No frills carriers will continue to add extra services for customers but their main priority will remain keeping costs down.
Airline bosses, speaking at the CAPA Aviation in Transition conference in Ireland, admitted that the difference between low-cost and full-service airlines was becoming increasingly blurred.
Alex Cruz, CEO of Spanish carrier Vueling, said that full service airlines were “removing some of the frills and moving towards low frills carriers”.
“Some of the low-cost carriers also want to find ways to differentiate their product by upgrading the services they have,” he added.
“We will introduce more frills at almost no cost or zero cost to us. When competing against other low-cost carriers, there’s one factor which is cost. When the cost is similar you need to be differentiating through your product.
“Make sure you have a damn low price available and then have additional features that will answer to what the business travellers want.”
David Barger, CEO of US airline Jet Blue, said that customers were willing to pay for extra services and he believed that his company had found the “sweet spot” between being a no-frills and full-service airline.
“We are higher frills and lower costs - people are willing to pay a premium to fly with us,” he said. “They don’t pay for the first bag, or have to swipe a card for the TV and we will not charge for wifi when it’s introduced. Geography, product and cost structure are what’s important – you need all three together.
“We have a higher cost structure by being based in New York. This is a high value proposition with a lower cost structure. It works as long as we maintain a lower cost base compared to legacy carriers.”
Tony Davis, partner at Irelandia Investments, which is a global investor and developer of no-frills airlines, said cost remained the most important factor for carriers.
“What passengers want is a cheap fare, an on-time flight and a suitcase which arrives on the same plane as them,” said Davis. “We are in the mass transportation business.
“The worry is that you can get somebody coming up behind you with a lower cost base and steal your market. That’s why it’s best to go for the lowest cost.
“Unbundling generally is an attempt by most legacy carriers to reduce costs and increase revenue streams such as charging for extra legroom at the emergency exits.”
Despite the continued growth of no-frills airlines, Willie Walsh, chief executive of IAG, insisted that carriers such as British Airways could compete with them on short-haul routes.
“There are lots of low-cost carriers who lose lots of money, and plenty of legacy airlines that make a lot of money,” said Walsh. “It’s much more complex.
“Ryanair and Easyjet are two airlines with very different business models – you cannot put them in the same category. There are many different business models that can and will succeed.
“We should recognise that it’s not solely about costs – if it was then Ryanair would dominate the world. It’s about what you offer your customers.
“Go was profitable but it competed with British Airways rather than Easyjet or Ryanair. It was competing against its parent company.
“BA will never be a low-cost brand. It would be crazy to do that – it would destroy so much brand equity.”