We are being offered more choice than ever before on long-haul flights. But where will it end, asks Tom Otley.
Long-haul low cost is here to stay, although not in the way you might imagine. The advent of Norwegian’s long-haul transatlantic flights from the UK in 2014 shook up the aviation industry, and whether Norwegian continues to be independent or is bought by an operator such as IAG, the effect is clear – long-haul low cost is, well, here for the long haul.
Norwegian attracts passengers because of its low fares. It can offer such low prices because it has adopted the low-cost carrier (LCC) model for long haul. Without going into the nitty-gritty of what makes an LCC so efficient, one way of achieving a low ticket price is to strip out the extras and then get passengers to pay for them. Whether it’s seat selection, checking-in a bag, or buying something to eat and drink on-board, Norwegian offers these as extras to that headline price that tempted you. And the approach is proving popular.
This success must have come as a bit of a shock. For years, when the bosses of existing airlines were asked whether they thought long-haul low cost was a feasible option, their answer was always the same: people might be prepared to pay for their food on a short trip, but they expected a meal to be provided on long haul. The same for seat selection, checked bags and a level of comfort. The consensus was clear – low cost worked short haul, but wouldn’t work long haul. Then Norwegian consistently achieved load factors of more than 80 per cent, and continued to expand – this year alone it will take delivery of a further 11 Boeing 787-9 Dreamliners, as well as 12 Boeing 737 MAX 8s and two Boeing 737-800s, taking the average age of the fleet to 3.6 years. And the legacy airlines have had to change their tune.
A GAME CHANGER
Take British Airways. At first it downplayed the threat. The year before the long-haul operation started, Willie Walsh, chief of BA’s owning company, IAG, said that Norwegian’s entry was “not significant”. Fast forward three years and it was significant enough for BA to launch direct route competition against Norwegian with flights from London Gatwick to Fort Lauderdale and to Oakland; two destinations it had ignored until Norwegian started flying to them. Then IAG announced its own low-cost airline – Level – which would commence long-haul low-cost flights out of Barcelona, traditionally an underserved airport, to Los Angeles, Oakland International, Punta Cana and Buenos Aires, and these flights have, apparently, done well. Finally, IAG has made a number of takeover bids for Norwegian, the final result of which we were still waiting for at the time of going to press. The real effect Norwegian has had is elsewhere, however. It has demonstrated to other airlines that in search of a low price we are prepared to buy a flight-only fare, and then pay for what we actually want on top via add-ons – what the airlines call ancillary revenue. Not surprisingly, they are jumping on this bandwagon.
Lufthansa Group has announced new transatlantic hand-baggage only (HBO) fares this summer, along with its partners Swiss, Brussels Airlines and Austrian Airlines. As you’d expect, it’s all about choice, or as Lufthansa puts it, the new fares will be “the least expensive option for price-conscious passengers only travelling with carry-on luggage and who do not require any ticket flexibility”.
Alitalia, Delta and Air France-KLM all offer various versions of a “light” fare (HBO), while British Airways has introduced a new “Basic Economy” HBO fare, which includes in-flight meals, two-pieces of hand baggage and the use of Avios (the currency of its loyalty programme) as part payment.
IAG’s Aer Lingus, meanwhile, is clear that as a result of competing with Ryanair for two decades and nearly going bankrupt in the process, it is already very well placed to compete. Declan Kearney, former director of communications at Aer Lingus, said in April that the airline saw itself not as low-cost but as “value”. It has offered HBO fares – what it calls a “Saver Fare” – since 2017.
“As far as the low-cost competition goes, we have long experience of this,” Kearney said. “Look back to 2001 and we nearly went bankrupt, and our response was to become a low fares carrier. We ploughed that furrow, but we could see that we were also leaving money on the table, since we had a stripped down short haul and a long haul with a business cabin with bells and whistles. So, the model that evolved is that we are competitive on pricing. [Norwegian] might be €99 each way [transatlantic] and we are €159, but we would say that on a seven-and-a-half-hour flight, the extra £50 represents value for money. We think that when you’re travelling the Atlantic in the middle of the night and you want a blanket and someone tries to charge you, it leaves a bad taste.” Virgin Atlantic, meanwhile, has introduced three forms of economy, one of which is a HBO fare.
