Few subjects in the aviation industry have generated as many headlines in recent years than the attempts to transfer the low-cost carrier model to long-haul markets.

However, a number of the more recent headlines have been negative – particularly around the transatlantic market. Financial challenges over the past year have got the better of Wow Air and Primera Air, both of which collapsed, and have consistently threatened to derail the poster child of the sector, Norwegian.

As a result, newly-arrived transatlantic services have proved short-lived for several airports.

Financial problems have been compounded by challenges around the key instruments behind the model – the re-engined narrowbodies whose economics make lower-density transatlantic routes feasible. Primera cited delays to the delivery of its CFM International Leap-powered A321neos last year as a factor in its collapse, while the likes of Norwegian and WestJet are among those now being hit by the grounding of the Boeing 737 Max.

As a result, overall seat capacity on transatlantic services from low-cost carriers – whether evolving leisure and charter carriers are included or not – will be down in June compared with the same month in 2018.

But the market continues to attract interest, most recently evident with JetBlue firming its plans to launch transatlantic flights.

LOST CAPACITY

Cirium schedules data shows that overall seat capacity across the Atlantic will be around 3.2% higher in June than it was for the same month a year ago. That slightly exceeds the capacity increase measured in terms of flights – up 1.7% – while ASK capacity has risen around 4.2%.

But capacity among low-cost and leisure carriers in the sector is down around 6%, analysis of Cirium schedules data shows. That fall in capacity is even more pronounced when applied specifically to low-cost sector operators.

That is largely a consequence of the collapse of Wow and Primera.

Wow was forced to pull the plug on its services in late March, after interest from Icelandair and private equity firm Indigo Partners failed to produce firm deals.

The Icelandic carrier had been serving 16 destinations across the USA and Canada from Reykjavik. This dropped to six – Baltimore, Boston, Detroit, Newark, Montreal and Toronto – in the last two months of its operations as the carrier began to cut back, in a bid to return to its roots. That move included returning all of its widebodies.

Wow Air Americas destinations

Wow accounted for almost 200,000 monthly seats on transatlantic routes during last summer's peak.

The demise of Primera had less of an impact. The carrier contributed around 50,000 seats a month last summer on its fledgling transatlantic network, which primarily covered routes from London Stansted and Paris Charles de Gaulle. But the collapse of the airline last October also put paid to its plans to expand its long-haul operations from Brussels, Berlin, Frankfurt and Madrid.

Overall the transatlantic market remains dominated by network carriers – albeit many of whom have made concessions of their own to the model, be they the premium leisure targeted operations from British Airways out of Gatwick, or the roll-out of premium economy products and fares by US carriers.

Norwegian represents the only low-cost carrier among the 10 biggest operators by seat capacity across the Atlantic in June 2019, Cirium schedules data shows. It ranks as the eighth largest carrier, with the 10th biggest operator, leisure carrier Air Transat, also nudging in among the the network carriers.

Top 10 airlines transatlantic Jun 2019

Norwegian, despite a more conservative approach to capacity as it shifts emphasis towards profit rather than building share, is notably still the only one of the 10 biggest carriers on transatlantic services to raise capacity at a double-digit rate in June compared with a year ago – and it is behind only American Airlines in absolute seat growth.

Its growth of almost 12%, though, is relatively low compared to its capacity acceleration rate since the carrier began long-haul flights in 2013.

Norwegian Americas flights development 2013-19

Norwegian has cut more transatlantic routes than it added in the past 12 months. June schedules data from Cirium shows it has removed a dozen transatlantic routes and added nine compared with a year ago. But the new flights represent more seats, because they are either higher-frequency services or involve larger aircraft.

The cut routes include links from Providence to Belfast, Edinburgh, Cork and Shannon, and from Stewart airport – serving New York – to Belfast, Bergen, Edinburgh and Shannon.

Norwegian ceased flights since June 2018

This also includes Norwegian switching its Gatwick flights from Oakland and Fort Lauderdale to San Francisco and Miami respectively, as part of efforts to lift yields by serving more established hubs.

Likewise the bulk of the rest of its new routes link to larger US airports – Boston, Chicago, New York JFK and Los Angeles – from points in mainland Europe. Notably this includes the first long-haul low-cost services out of Madrid.

Norwegian new flights since June 2018

Similarly, comparing June schedules data with a year ago shows that Norwegian has added more seat capacity on its other routes than it has cut.

Capacity has largely been trimmed on routes from Scandinavia and Gatwick, while it has mostly been added on points from mainland Europe – in particular Paris Charles de Gaulle.

Outside of North America, Norwegian has expanded its Latin American network by adding Gatwick flights to Rio de Janiero. But in Asia, it dropped its fledgling Singapore route in the winter after little more than a year.

WESTJET GROWTH

Canadian carrier WestJet is among the fastest-growing carriers in percentage terms that has operated transatlantic services over the past year, but it still sits outside the top 20 biggest carriers in terms of seat capacity. The only other low-cost carrier which has ranked among the 20 biggest carriers on transatlantic routes is Wow.

WestJet’s more recent growth has also been outside London Gatwick, where it debuted its European services. It has added more links from Canadian cities to Barcelona, Dublin and Paris Charles de Gaulle. Its new links from Calgary to the latter two European cities are among the routes served with its first Boeing 787s. The airline began Dreamliner services at the end of April on its Calgary-Gatwick route.

