The budget flight revolution began in America with Southwest Airlines in Dallas, Texas. With flights turning profitable in 1973 and remaining so ever since, former lawyer Herb Kelleher proved the viability of low cost flights. In terms of passengers carried each year, Southwest is now the biggest airline in the USA and the second biggest airline in the world. It has no plans to expand to international flights.
Virgin’s Richard Branson, Ryanair’s Michael O’Leary and Easyjet’s Stelios have all acknowledged their debt to Southwest and its inspirational business model. Ironically US low cost carrier Skybus launched in 2007 modelling itself on the UK’s Ryanair. Branson has recently launched Virgin America, his own entry into the USA domestic market with low prices but better customer service options, such as pay per view movies and music, fresh food that can be ordered through the seat screen, mood lighting, and a power socket for laptops in every seat. Virgin Atlantic has also reintroduced a First Class option to its flights.
London’s Heathrow remains the busiest airport in the world and the UK’s capital still the most important travel hub in the world. For decades Heathrow’s status meant that airlines operated a virtual monopoly and charged astronomical prices. First challenged by Freddie Laker in the Seventies with his budget Skytrain flights to the USA, the 1990s saw the rise of UK low budget pioneers Easyjet and Ryanair as they opened up London’s previously neglected Stansted airport. Easyjet and Ryanair have studiously avoided direct competition on the same flight routes and between them now offer cheap flights to a huge amount of destinations across Europe.
South East Asia has witnessed explosive growth in the budget airline market since 2000. Malaysia’s AirAsia has rapidly expanded to become the major carrier in the region, operating right across the subcontinent and opening up the possibility of flying to many Asians who previously would never have considered it due to the cost. AirAsia’s success has generated a host of rivals, notably Singapore’s Tiger Airways and Australia’s Qantas owned Jetstar. Both of these airlines are competing aggressively with each other on Asia to Australia routes as well as within the domestic Australian market, which is dominated by the low cost Virgin Blue. AirAsia’s next plan is to launch AirAsiaX, a budget long haul carrier to Europe
The Future – Long Haul Low Cost Carriers
Virgin Atlantic is bridging the gap between short haul and long haul with 3+ hour flights. Richard Branson has also taken a 20 per cent stake in AirAsiaX, the proposed low cost long haul carrier that will operate from Kuala Lumpur, following the model of its sister company AirAsia, which is the dominant low cost carrier in South East Asia.
In the emerging low cost long haul flight market, food, blankets and entertainment are much more important to travelers than on short hop flights. This “pick and mix” style of upgrades provides more comfort for travelers and more profit for the airlines, provided they can anticipate their customers needs correctly. Qantas owned Jetstar has already begun offering this method on 8 hour flights between South East Asia and Australia.