flyboy80
Topic Author
Posts: 2014
Joined: Fri Jul 13, 2001 8:10 am

ULCC ranks and futures questions.

Mon Mar 18, 2019 2:34 pm

My history, research, and facts may not all be correct, or close to, but I'll try to summarize my opinions and questions with what I know, or think to know, in mind.

How fast is the ULCC market growing in the states? Is the business model under more pressure or less versus traditional network carriers? They seem to have a valuable niche now the network carriers are only willing to partially step into with branded fare concepts. And for good reason.

IIRC Allegiant was more or less the pioneer of the modern day model when they operating limited service to Las Vegas from non-traditional airports. Spirit was probably first to capitalize and modify into on a more traditionally scheduled ULCC service from larger airports. More recently Frontier riddled with bankruptcy and other issues, including pressures in DEN from WN, became an ULCC and changed their network significantly. The Frontier I flew on in 2004/5 timeframe was significantly different than the F9 of today. Then it reminded me then of a smaller Alaska Airlines with a quality service, comfortable clean airplanes, friendly staff and easy connections through Denver. Definitely a step above America West experience wise albeit a much smaller network than HP. Although I don't think Frontier has First class but I can't remember.

Predictions are worth pennies here, but what will or could happen with the ULCCs in this operating environment and economy? Both F9 and NK are growing, G4 too. There's this demand for "bare" fares despite it seems everyone who purchases them ridicules the lack of service- the point of buying them. The ULCC model is finally sinking-in en masse from the consumer side I think. Many folks I talk to know exactly what they're buying when flying G4, NK, F9.

Network wise, Is one more dominant versus the other? This is a novice question I know, with all the changes and sporadic nature of F9 I've lost track. I've been through Denver three times this month and F9 is but a shadow of what was once in the late 90s and early 2000s. Sad- like Midwest Express Sad. As far as I know Spirit now has the larger overall network, just in the last three years, versus Frontier, but Frontier has a more diverse network P2P flying it would seem. Allegiant has slowly become something more similar to the both of them than what they were originally although retaining some fundamental differences operating to smaller airports more often like when they started. Now G4 has a national presence and brand recognition. All three are competing in a similar space with G4 still more attached to smaller markets in the spectrum, but is there anything that dramatically differentiates how they operate or what makes them different? I think Frontier still has a superior and more recognized-for-quality brand versus NK or G4. I know NK has a much larger international presence with their flights to Central/ South America versus the others and given they have a hub in FLL.

Could a merger be in the interests with these three carriers? I don't see why another company such as AS, B6, or WN would want to merge given their operating styles unless it was a bargain sale just for the aircraft, same with network legacies. Perhaps WN would want kill a competitor if theres value, like they saw in FL and ATL and other synergies (more 738s) I haven't brought Sun Country into this discussion, but in the last year they as well have really branched out. This is an interesting segment of carriers to observe.
 
MIflyer12
Posts: 5215
Joined: Mon Feb 18, 2013 11:58 pm

Re: ULCC ranks and futures questions.

Mon Mar 18, 2019 4:50 pm

flyboy80 wrote:
How fast is the ULCC market growing in the states? Is the business model under more pressure or less versus traditional network carriers?


Data for each carrier's growth in ASMs and RPMs are in the public domain. CASM and PRASM by carrier are regularly reported. Chart them, maybe by quarter for five years. That is the proper nature of research. Airport pairs served isn't so easy because route maps don't show frequency or reasonable connect times.
 
upperdeckfan
Posts: 857
Joined: Fri Jun 08, 2007 1:59 am

Re: ULCC ranks and futures questions.

Mon Mar 18, 2019 4:59 pm

For us outside the US, why is WN not considered an LCC?

I have never flown them but their business model looks similar to what we call LCC in Europe (low fares, Y only, no interlining or connections, no seat assignment, etc)

BTW, thread title should be "US ULCC ranks and futures...."
748,744,742,741,772,773,762,763,
764, 789, 732,733,735,737,738,739,
752, 722, 717,74M,DC10,DC9,M82,
M83, M87, M88,310,319,320,321,332,
333, 343, 346,359,388,L1011,CR2,
CR7, CR9,CRK, E175,E190,ATR42,
DSH8, CS1,CS3
 
winginit
Posts: 2514
Joined: Sat Feb 23, 2013 9:23 pm

Re: ULCC ranks and futures questions.

Mon Mar 18, 2019 5:11 pm

flyboy80 wrote:
How fast is the ULCC market growing in the states? Is the business model under more pressure or less versus traditional network carriers? They seem to have a valuable niche now the network carriers are only willing to partially step into with branded fare concepts. And for good reason.


I'll bite.

The model is growing and steadily at that. I believe an effective way to measure that is the percentage of US domestic seats that are flown by ULCCs. The below identifies every carrier as either OA, ULCC, or US4 for the sake of simplicity.

