Airlines face the bleakest of winters following a summer of cancellations and rising costs. Ryanair chief executive Michael O’Leary said this summer that the likes
of the Irish low-cost carrier’s famed cheap promotional fares will not be seen anytime soon with its average fare set to rise to around €50 over the next five years from roughly €40 in 2021.
Yet it’s not all doom and gloom as many low-cost carriers are actually betting that the current cost-of-living crisis could drive passengers to spurn their more expensive legacy rivals.
Indeed, a recent industry analysis from Cirium shows that the best-of-breed low cost carriers have moved quickly to exploit the post-Covid appetite for travel. It shows how the world’s 25 largest airline groups have grown since 2019, before the pandemic. In summary, the three airlines ranked highest are all low cost carriers which have each increased their capacity substantially: Wizz Air (34%), IndiGo (16.9%) and Ryanair (16.4%) with Southwest Airlines turning in a credible 4.8% growth.
Will that level of growth continue? According to O’Leary, people are going to become much more price sensitive, and therefore will likely ‘trade down in their many millions’.
Happy days. Meanwhile, Frontier Airlines in the US is similarly positioning itself to capitalise on robust leisure demand, Already, on a steep recovery trajectory, it benefits from the fact that, being an ultra-low-cost carrier, it is not burdened like 90 per cent of the US airline with 35% higher unit costs.
The recent rebuff by Spirit Airlines has left Frontier president and chief executive Barry Biffe undaunted. He says that the rebound in leisure travel has underpinned the airline’s ambitious growth strategy and that prospects are sufficiently good to launch a whole raft of new capacity and route initiatives.
The true effects of the spending squeeze won’t be known for some time yet but even the best low cost airline needs to be cautious about how the prevailing economic uncertainty, together with industry-wide staff shortages and rising fuel costs, could impact the all-important desire for travel.