Analysis show Gatwick remains the biggest airport for low-cost carriers operating long-haul services to North America, offering double the seat capacity of the next biggest European airport for such flights.

Europe airports for LCC long-haul June 19 V2

There was notable growth across mainland European airports, while Norwegian has trimmed its transatlantic capacity out of Scandinavia over the past year.

New York JFK is the biggest airport in the Americas for low-cost operators serving Europe. Airlines raised seat capacity from the airport by a fifth over the past year.

North American airports for LCC long-haul June 19

IAG POSITIONING

Most network operators have responded to low-cost carriers' moves into the transatlantic market – perhaps most evident at British Airways parent IAG. It has launched its own long-haul budget brand Level and developed competing leisure-market-targeted services at BA. It was also a factor behind the group's aborted bid to acquire Norwegian.

Some of the early enthusiasm behind these moves seems to have waned. IAG ultimately dropped out of the running for Norwegian early this year after two initial bids for the carrier were knocked back in the spring of 2018, saying it was not convinced the budget carrier's cost base was low enough.

"I think it was the right thing for us to do to look at it as an option," said IAG chief executive Willie Walsh, speaking in March at the A4E Aviation Summit in March.

"It's a pity – I still hope they succeed," he adds, citing concerns around recent financial challenges faced by Norwegian, particularly regarding fuel costs and hedging.

Walsh praises the job done by Norwegian's chief executive Bjorn Kjos in the proof-of-concept work relating to long-haul low-cost operations. "He's proven, if not to everybody but certainly to us, that the market exists and the customer will embrace the business model."

Walsh adds: "There is a profitable niche there, and we are going to serve it. We are committed to expanding Level. It is performing very well in the markets it is operating in."

The most recent long-haul growth at Level has come at Paris Orly, after it took over operations at the French airport from OpenSkies and will this winter add Las Vegas services. This summer it will base a fourth A330 at Barcelona, launching New York JFK and Santiago flights – although last winter it dropped its Los Angeles service from the Spanish city. The carrier's more recent growth has also included taking on short-haul routes out of Amsterdam.

BA, meanwhile, responded to the threat of Norwegian in its London backyard by competing directly on US services. BA launched services to Fort Lauderdale and Oakland in 2017 from Gatwick, putting it directly in competition with Norwegian, as part of efforts to enhance its presence in long-haul premium leisure sector. It deployed higher-density configured Boeing 777s on the route.

Last winter BA axed its Oakland flights from Gatwick, opting to focus on its Heathrow flights to nearby San Francisco and San Jose.

BA has now disclosed it will end its Gatwick service to Fort Lauderdale from the end of the summer, focusing its south Florida services around Miami, where joint-venture partner American is also stepping up its presence.

Speaking at the Skift Europe Forum in London at the end of April, BA chief executive Alex Cruz said that the rise in London-New York passenger numbers following the entry of low-cost operators had provided evidence that "there is extra demand that was not being served, apparently".

But he describes these passengers as "very price-sensitive", and says there remains the question of "whether you can make money serving that demand". He adds: "It appears this hasn't been proved just yet."

Commenting on BA's decision to axe its Gatwick flights to Oakland Fort Lauderdale, Cruz says that "ultimately those routes need to make sense themselves".

JETBLUE ENTERS THE FRAY

One player that has reaffirmed its interest in the market is JetBlue Airways. The airline is converting 13 aircraft in its Airbus A321neo orderbook to the A321LR, and will launch its first transatlantic flights in 2021.

Again the focus is on the New York-London market, and the carrier plans to serve the British capital from Boston as well as JFK. It has, however, held fire on finalising its choice of London airport. "For commercial reasons we will hold that a bit closer to the chest, but we are confident we have a path into multiple London airports," JetBlue chief commercial officer Marty St George tells FlightGlobal.

London-New York is undoubtedly a busy market. Cirium schedules data shows 35 daily scheduled flights linking London to New York will operate this June. The collapse of Primera, which had been plying the London Stansted-Newark route, means all of these flights will be connecting either Heathrow and Gatwick in London, and the New York airports of JFK and Newark. That includes Norwegian and BA's Gatwick connection to JFK.

London New York market Jun 19 v2

Notably competition in that market will be stepped up even before JetBlue begins. Joint venture partners Virgin Atlantic and Delta Air Lines are to compete with BA and Norwegian on routes from Gatwick to Boston and New York next summer.

Along with its 49% shareholder Delta, Virgin Atlantic plans to offer a combined 18 daily flights between the two US cities and the London gateway in 2020. The flights will mark the return of SkyTeam carrier Delta to Gatwick after an eight-year hiatus.

JetBlue believes one of the advantages it has is its premium cabin Mint, which it launched in 2014. "Mint has really driven a lot by our success," St George says. JetBlue has continuously touted the product's success on its US transcontinental routes, citing Mint's ability to push premium fares down and grow margins.

JetBlue now hopes to replicate that success with its transatlantic service. While economy class fares on transatlantic routes are "pretty low most of the year", St George sees an opportunity to offer a differentiated product for premium travellers in the market, starting at a lower price point.

"This is made and broken on premium service," he says. "And with the incredible success we've had with Mint, we are very confident we can penetrate our small share of that premium market when the time comes."

Source: Cirium Dashboard