10/03/2021 – Aviation / Low-cost Airlines / LLC / Market / GlobalData / Recovery
Low-cost airlines will lead post-Covid recovery, says analyst
Low-cost carriers’ aggressive cost-cutting will give them an even larger cost advantage than pre-pandemic. Amidst considerable consumer concern about personal finances, low-cost carrier’s cheap fares are well-positioned to meet this need and cater to pent-up demand, say analysts at GlobalData.
The low-cost airline model will lead post-Covid recovery and help revitalise demand. Frugal cost-cutting measures taken and operational responsiveness will see these carriers move quickly to absorb pent-up demand and capitalise on any opportunities ahead of other high-cost model airlines, according to the data and analytics company GlobalData.
Amplified personal finance worries
The COVID-19 pandemic has amplified consumer concerns around personal finances. GlobalData’s latest Covid-19 Recovery Survey showed that globally, a staggering 87 per cent of respondents were ‘extremely’, ‘quite’, or ‘slightly’ concerned about their personal financial position.
The data was taken from GlobalData’s survey of 5,766 global respondents- Fieldwork (undertaken 2–6 December 2020).
“Low-cost carriers (LCCs) have trimmed costs well,” observed Gus Gardner, Travel and Tourism Analyst at GlobalData. “Although all airlines have drastically reduced costs to weather the storm created by Covid-19, it is evident that low-cost carriers have managed to push already low-cost bases even lower. These carriers can now operate cash-positive routes with a lower load factor than before, which is incredibly important with the current low levels of demand.
LLCs have remained “nimble and flexible”
“LCCs were the first off the blocks to capture any pent-up demand in the market and were successful in doing so,” he continued. “Wizz Air responded quickly by adding capacity from the UK to the Canary Islands when it was added to the travel corridor list. Relaxation of travel rules across Europe in the summer, and the rapid increase in capacity deployed by LCCs to respond to the high levels of pent-up demand, showed that low-cost airlines remained nimble and flexible during the pandemic.”
According to GlobalData, LCCs have shown a high degree of resilience and flexibility to network planning and aircraft deployment. The sale and leaseback agreements forged by easyJet have given the company a high degree of fleet flexibility to better respond to changes in demand over the coming years. This places it in a much stronger position than legacy carriers that have retired aircraft from their fleets.
Ticket prices could be pushed to new lows
“The low fares offered by LCCs will better cater to the increased need of affordability,” Mr Gardner said in closing. “Cost-cutting measures will allow LCCs to push ticket prices to new lows if necessary and still break-even, leaving other carriers at the risk of flying unprofitably if they choose to compete.
“These [LLC] airlines will likely gain a stronger foothold in the market as a result of the pandemic. With leisure travel most likely to rebound first, LCC’s short-distance, point-to-point networks will better suit pandemic-cautious travellers looking for trips closer to home.”