations in Europe.
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More competition from LEVEL will probably not make $149 one-way fares the norm, but it could help push standard, everyday fares lower.
In addition to LEVEL’s new California routes, Lufthansa subsidiary Eurowings will launch flights to Seattle, Washington this summer. The German carrier also has plans to fly to Orlando, Florida and Las Vegas, Nevada.
Yet, the most important trend could be what industry leaders are doing to keep costs low in the long run.
Part of the reason low-cost carriers are able to offer cheaper fares is because they have very low operating costs. For Norwegian, flying cheaply meant shelling out for Boeing Dreamliners. Though these new aircraft carried a higher price tag, they are also much more efficient, allowing for fuel savings on each flight of 20 to 25 percent.
As crude prices rise, that 25 percent could become more and more important to the airline’s bottom line.
Norwegian is doing other things to cut costs as well. The airline will use the 737 MAX, a larger, longer-ranged version of the plane that dominates short haul markets. LEVEL, meanwhile, will operate A330s with large economy class cabins (293 plus 21 premium economy seats).
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Another part of the cheap-operations equation is that these airlines fly to smaller airports: Norwegian’s new flights land in Hartford, Connecticut and Rhode Island, not Boston or New York City. LEVEL’s Bay Area service will utilize Oakland Airport instead of SFO.
This is not a new strategy for low cost carriers; Southwest and JetBlue have been flying to secondary airports for years. However, the fact that international flights are now choosing these airports IS a new development.
Norwegian is widely seen as the leader in the low-cost carrier industry. As more players come into the transatlantic competition, more efficient aircraft and more creative use of secondary airports may become more important because these things are what will make it possible for no-frills airlines to sustain low fares for the long term.
In the meantime, fliers should jump on the initial promotional fares for new low-cost, long-haul services before they disappear.