Low-cost long-haul carriers: A hypothetical analysis of a 'Kangaroo route'

Given the success of short-haul, low-cost airlines in most regional markets, it was expected that low-cost airlines would next venture into long-haul markets; however, most attempts in the past decade have, like their predecessors, failed. The purpose of this paper is to demonstrate that a long-haul, low-cost operation based on a hypothetical airline that operates between Melbourne (Australia) and London (UK) can achieve a cost advantage compared to full-service airlines, but this advantage is not as great as the difference between low-cost carriers that operate in short-haul markets compared to full-service airlines (FSAs). Research to date on concept of low-cost long-haul airline operations is limited, but it does acknowledge that the cost differential between low-cost airlines and full-service airlines in short-haul regional markets is not as strong in long-haul operations. Factors such as larger and more expensive aircraft; flight-operating conditions including fuel burn; congestion around busy airports; crew costs; airport charges at main airports; and marketing issues such as branding, advertising and distribution all combine as deterrents for low-cost carriers to enter long-haul markets. This research confirms that it is possible for a low-cost, long-haul operation between Australia and the UK to attain a 13-17% cost advantage measured in cents per available seat kilometre (ASK) relative to full-service airlines.