My definitions are simple: NK/F9/G4 are ULCC (even though F9 didn't act as a ULCC until their Indigo acquisition), the US4 are AA/UA/DL/WN, and everyone else is OA. It's not perfect I know but the trend is clear - ULCC capacity is growing at the expense of the US4, but of course this is complicated by the fact that Basic Economy fares and the like have been introduced in a way that the US3 are flying what is essentially a product targeted specifically at the ULCCs. I would argue that being the case that the ULCC percentage growth is in practicality even higher:

Image
Source: OAG, Nondirectional Seats flown within the United States

Hopefully this answers at least part of your question.

Edit: I will not be adjusting this analysis. If you take issue with my carrier labels - I don't care, and if you take issue with my conclusions run your own analysis and we can compare. Let's just get all that out of the way upfront.
 
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hawaiian717
Posts: 3320
Joined: Tue May 18, 1999 2:46 am

Re: ULCC ranks and futures questions.

Mon Mar 18, 2019 6:06 pm

upperdeckfan wrote:
For us outside the US, why is WN not considered an LCC?

I have never flown them but their business model looks similar to what we call LCC in Europe (low fares, Y only, no interlining or connections, no seat assignment, etc)


Southwest (and Pacific Southwest Airlines before them) defined the idea of an LCC. However the Europeans (Ryanair, Easyjet, etc) took things a step further than Southwest and added lots of ancillary fees for things. Southwest never charged an extra fee to check in at the airport and inflight snacks and non-alcoholic drinks are free, and while the major airlines in the US now charge for checked bags, Southwest still gives two free checked bags. I think the defining characteristic of the "ultra low cost carriers" (ULCCs) like Spirit, Frontier, Allegiant, Ryanair, and Easyjet is very low fares but with many additional charges including for some things that some people would be considered "essential", while Southwest's fares tend to be generally inclusive of most necessary things.
 
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PatrickZ80
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Joined: Tue Jul 13, 2010 5:33 am

Re: ULCC ranks and futures questions.

Tue Mar 19, 2019 7:08 pm

Southwest is indeed very different from what the rest of the world knows as LCCs and ULCCs. While most ULCCs have a low service level in order to save costs, Southwest actually has a very high service level. Maintaining that high service level costs a lot of money, therefor fares on Southwest are higher than on the competing ULCCs.

Southwest is known for giving a lot of things for free. Of course they're not really free, they're incorporated in the ticket price. This means that if you exclude those things you could lower the ticket price. That's what ULCCs do and Southwest doesn't do. ULCCs will do everything to keep the ticket price as low as possible while Southwest is confident in asking a higher fare and making up for it with a higher service level.
 
Jutlander
Posts: 35
Joined: Sat Nov 24, 2018 11:04 am

Re: ULCC ranks and futures questions.

Tue Mar 19, 2019 7:22 pm

The differences between ULCCs and legacies are smaller in the USA than in Europe.
 
OB1504
Posts: 3605
Joined: Tue Jul 27, 2004 5:10 am

Re: ULCC ranks and futures questions.

Tue Mar 19, 2019 8:36 pm

upperdeckfan wrote:
For us outside the US, why is WN not considered an LCC?

I have never flown them but their business model looks similar to what we call LCC in Europe (low fares, Y only, no interlining or connections, no seat assignment, etc)

BTW, thread title should be "US ULCC ranks and futures...."


Southwest started as a traditional LCC, but they didn’t follow the lead of the legacy carriers in gutting their basic product so they ended up with the most generous offering.

You should’ve seen the posts about Southwest on this forum 15-20 years ago. People complaining about the “cattle call” boarding process (since refined), lack of IFE, and the indiginity of only getting a pack of peanuts instead of a meal.

Nowadays the legacies have as many as 10 boarding groups to keep track of, American and United are taking delivery of new airplanes with no IFE and ripping out existing IFE, and all 3 legacies only offer a Biscoff (and not even that for a few years) and 30” pitch on their new and reconfigured aircraft. If you’re lucky enough to be on a 3+ hour flight, you can buy a $5 sandwich for $10.

Nowadays Southwest’s product looks much better by comparison. Couple that with their viciously loyal customer base that they’ve managed to convince that they’re the cheapest airline and their refusal to list their fares on comparison sites (which would show that they’re usually the most expensive option), and they’re now an LCC that can command a revenue premium.
 
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spinkid
Posts: 1864
Joined: Fri Jul 20, 2001 5:59 am

Re: ULCC ranks and futures questions.

Tue Mar 19, 2019 10:12 pm

Don't forget to include SY Sun Country. They have now shifted to a full ULCC model. They are much smaller than the others in the market, but they have a sizeable presence at MSP.

In my opinion they are being built up to eventually be sold off in a merger. As of now they don't own enough planes, or anything else of tangible value such as slots, etc.

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