Sabre Study Asserts "Hybrid" Airlines Edging out Traditional LCCs

According to a new study from Sabre Airline Solutions, a new breed of "hybrid" carrier is quickly overtaking traditional LCCs (low-cost carriers).

The global study of 540 airlines revealed that out of 123 self-nominated LCCs, 59 percent had added enough complexity to their business model in recent years that they have either evolved into full-service airlines (7 percent) or were part of an emerging cross-mixture of low-cost and full-service operators (52 percent).

Only 41 percent retained true LCC characteristics including point-to-point routes, single-aircraft types, single-cabin configuration, and simple fares, with no interline or codeshare agreements and direct distribution usually through the Internet.

Furthermore, passenger numbers from 2007 show that these hybrid airlines carried 64 percent of all passengers in the broader LCC segment.

Gordon Locke, Sabre Airline Solutions' vice president of airline marketing and strategy, says, "The LCC market is one of the most competitive in the airline industry and this has spurred many pure LCCs to explore new ways of evolving their business to remain competitive and sustainable. For many, this has meant adopting some full-service carrier business practices to help grow their passenger base and expand their market reach, although they have often added their own twist on how these business practices are implemented."

The study shows that full-service carrier attributes are being introduced by LCCs include: international routes, use of the global distribution system (GDS), codeshare agreements, connecting services, multiple fares available at any time, advanced ticketing procedures, multiple aircraft types, multiple classes of service, interline agreements and long-haul destinations.

"Airlines that introduce more than three of these full-service characteristics should be considered a ‘hybrid’ carrier because each attribute adds a level of complexity and cost to the operating model that is inconsistent with the fundamental principles used to define low-cost carriers," according to Locke.

Based on this definition, within North America carriers such as Southwest, JetBlue, WestJet and AirTran, can be considered hybrid, the study concludes. In Europe, airlines like easyJet, Germanwings, Norwegian Air Shuttle, bmibaby, Sterling Airlines, KDAvia, Centralwings, Blue Panorama Airlines and Flybaboo are taking on hybrid characteristics, and Virgin Blue falls into this new category in the Asia-Pacific region.

"Many of these airlines have evolved into a 'hybrid' carrier in order to make a play for the highly lucrative business traveler, who has a completely different set of needs and shopping behaviors from the leisure traveler that LCCs have traditionally targeted.  "That's why some have introduced GDS distribution, multiple products, new classes of service, and interline agreements. They've also invested in sophisticated revenue management tools and techniques that help them maximize the revenue generated by every seat on every aircraft, every day of the year," Mr. Locke said. 05-12-2008.

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