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Hybrid airlines 'edging out LCCs'

Dubai, July 8, 2008

A new breed of “hybrid” carrier is quickly overtaking traditional Low Cost Carriers (LCCs), according to a study by Sabre Airline Solutions, the global leader of technology solutions for the airline industry.

The study reveals that more passengers travel on a new breed of “hybrid” carriers than on traditional LCCs.

A global study of 540 airlines found that out of 123 self-nominated LCCs, 59 per cent had added enough complexity to their business model in recent years that they had now evolved into a full service airline (7 per cent) or were part of an emerging breed of “hybrid” carriers, which blend low cost carrier traits with that of full service carriers (52 per cent). 

Only 41 per cent retained true LCC characteristics including point-to-point routes, single aircraft types, single cabin configuration, simple fares with no interline or codeshare agreements and direct distribution usually through the internet, the study said.   

Furthermore, passenger numbers from 2007 show that these “hybrid” airlines carried 64 percent of all passengers in the broader LCC segment. 

Maher Koubaa, vice president of Sabre Airline Solutions in Middle East & Africa, said there had been a lot of speculation about the evolution of the LCC model, but up until now no quantifiable research existed to show how these airlines were changing their businesses to stay competitive. 

"The LCC segment is one of the most competitive in the airline industry and this has spurred many pure LCCs to explore new ways of evolving their business to remain competitive and sustainable," Maher noted.

For many, this has meant adopting some full-service carrier business practices to help grow their passenger base and expand their reach in the marketplace, although they have often added their own twist on how these business practices are implemented,” he added. 

The study shows that full-service carrier attributes being introduced by LCCs include: international routes, use of the Global Distribution System (GDS), code share agreements, connecting services, multiple fares available at any time, advanced ticketing procedures, multiple aircraft types, multiple classes of service, interline agreements, and long-haul destinations. 

“Airlines that introduce more than three of these full-service characteristics should be considered a “hybrid” carrier because each attribute adds a level of complexity and cost to the operating model that is inconsistent with the fundamental principles used to define low-cost carriers,” said Maher.

Within the Middle East, low-cost airlines that may be considered “Hybrid” carriers include Air Arabia, Rak Airways in the UAE; Red Sea and Nile Air in Egypt; Nas and Sama in the Kingdom of Saudi Arabia; Atlas Blue and Jet4U in Morocco; Jazeera Airways in Kuwait, and Bahrain Air.

In Europe the trend is just as strong with easyJet, Germanwings, Norwegian Air Shuttle, bmi Baby, Sterling Airlines, KD Avia, Centralwings, Blue Panorama Airlines and Flybaboo also falling into this new category, joining global industry leaders such as Southwest Airlines, Jet Blue, West Jet, Air Tran, Virgin Blue, Air Asia and GOL. 

"As fast as the LCC Middle East sector is growing, just as many are shifting towards a hybrid model to make a play for the more lucrative business travel market as demand for premium services, especially in the Gulf region, rises," Maher pointed out.

“That’s why some have introduced GDS distribution, multiple products, and new classes of service and interline agreements. They are also willing to invest in sophisticated revenue management tools and techniques that help them maximize the revenue generated by every seat on every aircraft, every day of the year,” Maher said.

“In comparison, pure LCC airlines don’t use these tools. They stay true to the LCC model – a simple, no-frills<




Tags: Sabre | hybrid airlines | traditional LCCs | overtake |

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