Low fare airlines face transatlantic challenge this winter

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  • AMcWhirter
    Participant

    It’s going to be a tough winter for transatlantic airlines and especially for the LCCs.

    Mind you right there is only LCC, namely Norse Atlantic, with direct transatlantic flights from Europe and Scandinavia.

    Iceland’s Play goes via Reykjavik so can spread its options to some extent.

    Reason I started this thread was because of the terrible exchange rate between the European currencies and the US dollar.

    That’s hardly likely to encourage Europe-US leisure travel (unless staying with friends or relatives).

    It’s different for US travellers coming to Europe.

    Granted the US currency currency is strong but will US travellers want to come to Europe given the threat of blackouts, energy saving measures and so on ?

    Germany has already started to impose energy saving measures and further cutbacks must surely follow in the cold winter months. Will the Christmas Markets take place ? Will hotels be instructed to reduce their heating in the cold months ?

    Other nations are expected to act too.

    Yesterday I read in Le Parisien [paywall] that the govt has instructed SNCF to see if it can reduce the number of its trains should there be power shortages.

    These are unprecedented times.


    cwoodward
    Participant

    The ebb and flow of currency exchange rates is of course nothing new and as history illustrates is not I believe a travel killer.
    I am beginning to believe though the that the perceived huge power shortages are being rather over hyped for often political reasons.That is not to say that there will not be some serious shortages of course but in my view the pendulum is swinging a little far.
    Few business trips will be canceled nor I believe will many planned family trips due to a say 10-20% cost hike.


    transtraxman
    Participant

    Firstly, yes, there will be price hikes. Qantas is the latest to announce its own but these are mostly due to mismanagement.

    ( https://www.abc.net.au/news/2022-08-29/brief-history-of-qantas-ceo-alan-joyce/101381056 ).

    Yet how much do you need to invest to ensure your new(ly purchased) airline, re-investment to relaunch and rescue your airline, or your start-up.
    Look at Norse Atlantic, and Norwegian, plus Play(from Reykjavik). Then we will soon have the Anglo-Indian start-ups, like Hans.
    (“Hans Airways gets ready”, 5-9-22, BT News)

    https://www.btnews.co.uk/article/19579

    But what beats the lot is the Saudi Arabian government`s investment in its new airline RIA. To ensure its success in being able to reach the lengths that Etihad, Emirates and Qatar have achieved, the Saudi Gov. is prepared to invest USD30 billion.
    “New Saudi nat’l carrier to have $30bn war chest”, 5-9-22 ch-aviation.

    https://www.ch-aviation.com/portal/news/119014-new-saudi-natl-carrier-to-have-30bn-war-chest-report

    The appointed CEO will also be expected to achieve the targets in half the time it took the UAE carriers.

    There you have it. Build a hub airport in the desert with plenty of room to expand. Then found an airline (an LCC airline at that) which flies to all the continents (maybe not Antarctica) in order to provide a hub and spoke connecting service for everybody from everywhere to everywhere. But you must be prepared to foot the bill and not expect any return until after USD 30 billion has gone down the spout.

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    AMcWhirter
    Participant

    Thank you for the comments.

    Of course I hope low fare aviation is unaffected this winter … but the signs are not looking good.

    Two days ago Norse Atlantic issued a statement to say that its August load factor (and remember August is peak season for transatlantic travel) fell to 69 per cent.

    Normally one would expect a low fare carrier to run at 90 + per cent in August. Such carriers make money in the summer to compensate for losses in the winter months.

    Norse now says it is finding the transatlantic market “challenging” and that it does not rule out schedule cuts in the future.

    In a media statement Norse says “it was evaluating all routes, including potentially decreasing its programm in line with demand.”


    ASK1945
    Participant

    Norse now says it is finding the transatlantic market “challenging” and that it does not rule out schedule cuts in the future.

    I am certain that this is reflective of the catastrophic drop in the value of the GBP (and Euro) against the US dollar. I have been monitoring the costs of hotels and car hire in the USA. For those who might take LCCs to get there (not me), this must be a complete bar on going for leisure trips.


    AMcWhirter
    Participant

    I would agree ASK1945.

    I remember visiting the US as a tourist in the early 1980s which was a similar time of poor UK to US exchange rates.

    It was when airlines needed to encourage transatlantic travel and that is when the US carriers introduced those Airpasses which enabled visitors to fly around the US for little money.

    Best deal was with Northwest which sold either 30 or 60 days *unlimited* standby travel.

    They really were unlimited. Travellers were provided with a book of coupons and simply filled in the flight sector required. Any domestic route over mainland USA. When the booklet ran out, the airline provided another.

    In those days one of our freelance contributors accepted the offer of trialling one of these standby passes.

    Business Traveller published his routing and how he fared.

