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With low barriers to entry and financial concerns still high amongst travellers, now may be the best time for new low-cost carriers to enter the market.

Following a recent surge of airlines announcing their intent to start up, the low-cost carrier (LCC) business model is being primed for success. New airlines include Breeze Airways, Avelo Airlines, flypop and Flyr. With travellers seeking domestic trips and travel closer to home across 2021 and beyond, the low-cost model will likely be the most successful in the short term.

A GlobalData poll* revealed that 43% of global respondents are willing to travel domestically over the next 12 months, and 27% are willing to travel to the same continent – the bread and butter for many LCC’s short-haul operations. With consumer sentiment improving, airline startups could be well-positioned to capture this rising demand. Although, low ticket prices will be vital for stimulating demand.

Affordability makes LCCs attractive

Travellers will be seeking cheap tickets more than ever as the COVID-19 pandemic has placed a considerable strain on their finances. GlobalData** has outlined that 87% of global respondents are ‘extremely’, ‘quite’ or ‘slightly’ concerned about their current personal financial situation.

Characterised by the offering of low fares and a pay-as-you-use model, LCCs will likely be the business model leading market recovery post-COVID. Low prices will bode well with cash-strapped travellers looking for the cheapest way to escape. Loyalty with established players could be called into question as price becomes a more significant factor than before the pandemic. If new entrants can offer low fares, cannibalise existing airlines’ traffic and win market share, they could emerge in a strong position to succeed in the long term.

Barriers to entry are currently low

Entering the airline industry has historically been difficult, and many have shied away.  However, that has changed due to the impact of the pandemic, and many opportunities are now present.

With an abundance of attractively priced second-hand aircraft, airport slots and skilled labour (pilots and cabin crew) following the shrinking of many airlines, previous hurdles to begin operating are suppressed. Furthermore, fuel prices remain low. Startups are likely to hold industry low-cost bases, resulting in lower fares and the ability to win market share from their competitors. All factors combined equal a recipe for success for a new airline in the current climate and will likely see new entrants emerge strong.

New start-ups should remain cautiously optimistic regarding operations. Operational agility and seeking out lucrative market opportunities will be vital. With low barriers to entry currently present and passengers seeking low fare travel options, now could be the best time to launch an LCC.

 

*  GlobalData Live Tracker Verdict Poll of 1,157 respondents, Live since 17th November 2020.

** GlobalData’s Q1 2021 Consumer Survey.

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