PILING ON THE POUNDS
Of course, whether or not you choose the least expensive fare, the widespread adoption of the practice has a number of implications. The fact that all the airlines have so quickly switched to this model is because of the power of the internet. When we search for a flight, the metasearch engines trawl the internet to find the cheapest price and HBO fares rank higher in the search because cheaper. When you click through to the airline’s own website to find this fare, only then do you discover you will have to pay extra to check-in your bags or order a hot meal, but the bargain price has done its job and you are keen to book anyway.
For the airline, everything from this point onwards is a bonus. You are probably already going to pay extra for your bag, so while you are doing so, is there anything else they can sell you? Seat selection is something most cheap tickets now offer for an extra charge – those exit rows, bulkhead seats and simply the rows at the front or at the sides in certain cabins that offer more comfort, or in some cases, even extra legroom.
Then there is the prospect of paying for a better meal in economy – British Airways has been offering this option since 2015 (see a review of it on our website, businesstraveller.com). BA’s new Basic Economy (HBO) fare does not allow seat selection, but you still get in-flight meals, in-flight entertainment (IFE), headphones and a blanket. In contrast, new low-cost airlines such as Primera and Level assume that passengers will happily bring their own blanket (or do without), already have an iPad for in-flight entertainment, and would prefer to purchase something from a menu rather than having the existing economy food placed in front of them. And how long will it be before the HBO fare – or perhaps any of the fares, even the more expensive ones – also offers the option of wifi at a reduced rate if pre-bought, or of buying premium entertainment over and above that offered on the IFE system? All of which will be great, so long as it doesn’t lead to a stripping out of the existing package.
Ironically, Norwegian, the airline that started this revolution, at least this time (there was also Freddie Laker – see box right), is realising that although people love low prices, they also enjoy comfort. Norwegian first announced its long-haul low-cost fares in 2014. Fast forward to 2018, and it’s clear that it has had more success than it imagined in filling its premium cabin, and that is where it makes the most money. As a result, new deliveries of its B787-9 Dreamliners have a larger premium cabin – 56 seats as opposed to 35. Norwegian also needs a to attract business travellers, who are more likely to pay for this comfort, and so it is increasing the frequencies on routes such as London Gatwick to New York, where a third daily flight will start from October 2018 using these newly configured aircraft. Just as the other airlines borrow Norwegian’s low-cost tactics, Norwegian is trying to make some money by flying more people in premium. It’s similar to what has happened short haul with Easyjet, as it has increased its focus on business people who travel frequently, with great success.
For those of you reading this in premium economy or business class and thinking these developments won’t affect you, think again. Once airlines get us used to paying for “choice”, it will come into every class of cabin. If you could lower the price of your premium ticket by, say, not having the meal you always complain about, and instead have the option of choosing the meal you want, wouldn’t you be tempted? The technology is already there to do so, even when you are on-board. IAG’s Level airline has launched a new “Pair and Pay” mobile payment option, allowing passengers to purchase in-flight services using their personal devices. The technology enables customers to connect devices to their seat-back screen, and pay for elements including food, drinks, wifi, amenity kits and duty-free products. Level is planning to use the technology to allow for the payment of movies, TV shows and music.
So will all the airlines follow suit? Not according to Akbar Al Baker, chief executive of Qatar Airways Group and also a major shareholder in IAG. I asked him if Qatar Airways would start charging for exit rows in economy or for food.
“We don’t want to do this,” he said. “It becomes too complex to administer all these different charges. British Airways has to do it because of the competition. I feel that there will always be people who want to travel on full-service carriers. When you start paying for everything on a low-cost carrier, it is not a very big difference from what you will get in economy on a long-haul aircraft.”
