Article ID Journal Published Year Pages File Type
1030831 Journal of Air Transport Management 2015 10 Pages PDF
Abstract

•The financial viability of the long-haul low-cost model is tested using a bottom-up approach.•Low-cost viability is sensitive to demand and fuel price variation even with B787 aircraft.•A focus on higher seating densities and cargo/ancillary revenues can mitigate sensitivities.

The recent strong performance of long-haul low-cost carriers AirAsia X and JetStar have re-raised the question of the long-term feasibility of long-haul low-cost operations. For the first time, this study contains a detailed financial assessment of low-cost operations on the transatlantic market using best-in class aircraft technology, the Boeing 787. The study's main findings demonstrate how challenging the successful running of a European long-haul low-cost carrier can be. In particular, on-going operating profit appears to be very sensitive to variations in demand and fuel prices, despite the use of new, highly efficient B787s. The findings show any prospective long-haul low-cost carrier that pursuing a demand focussed network strategy can ensure financial viability. This involves the creation of higher seating densities, higher cargo revenues and additional ancillary revenues.

Related Topics
Social Sciences and Humanities Business, Management and Accounting Strategy and Management
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