Airlines offer dirt-cheap fares as they rebuild, woo travellers

NEW YORK • Dirt-cheap fares are popping up from airlines brave enough to expand or start out amid the Covid-19 crisis, as they try to eke out sales and get a jump on competitors that have pared back operations.

Airlines worldwide cut US$1 billion (S$1.35 billion) of expenses a day last year to cope with the slump in passengers, and that has given them some wiggle room to lower ticket prices.

More broadly, cost savings are emerging for carriers as unwanted planes become available on the cheap. Thousands of laid-off flight crew are also eager to work again, allowing some airlines to go on hiring sprees.

Ultra-cheap fares could help revive the market by luring back customers who have been reluctant to fly due to border curbs and lengthy quarantines. Vaccine roll-outs add to the bullishness, even with air passenger travel in an unprecedented funk and a return to pre-crisis levels not likely before 2024.

Here is a rundown of some of the latest industry moves:

With the vaccination programme in the United States gathering pace, Allegiant Travel has embarked on the second-largest network expansion in its history.

It is adding 36 new non-stop routes from cities such as Austin, San Diego, Indianapolis and Albany.

"There is a lot of pent-up demand for travel to cities that offer a gateway to great outdoor experiences," said Mr Drew Wells, Allegiant's senior vice-president of revenue. One-way fares on the new routes cost as little as US$39.

Dallas-based Southwest Airlines is conducting its biggest network expansion since 2013, starting or planning services at 17 airports including beach and mountain vacation destinations.

Southwest is also adding flights for the first time at the major airports in Houston, Chicago and Miami in a bid to win more business travellers.

Breeze Aviation Group, a start-up airline planned by JetBlue founder David Neeleman, won tentative operating approval from the US authorities last month and aims to begin services this year.

A second US start-up, Avelo Airlines, formed by Allegiant co-founder Andrew Levy, plans to begin services in the first half.

As demand cratered last year, average US domestic fares fell to US$245 in the third quarter, the lowest on record, the Department of Transportation said in January. That was 30 per cent down from the same quarter in 2019.

The prices reflect the carnage across the industry. Some 425,000 jobs have been lost, and commercial airline traffic remains 45 per cent below pre-pandemic levels, according to FlightAware. Highly contagious Covid-19 mutations have dashed previous hopes of an imminent rebound.

Little known outside Australia, Regional Express Holdings (Rex) has decided now is the time to go up against Qantas Airways and Virgin Australia Airlines on one of the world's busiest routes - Sydney-Melbourne.

Backed by Asian private-equity firm PAG, Rex last week launched full-service flights between the cities on leased Boeing 737s that include eight business-class seats. One-way tickets start at A$79 (S$82), and Rex plans to offer as many as nine return trips a day.

It is a major step for the airline, which mostly operates smaller propeller planes. The company secured a "significant reduction" on normal rates on its 737s and aims to add flights to other state capitals, according to deputy chairman John Sharp.

"There's never been a better time to set up a domestic airline operation in Australia," he said.

Rex plans to hire 400 extra staff to run the new services, including 80 pilots.

For a trip from Melbourne to Sydney on June 10, Virgin Australia is matching Rex's fares, while Qantas flights start at A$109, according to their websites.

Edmonton-based Flair Airlines is betting that pent-up demand to see friends and family will spur a domestic travel recovery in Canada in the summer. The ultra-low-cost Canadian carrier is bulking up its fleet and almost doubling its network, with fares starting at C$39 (S$41.50).

Flair is leasing 13 new Boeing 737 Max jets from one of its investors, 777 Partners, after the aircraft was cleared to fly again in January by Canada's aviation regulator.

"Affordable air travel within Canada is the first step in restarting travel and tourism," said president Stephen Jones last month.

Crunched by border restrictions in South-east Asia, low-cost airline AirAsia Group is front-loading its revenue recovery by selling RM599 (S$196) travel passes that allow unlimited flights in Malaysia and the Asean region for a year. The all-you-can-fly offer ran from March 3 to 7, and does not include taxes, fees and other add-ons.

AirAsia does not expect to start services to most of South-east Asia before the third quarter, so the travel pass means it can book income months before costs are incurred. The airline can also control the number of flights available to pass holders, capping the overall redemption cost of the deal.

It is a proven model. Last June, China Eastern Airlines was among Chinese carriers promoting unlimited weekend flights for the rest of the year for a single fee of 3,322 yuan (S$687).

Deutsche Lufthansa expects cooped-up Germans will be overcome by wanderlust when lockdown finishes, and is starting a new airline to cater to them: Eurowings Discover, aimed at the low-cost, long-haul market.

Executives hope the carrier will enable Lufthansa to profit from a faster recovery in leisure flying as its core operations struggle due to a collapse in intercontinental corporate travel.

DZ Bank estimated Germans collectively saved €393 billion (S$629 billion) last year. Looking to tap those savings, Eurowings Discover is offering return flights from Frankfurt to Namibia or the Dominican Republic from around €600.

BLOOMBERG