Analysis reveals potential for carriers launching low cost fares on long-awaited transcontinental routes, if costs can be kept down.
A new study by Skyscanner reveals the potential opportunity for Transatlantic low cost routes between Europe and the US, by highlighting the impact of ‘Price Elasticity’ and the increased demand for the routes among travellers.
The full analysis is available here.
Traditionally, many airlines’ attempts to introduce low cost long haul services have fallen flat. However, recently the Transatlantic market has seen renewed competition from several carriers. The analysis, derived from Skyscanner’s extensive traveller search and pricing data, shows this market has the potential to be popular for carriers willing to drop their prices due to strong passenger intent for low cost tickets on transatlantic routes.
The study demonstrates the importance for airlines to consider ‘Price Elasticity’: the ability to understand and measure passenger intent to know how many more passengers would fly if the prices were to drop. Skyscanner is in the unique position of being able to access data on travellers’ intent by measuring completed bookings on given routes, as well as at what point travellers dropped out the search process, enabling them to draw insights on price preferences.
The report found that compared to other route groupings, the transatlantic market is especially ‘Price Elastic’ with ample demand from travellers, which will come as good news to several airlines taking interest in the market, including Norwegian who just announced the launch of a new Rome to New York route at the end of last month. Skyscanner found that route in particularly has the potential to be popular, however to be profitable, airlines will need to operate under a significantly lower cost or increase ancillary revenues.
Faical Allou, Head of Business Development for Skyscanner’s industry Travel Insight product said, “Low cost long haul has been a segment that carriers have found challenging in the past, however our study underlines the importance of having data to understand ‘Price Elasticity’: being able to consider traveller intent and how this links to pricing on demand for routes.”
“The great news is that by using this data, we’ve been able to demonstrate that the transatlantic low cost segment, a market that has received buzz of late with the likes of IAG’s new Level brand, Jet2’s low cost approach, as well as Norwegian’s new US routes to and from Europe, has much potential for success as long as airlines are able to keep costs down and maintain strong ancillary revenue. This is certainly good news for both travellers who have long sought these services and for the carriers who may be able to capitalise early on this opportunity.”