Two European low-cost, long-haul carriers—Iceland’s WOW Air and Norwegian Air Shuttle—are continuing to add new trans-Atlantic routes with bargain fares in a challenge to legacy carriers. The long-haul discount carriers are succeeding by targeting a specific consumer “pain point” among people who have the time and desire to travel, but not necessarily the funds needed to fly on the legacy carriers.
Older travelers with more established frequent flyer relationships with legacy carriers may be harder to win over to the low-cost, long-haul carriers. But it’s hard to argue with a bargain. For example, a search for a flight from Los Angeles to London, selected for a random future date, yielded a round trip ticket price of more than $1,000. The same route on a low-cost, long-haul carrier was $300 round trip.
This is a competitive wake-up call for legacy carriers, which could lose a portion of the international travel segment from their current and future frequent flyers. WOW and Norwegian are able to appeal to cost-conscious travelers, who would rather spend their money once they reach their destination, thanks to advanced aircraft technology—specifically the Airbus A320neo in the WOW fleet and the Boeing 737 Max, flown by Norwegian. These next-generation aircraft boast lower fuel consumption, which lowers operating cost and allows the airlines to price seats very efficiently.
In addition, without offering two or three different classes of service, as the legacy airlines do, the discount carriers can configure seating differently. In some cases, the one-class configuration of these new aircraft can result in a few extra seats on the plane. When tickets are a bargain, every seat matters.
Though both are equally innovative, the two European discount carriers operate on different system configurations. WOW, which began service in 2012, works on a traditional hub-and-spoke concept, with all flights from the U.S. going through Reykjavik, Iceland, for connections to 25 European destinations. Norwegian, which started long-haul flights in 2013, uses point-to-point routes, which requires more targeting of consumer tastes to keep their planes full. For example, in launching the Fort Lauderdale-Barcelona routine, Norwegian was able to appeal to Spanish-speaking consumers in Florida for whom Spain is a desired destination.
Regardless of their route management, both WOW and Norwegian have demonstrated the ability to offer consistently bargain pricing, which gives them room for other intercontinental expansion. For example, Norwegian has plans to expand to South America.
The secret to their success, however, appears to be in the long hauls. A smart option for these carriers would be to continue focusing on intercontinental flights, rather than expanding regionally; for example, within Europe. Instead, they can continue to forge inter-carrier agreements that allow passengers to fly on low-cost local carriers to their final destinations.
Without question, innovative carriers such as WOW and Norwegian are changing the cost and appeal of long-haul travel, with more consistent travel bargains. In fact, as they keep the cost of airfares low, there could come a time when the taxes and fees are higher than the ticket price itself.
Dean DeBiase is adjunct lecturer of innovation and entrepreneurship at Kellogg School of Management at Northwestern University and a co-author of The Big Moo.
