Are cheap flights to Europe here to stay?

If you’re traveling to Europe this summer, you may have noticed new flights from foreign carriers at discount prices: Danish carrier Primera Air recently announced new routes between Newark and London. Norwegian Air recently announced new service from Denver to Paris, and the airline is also expanding flights to Austin and Chicago. And the Icelandic company Wow Air recently started flying from Chicago to Reykjavik.

Here NowJeremy Hobson learns more about what’s going on – and whether flying to Europe is a sustainable business for budget airlines – from Airline Weekly Seth Kaplan.

Interview Highlights

On low-cost airlines entering new markets

“There is a lot of demand for leisure services between the United States and Europe, I mean that is the fastest growing segment of the market. Business travel is the most profitable business basically higher air fares but they don’t grow as fast so these airlines are trying to go where the growth is it’s not a new concept it’s been tried many times over the decades. Cheap fuel prices help somewhat this time, airlines think that when fuel is cheap, things that might not work as well in another environment can work.”

On low-cost carriers like Norwegian Air and their profitability

“Well, that’s the big question. If you just look at the growth, you might think, ‘Oh, those airlines must be doing great, right? Well, Enron was a very big growing company, we know how it ended. Now, Norwegian, to be clear, is not Enron, I mean they provide a very real, actually great service to consumers: they are people who are able to travel, from a United States perspective. United, in Europe, in some cases for the first time, when they could never have afforded it before. The problem is that the company doesn’t really make any money doing it. in the last two quarters, they are likely to lose money this year; despite the fact that fuel prices are as low as they are, and so you should think that if fuel were to go up, anything beyond a little, they could be in real trouble.”

“As a consumer, you certainly support its success, but the burden of proof is always on the airlines trying something that hasn’t worked so far.”

Seth Kaplan

On low fares – like Providence to Belfast for $238 return on Norwegian – being too good to be true

“It’s been the law in America, for several years, that when you advertise a fare, it must be possible to travel at that fare. Now, to be clear, that doesn’t include food, that doesn’t include baggage checked in but yeah as long as you travel light you really can do it I mean the answer is [Norwegian] can’t make money by charging everyone for this. The lower rate has to be balanced somehow with higher rates for people maybe booking at the last minute, for example, but right now they’re just trying to develop a market like that because that didn’t exist before, and I hope this word of mouth helps them build the market. But they have to count, at some point, on something that will change, because currently — although they don’t break down their revenues by market and they also have a short-haul operation in Europe, a bit like what Southwest is doing in the United States – it’s fair to guess that if the company isn’t doing so well, and if it’s doing something else that’s making a bit of money for its competitors… that transatlantic service doesn’t probably not doing very well.”

On airlines like Wow Air competing strategically in the transatlantic travel market

“Their advantage would be in some of the secondary markets, where Norwegian doesn’t compete. You’re right, a nonstop flight will always win – in terms of convenience at least – over a connecting flight. Sometimes people connect to save money, but it’s pretty hard to save money on those kinds of tariffs you mentioned, so Wow is going to have to, to some extent, specialize in markets where there isn’t will probably never have a non-stop flight – say Baltimore to Bristol, England which Wow can offer you on a connecting basis Norwegian is probably not going to offer this non-stop service so in that case it might be the most convenient way to travel between these two locations.

“By the way, Wow also has the advantage, because of its geographical location – there are limitations when your home market is Iceland, a rather small local market – but one of the advantages is that geography is such that you can fly smaller planes deeper into the United States than you can from anywhere in mainland Europe or even the United Kingdom, and that’s important because sometimes you can fill a plane smaller, whereas you may not be able to fill a larger plane. [Boeing 787 Dreamliners] across the Atlantic where you have to occupy almost a few hundred seats, so Wow has the advantage of being able to use what you might call low-risk aircraft to get into the United States… As a consumer, you are certainly in favor of its success, but the burden of proof is still on the airlines trying something that hasn’t worked so far.”

On the response of US carriers like American, Delta and United

“They can’t just ignore it, because these are rates that are on the market. Now listen, a time-pressed business traveler who has to travel from New York to London for a meeting, and needs to know that there is going to be, if the meeting runs late, there will be another flight there will be another flight two hours later, if the meeting ends early, there will be one they can jump on. kind of person probably won’t consider Norwegian, so Delta, United and American don’t have to compete with Norwegian on those kinds of fares, but these are seats that are on the market, and at the right price, all kinds of people will consider.”

In the changing market, as evidenced by the expansion in Fort Lauderdale, Florida

“I used to live there, and I remember this weird kind of blue-purple-purple 767 landing for a few years, it said ‘Zoom’ on the side, it was an airline called Zoom, flying between London and Fort Lauderdale, and it was one of the last airlines to try that sort of thing. Then, during the fuel price spikes of the last decade, it finally paid off for Zoom, and for several years it didn’t. there’s been nothing like that kind of service. Now you’re going to Fort Lauderdale, that’s just one example of that kind of thing, but very dramatic. You’ve got Norwegian flying in a few weeks from now to six cities different in Europe: Stockholm, Copenhagen, Oslo, London, Paris, Barcelona.

“It’s really a changed world, all sorts of new options for travellers, so hopefully this – from a consumer perspective – can work. Norwegian says, ‘This time it’s different’, they say, “Forget all those experiments that didn’t work in the past, airplane technology and so on changed things this time around”, and so far their benefits aren’t really there to confirm it, but let’s look here and see what happens.”

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