Asia has seen a flurry of activity lately, with airlines acquiring widebodies for new services touted as “long-haul low-cost,” but the term is misleading because the flights being proposed are really medium-range.
A question mark hangs over whether the low-cost carrier (LCC) model can be successfully applied to long-range flights.tried it and failed. The Malaysia-based airline has been serving and Paris Orly airports, but will suspend these services at the end of March.
CEO Azran Osman-Rani tells Aviation Week that the decision to withdraw from long-haul “is something that had been brewing since 2010.
“The continued high jet fuel prices and the weakening demand for air travel from Europe—brought about by the current economic situation together with exorbitant government taxes—have placed cost pressures on operating long-haul low-cost flights between Asia and Europe, compromising our ability to offer the low fares for whichX is known.”
Azran says his airline plans to shift capacity to medium-haul routes within the Asia-Pacific region. Soon after it announced its withdrawal from Europe, AirAsia X disclosed it will launch flights to Sydney in April.
Australia also is a key market for’ (SIA) new low-cost widebody operator Scoot, which plans to begin services in the middle of this year, with flights from Singapore to Sydney and the Australian Gold Coast near Brisbane. The next country to be targeted is China.
Scoot CEO Campbell Wilson says it is “no coincidence that our initial network doesn’t include flights beyond eight hours. The profitability of longer distances is constrained by fuel. There’s the economics of carrying fuel, the cost of fuel itself and then the ability to charge passengers enough to cover those costs. For [LCCs] the yield is lower because you don’t have the premium cabins.”
But he qualifies his assertions by adding, “That doesn’t lead to the conclusion that long-haul low-cost is unviable. Scoot [in the] long term has ambitions to fly to Europe. But long-haul does consume a lot of resources. It’s also hard to fly [these routes] when fuel prices are high. For us, it is better to first build our network” in the Asia-Pacific region. Scoot will be launching its Australian services using ex-SIA-200s with derated engines, which means the aircraft lack the range to fly longer routes.
Philippine carrier Cebu Pacific, meanwhile, has opted for leased-300s, the same type that AirAsia X operates on medium-range routes. Cebu CEO Lance Gokongwei says his carrier hopes to start flying A330s in the third quarter of 2013 and have four in service within the first year. The aim is to have eight by 2016, he says. All will be new aircraft on operating leases.
As for the medium-haul routes that Cebu Pacific will serve, Gokongwei says they are still subject to approval but are likely to be flights from Manila to the Middle East. He notes that no Philippine-designated carrier is currently serving eight of the top 10 international routes popular with Filipinos. Data show that the eight include Dubai and Abu Dhabi, United Arab Emirates; Doha, Qatar; and points in Saudi Arabia.
There are a lot of Filipino migrant workers living in the Middle East, and Cebu Pacific’s widebody operation is pitched at them. Alex Reyes, VP-commercial planning, says the A330s will all be in a single-class configuration. This is significant because every other Asia-Pacific medium-haul low-cost carrier has a two-class cabin in order to tap higher-yield traffic. Reyes also says the A330s will accommodate roughly 400 passengers with nine-abreast seating. “Airlines like XL Airways in Europe and AirAsia X have nine-abreast,” he notes.
Regarding the profitability of medium- versus long-haul routes, Gokongwei says, “Certainly, the advantage of LCCs is magnified on the shorter routes. In selecting our routes, we have a preference for medium compared to long-haul.”
But he also notes that Cebu Pacific eventually wants to launch long-haul flights from the Philippines to North America when it acquires longer-range aircraft in 2020 or 2021. The carrier will choose between the Airbusand , he says.