Does the future belong to low-cost airlines?

What if Europe's post-containment skies were dominated by low-cost airlines? This is a more than likely scenario, according to the report "After Covid-19 - Air transport in Europe: time to decide" published recently by the Fondation pour l'innovation politique (the think tank Fondapol) and the firm Roland Berger. At a time when many more or less pessimistic prophecies are being made about the after-effects of the pandemic on the travel industry, this exhaustive 70-page analysis - which also includes an equally comprehensive review of the pre-epidemic market - suggests that the pandemic is likely to have a negative impact on the travel industry. accelerating the low-cost offensive. To the detriment, of course, of 'traditional' airlines.

For the authors of the report, Emmanuel Combe and Didier Bréchemier, " the low-cost giants are set to extend their lead as the crisis draws to a close ". In the short term, the timing of deconfinement would be favourable to low-cost carriers: " if the European network takes off first, the incumbent airlines will suffer on their most profitable network, i.e. long-haul, and will have to compete on the European market against highly competitive low-cost operators. "the authors stress. But for them, it is in the medium term - and even beyond - that the balance of power will be unfavourable to the incumbents. This is explained above all by the threat to the traditional companies in their strongholds: the hubsthe cornerstones of their strategy.

Already weakened for several months, the air transport sector is more vulnerable than ever with the health crisis. Visit number of bankruptcies of airlines could therefore accelerateand buyouts, redrawing the European map of transport operators through a concentration unprecedented - at least on this side of the Atlantic. However, as this report points out, these acquisitions could well reshuffle the cards of slotsThis will add crucial advantages to the game played by low-cost airlines. The incumbents' stranglehold on these operating niches could then be shaken. And the hub's logic of connections could even find itself in head-on competition with a low-cost alternative, the "connectingalready embodied by the Worldwide by easyJet platform. With a sufficiently consistent offer and a sufficiently dense network, low-cost carriers would then allow passengers to organise their own flights with stopovers, which until now have been the preserve of the incumbents.

If these "DIY" ( Do It Yourself"However, this segment is not spared by the low-cost offensive described by Emmanuel Combe and Didier Bréchemier. It is likely that low-cost airlines will continue to develop their targeting business customers by going to the main airports, in head-on competition with the incumbent operators. They will also pursue their connecting strategy, which consists of developing indirect flights without having to bear the constraints of a hub and spoke model. Even beyond Europe, low-cost airlines are beginning to forge partnerships with long-haul carriers, posing a direct threat to the hubs of the incumbent airlines. ". The authors of the report even point to another threat, with the possible establishment of a new kind of air-rail alliance. " We can even imagine that, in the future, low-cost carriers will form partnerships with other transport operators in order to increase their frequency and thus better meet the expectations of business customers. Particularly in Europe, where rail transport is due to be liberalised on national markets from 2021, we can envisage new entrants or incumbent rail operators forging alliances with airlines, in order to increase the number of frequencies on a given destination (for example Marseille-Paris) or to benefit from the commercial power of the airline partner (contracts with companies, brand awareness, distribution costs on a platform such as easyJet Worldwide, the websites of incumbent airlines or all the players in online distribution). ".

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The report's authors' diagnosis is clear: incumbent companies have every interest in using aid released by their respective governments to invest in an in-depth overhaul of their business model, particularly in the low-cost and medium-haul segments, at the risk of seeing themselves heckled even more by low-cost carriers. In short: make this Covid-19 'big bang' the breeding ground for a renaissance, at the risk of joining the list of endangered species.