With low barriers to entry and financial concerns still high among travelers, now may be the most opportune time for new low-cost carriers (LCC) to enter the market, says GlobalData, a leading data, and analytics company.
Following a recent surge of airlines announcing their intent to launch, the LCC business model is being primed for success. With travelers 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 within the same continent – the bread and butter for many LCCs short-haul operations.
Gus Gardner, Associate Travel and Tourism Analyst at GlobalData, comments: “With consumer sentiment improving, airline startups could be well-positioned to capture this rising demand. Low ticket prices will be vital for stimulating demand.”
Travelers will be seeking cheap tickets now more than ever as the COVID-19 pandemic has placed a considerable strain on their finances. In GlobalData’s latest consumer survey**, 87% of global respondents said they are ‘extremely’, ‘quite’, or ‘slightly’ concerned about their current personal financial situation.
Gardner continues: “Characterized by the offering of competitively low fares, LCCs will likely be the business model leading market recovery post-COVID-19. Low prices will bode well with cash-strapped travelers looking for the cheapest way to escape. Loyalty with established players could be called into question as price becomes a more significant factor compared to pre-pandemic. If new entrants can offer low fares, cannibalize existing airlines’ traffic, and win market share, they could emerge in a strong position to succeed in the long-term.”
Entering the airline industry has historically been difficult, and many have failed to establish a foothold. However, that has changed due to the impact of the pandemic, and many opportunities are now present.
Gardner adds: “With an abundance of attractively priced second-hand aircraft, airport slots, and skilled labor (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, however, 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.”