What Al Baker means by this is that if you bought the LCC fare and then added in a cabin bag, the meals and the rest, it would, in fact, end up costing a similar amount to an economy ticket with a legacy airline.
“There is a perception that it is cheap, but when you buy something and then keep paying more for it, some people don’t like it,” Al Baker added. “Many think going on an LCC is good value for money. Well, maybe on short haul, but on long haul, if you eat two meals you have already paid the price difference to a full-service airline.” He may be right. We will see.
LONG-HAUL LOW-COST FORERUNNERS
Back in 1977, Freddie Laker’s Skytrain broke the transatlantic cartel of British Airways, Pan Am and TWA by ushering in a low-fares revolution. One-way tickets from Gatwick to New York JFK cost £59 (around £400 in today’s money) on a first-come, first-served basis. At the time, it wasn’t uncommon for people to travel from other parts of the UK to London on night trains and buses so they could obtain a good place in the queue at Victoria station, as tickets were only sold there or at Gatwick Airport.
Skytrain was followed a few years later by US low-cost carrier People Express – I once bought a Gatwick-New York Newark return flight for £130; bear in mind that taxes and charges in those days were just a few dollars.
Back then, it was thought that low transatlantic fares were here to stay. But we were wrong. Skytrain and People Express got their sums wrong. Both failed for a variety of reasons, one of which was predatory pricing by rivals. For decades thereafter, cheap fares were only available if you travelled out of season and met restrictions. Alex McWhirter
FLYING ECONOMY DELIGHT WITH VIRGIN
Virgin now offers three types of economy ticket – Light, Classic and Delight. Light is hand-baggage only (HBO), with an allowance of one item weighing up to 10kg, plus a handbag or small backpack. Classic adds checked baggage and free seat selection.
I flew Delight, with priority check-in and boarding, advance seat selection, checked baggage and 34-inch seat pitch (as opposed to 31 inches). Delight replaces the previous option of buying extra legroom.
Virgin says that, with the lead-in fare to JFK currently £300 return, the Light option is cheaper than anything it has previously offered before, even during sales, allowing it to compete with low-cost carriers.
On my A330, there were 185 economy seats (28 of which were Delight in what were the extra-legroom seats). Economy Delight was located in the second section of the aircraft. All economy seats reclined 5 to 6 inches, had USB power points but not AC, and a pillow, blanket and earphones. I had plenty of space to stretch my legs out. There were two restrooms at the front of my cabin section, and two at the rear.
The same menu is served across Economy, with a selection of three dishes for the main meal, plus an afternoon tea. Food was reasonably good and there was a regular drinks service.
The in-flight entertainment was excellent – the A330s feature the 9-inch VERA touchscreen system throughout economy, and a comprehensive selection of the latest films, TV shows, games and music, plus extras such as guided meditation with Headspace. Passengers can play their own content via a USB connection. Good-quality wifi is available in all classes on Virgin flights, charged at £4.99 for an hour or £14.99 for the entire flight. Throughout the flight, the Virgin cabin crew were upbeat, friendly and helpful.
So is Delight worth paying around £200 more than for Light and £100 more than for Classic? Light passengers who want to check bags will have to pay an additional £45 each way. Extra legroom, meanwhile, used to attract an additional charge of £50-£75 each way, but can now only be selected by paying for Delight; the same for priority check-in and boarding. Light passengers cannot upgrade once they have bought their ticket – though Classic can be upgraded to Delight or Premium. Advanced seat selection (included in Classic and Delight) costs a further £35 for Light passengers.
In my case, I could happily have opted for Light for shorter trips (the 10kg hand-baggage allowance would be adequate), but for a longer trip I‘d opt for Classic. Legroom isn‘t a problem for me as I am relatively short.
On balance, the changes offer passengers more choice in what they want to pay for in economy.
Internet rates for return fares LHR-JFK in mid-October range from £400 for Light to £550 for Delight. Becky Ambury