BTN Europe presents an overview of business travel and MICE predictions for this year
ExCeL London - 24-25 February 2021
Low fares, low fares, everywhere—nor any drop for the
corporate travel buyer.
The face of transatlantic air travel is changing as low-cost
entrants pour into the market. Norwegian Air Shuttle is expanding service to
the U.S. this summer, following a years-long battle for approval from the U.S.
Department of Transportation and resistance from the three U.S. legacy
carriers. Iceland's Wow Air also is building a network between Europe and the
U.S. via Reykjavik. Both carriers regularly offer base fares below $200.
Legacy carriers are getting in on the action, too. British
Airways parent company International Airlines Group this summer is launching a
low-cost carrier, Level, to fly transatlantic from Barcelona. Air France-KLM
plans to launch its own long-haul, LCC, Boost, this year with flights to Asia,
and transatlantic expansion also is a possibility. Lufthansa's low-cost
Eurowings brand also is considering expanding its current limited transatlantic
In Canada, LCC WestJet began service to London's Gatwick
Airport last year and is eyeing further transatlantic expansion. Air Canada is
boosting its transatlantic service, and its LCC Rouge is a part of that.
If they're willing to provide fares attractive to corporate clients where amenities have been included, they might get additional share."
In the longer term, U.S. LCCs eventually could be a factor.
Last year, JetBlue amended a purchase agreement with Airbus: The 15 A321neo
aircraft to be delivered over the next several years now come with the option
to configure them to long-range aircraft, opening the door to European routes.
Southwest also has not ruled out transatlantic expansion.
Lower Fares on the Horizon?
All this low-cost competition could result in lower fares
for corporate travelers, as well, right? Think again, said Scott Gillespie,
managing partner of airline data analytics firm tClara. "No doubt these
new entrants will put significant pressure on their full-service rivals for the
leisure crowd," he said. "The question for the corporate crowd is how
much corporate market share these LCCs will take. My early guess is not much at
For starters, most do not connect major business hubs.
Norwegian's new routes, for example, connect not to the major airports in New
York or Boston but to T.F. Green Airport near Providence, R.I.; Bradley
International Airport near Hartford, Conn.; and Stewart International Airport,
about 70 miles north of New York City.
Even on routes where these carriers make sense for corporate
travelers, the ancillary costs will add up quickly. In general, LCCs charge
extra for beverages, meals, seat selection, checked luggage and in some cases
even carry-on luggage, all of which remain inclusive in most full-service
carrier transatlantic flights.
These carriers also remain dwarfed by the massive networks
created by legacy carriers and their alliances, which have helped keep
transatlantic fares strong, according to a recent Egencia white paper on
airline competition and consolidation. "On transatlantic routes, the level
of competitiveness is rather opaque and strongly impacted by the three
alliances and joint ventures," according to the white paper. "These
have acted as a stand-in for consolidation in this market, as airlines agree to
share slots and revenue."
Airlines also can adjust capacity much more easily than
other travel categories can, and should transatlantic routes become a drag on
their profitability, they will adjust accordingly.
The International Air Transport Association noted that
transatlantic demand has "trended sideways" for about a year, but
legacy carriers are facing challenges on those routes beyond the LCCs.
After the fourth quarter, American Airlines president Robert
Isom called transatlantic coverage the carrier's "worst-performing
international entity," as unit revenue decreased 7.7 percent year over
year during that quarter. Competition with LCCs was a factor, but so was demand
for travel to the U.S. thanks to the strengthening dollar against the British
pound. American is vulnerable to the U.S./U.K. currency game because half its
transatlantic capacity flies to/from the U.K.
The continued fallout from Brexit, of course, remains to be
seen, not just on the macroeconomic level but in terms of aviation
specifically. Departure from the European Union will require the U.K. to replicate
open skies agreements with other countries, including the U.S. and Canada. La
Compagnie, the all-business-class carrier, ended its New York-London service
last year, citing Brexit as the major reason.
Delta cut its transatlantic capacity by 4 percent year over
year during the first quarter. Its long-term plan for the routes includes "more
seasonal flying that better aligns our capacity with demand," Delta
president Glen Hauenstein said.
United does not have a U.K. partner as American and Delta
do, but it actually reported year-over-year unit revenue growth on
transatlantic routes in the first quarter, due in part to strong demand in
Germany, United president Scott Kirby said.
The LCC flies to Cancun, Las Vegas, Miami, Montego Bay,
Orlando, Punta Cana & Seattle.
In June, routes will launch from Barcelona to Buenos Aires,
Los Angeles, Oakland & Punta Cana.
Norwegian Air Shuttle
This summer, service will expand to routes from Scotland,
Northern Ireland and Ireland to Providence, R.I.; Hartford, Conn.; and Stewart
International north of New York City.
Air Canada Rouge
Seasonal service destinations include Athens, Barcelona,
Berlin, Budapest, Dublin, Edinburgh, Glasgow, Lisbon, London, Manchester,
Prague, Venice & Warsaw.
The Canadian LCC flies year-round to London and seasonally
to Dublin and Glasgow.
The Iceland LCC connects 32 destinations in
Europe and North America via Reykjavik, and it will grow its fleet from 17 to
24 aircraft by the end 2018.
"Of course, we carry a lot of revenues to the U.K. and
to Paris, so we're impacted by that but less impacted," Kirby said. "Also,
at least in this portion of the year, we're disproportionately selling U.S.
point of sale. As we move to the back half of the summer, the normal demand
pattern shifts to European point of sale." The fact that Easter fell in
April instead of March also benefited results, he said.
Beyond fares, though, the low-cost entrants still stand to
reshape the model of transatlantic flying, just as LCCs have on domestic U.S.
routes. On one hand, legacy carriers will emphasize service and amenities to
entice the travelers who make purchases based on more than price. "If you
look at what Norwegian flies, they don't have flatbeds," Hauenstein said. "The
ultra-low-cost carriers haven't made that investment in those types of
products. We need to adjust to that new paradigm as a high-quality product for
leisure customers who are willing to pay more than just standard coach fares."
On the other hand, additional unbundling seems inevitable
should LCCs continue to build transatlantic presence. Delta's Basic Economy
fares—no-frills fares that do not include seat selection or changes and that
board last—already have expanded internationally, Hauenstein said.
This could trickle into standard economy classes, too. On
some shorter transatlantic flights, British Airways already has cut back from
two meals to one. More recently, the carrier indicated that switching to paid
meal service is not out of the question.
If they expand to more business-friendly routes,
LCCs could get more aggressive in courting corporate business, as well,
especially considering that for years, corporate travel policies have trended
more restrictive, requiring travelers to use economy class on transatlantic
flights, Egencia consulting manager Max Weyde said. "Norwegian is smart
enough to adjust their business model to make travel with them also attractive
to corporations," he said. "If they're willing to provide fares
attractive to corporate clients where amenities have been included, they might
get additional share."