Limits to the Low-Cost Niche? Finding Sustainable Strategies for Low-Cost Long-Haul Airlines

Abstract

Entrepreneurs taking advantage of air transport liberalization have searched for ways to challenge the network airlines using the low cost carrier (LCC) model cloned on Southwest Airlines. Low-cost long-haul flights (LCLH) is an extension of this model gaining increased attention around the world. LCLH carriers have followed what we already know about low cost airline business models over shorter distances, with adjustments through innovation and trial and error. Entrepreneurs and analysts tend to list service features and operational characteristics that such airlines should have and not have. However, underlying principles of the LCLH business model remain largely unclear. Some analysts have even stated that LCLH cannot work, because the cost advantage such airlines gain over the network carriers, is too low to provide sustainable competitive advantage. Then we observe carriers like Air Asia X that appear to have overcome at least some of the shortcomings of past LCLH airlines. The question is if there are some guiding principles we can use to make the LCLH model work better? This article suggest such principles, but argues that LCLH airlines will continue to struggle assimilating and keeping to these principles.