    Michael Bartlett made many, many flights over the course of a few weeks. Eventually he had to terminate his travels as he simply collapsed from exhaustion !


    ASK1945
    Participant

    Best deal was with Northwest which sold either 30 or 60 days *unlimited* standby travel.

    They really were unlimited. Travellers were provided with a book of coupons and simply filled in the flight sector required. Any domestic route over mainland USA. When the booklet ran out, the airline provided another.

    Alex – 20 years before that I spent a summer travelling around the USA using Greyhound Buses “99 days, 99,000 miles for $99” deal. I went through two books of vouchers and started a third. They guaranteed to carry you on a scheduled journey in their timetable for free.

    I don’t know how many miles I travelled but went through about 35 states that trip. I flew out and back for ÂŁ60 on an Aer Lingus low cost charter flight.

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    AMcWhirter
    Participant

    Surprise, surprise.

    Today Norse says it will have a seat sale from LGW to JFK from now (today) until March 23, 2023. Blackout periods apply.

    Says the airline’s COO Andrew Hodges, “There has never been a better time to book a long weekend city break to New York …”

    Of course that’s true as regards the keen fares which Norse is selling for its two-class (economy and ‘business class’) B787 flights … but what about accommodation costs on arrival ?


    ASK1945
    Participant

    Of course that’s true as regards the keen fares which Norse is selling for its two-class (economy and ‘business class’) B787 flights 
 but what about accommodation costs on arrival ?

    Earlier today I was talking to someone booked to go to New York with her family for a week in December – with BA, bought during a seat sale earlier this year. She checked the hotel prices before booking and thought they were reasonable, but didn’t book then. She has just been looking again at hotels and was astonished at the prices. She has cancelled the flights.

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    AlanOrton1
    Participant

    Hotel prices in NYC always tend to be high in Q4.
    The hotel I stayed in, arriving 5 Sep, for my next visit 2 months later, is over 50% more expensive.
    If you can book ahead, and see a good refundable rate, grab it. (I was looking last week for hotels in Nov and when I went to book yesterday the rate was already 10% higher).


    LuganoPirate
    Participant

    But what beats the lot is the Saudi Arabian government`s investment in its new airline RIA. To ensure its success in being able to reach the lengths that Etihad, Emirates and Qatar have achieved, the Saudi Gov. is prepared to invest USD30 billion.
    “New Saudi nat’l carrier to have $30bn war chest”, 5-9-22 ch-aviation.

    Sorry a bit late to this, but to put it into perspective that represents just 35 days of their oil production.
    Peanuts really 😉

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    AMcWhirter
    Participant

    Norse Atlantic has now started to amend its transatlantic network in light of the current “challenging” conditions.

    Although the airline has not yet informed UK media, news of the cuts has appeared in the USA.

    Flights to Los Angeles from Berlin and Oslo will be suspended from mid-October. It’s reported these will be downgraded to “seasonal” services and could restart in 2023.

    Oslo-New York will be reduced from daily to thrice weekly.

    Oslo-Fort Lauderdale will be reduced from three to two flights a week.

    Further changes are possible.

    Good news (at time of writing) for UK readers is that London (Gatwick)-New York remains unchanged.


    FDOS Redux
    Participant

    Hi Alex, I’ve never been convinced the loco model works on long haul in most places, as the trad airlines are quite cost efficient and can using pricing elasticity as a lever, when they need to, so difficult to find a competitive edge.

    Short haul is another matter, as Ryanair have demonstrated – the fact they have never entered a long haul market speaks volumes to me of their view of the risk/reward coupling.


    AMcWhirter
    Participant

    In fact I have written a piece for the October issue of Business Traveller on this very subject.

    I remember the time when Laker’s Skytrain ceased some 40 years ago. At the time there was much wailing and gnashing of teeth as it was thought that would be the end of budget transatlantic travel.

    Of course that never happened. More new entrants emerged since Laker although almost all failed. But it has never stopped others wanting to try their luck.

    Transatlantic would seem to the only market (in this part of the world) where low-cost long-haul has a chance of success.

    Yes Ryanair and Dallas-based Southwest are two low-cost airlines who never deviated.


    ASK1945
    Participant

    Transatlantic would seem to the only market (in this part of the world) where low-cost long-haul has a chance of success

    Alex

    I have travelled to North America simply dozens of times during the last 60 years, and have been to most of the states of the USA. Always the bottom line was that the cost of hotels (except for in the largest cities – NY, Chicago and DC) were not a major factor, as they was cheaper than equivalent hotels in Europe.

    Now, even in Florida (which was always dirt cheap), North American inflation, the staggering drop in value of most European currencies against the dollar, not forgetting the relatively new tourist/city taxes, the massive hike in essential car hire and finally the tipping inflation, makes this a bad time for the market for LCCs to be there.

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