Full-service carriers closing the gap with budget ones

The business model of long-haul budget carriers is driven by two main factors: fuel prices below US$50 per barrel and fuel-efficient planes (Norwegian's S'pore-UK route a boon for Changi; May 3).

But the same applies to full-service carriers, too, and some of them have already started taking advantage of these to considerably reduce their economy class fares, closing the gap with the budget carriers.

The Middle East full-service carriers also have the capacity, both in the number of planes and the size of the planes, to apply dynamic pricing and subdivide their economy class, allocating a portion of the seats towards budget-conscious long-distance travellers.

By doing so, they succeed in undercutting even budget carriers on their long-haul routes and can still offer a complete set of services, including gourmet meals, check-in luggage, loyalty programmes and even lounge access.

Budget airlines also depend highly on ultra-fast turnaround times, allowing them as many point-to-point flights as possible within a given period.

One plane could theoretically make up to 10 daily flights between Singapore and Jakarta, and ferry more than 3,500 passengers.

This would be reduced to 700 passengers on a long-haul flight to Australia, and even fewer on a flight to Europe.

Because of these reasons, long-haul budget carriers are likely to fail.

Bruno Serrien

A version of this article appeared in the print edition of The Straits Times on May 05, 2017, with the headline 'Full-service carriers closing the gap with budget ones'. Print Edition | Subscribe