Whether you refer to them as low-fare airlines or low-cost carriers, operators using this business model have been the growth engines for air transport this century. In terms of their fleets, the original premise was simple – a single type.
There have, of course, been exceptions to that rule, most notably JetBlue Airways which has successfully operated a two-type fleet since September 2005. In the main though, the single fleet type strategy has received strong adherence.
The re-emergence of passenger service – at different rates depending on geography – following the heights of Covid-caused restrictions has been led by domestic and short/medium-range flights, with a noticeable right-sizing of aircraft to routes. The attributes of crossover narrowbody jets – such as the Airbus A220 and Embraer E-Jets E2 families – have thus received increased attention, to the point of them becoming stronger candidates to play a greater role with low-fare airlines.
Claude Debeauquenne, head of single-aisle market development at Airbus, tends to agree, especially as the two A220 models have “25% lower fuel burn and CO2 emissions and a 25% cost advantage per seat” compared with previous generation aircraft. “The A220 offers the right blend of capacity, passenger comfort, performance and economics, making it the perfect complement to any larger single-aisle aircraft,” he states. “The smaller gauge size allows an airline to better match capacity to demand without sacrificing performance or economics.”
Such attributes, he argues, will help to overcome the idea of sticking to a single fleet type. “The A220’s smaller gauge allows airlines to match capacity to demand better without sacrificing performance or economics,” Debeauquenne emphasises.
Daniel Galhardo, strategic marketing director for Embraer Commercial Aviation, recalls that crossover narrowbody jets in the pre-Covid world were used “to provide more flexibility – opening new markets, complementing narrowbody operations with more frequencies off-peak, increasing network connectivity and as a tool to increase yield”.
The post-pandemic world will have fewer business passengers, Galhardo believes. “Demand will be less concentrated since working from home is enabling people to move away from large cities. Also, the climate crisis is a huge concern that will change passenger behaviour and force new airline fleet strategies.
“In this context, the benefits of the crossover jet will be even more relevant. Increasing the relevance of medium and smaller cities increases the need for more regional operations, where smaller aircraft are more profitable,” he continues. “Fewer business travellers means the battle for their business is even tougher, and frequency and connectivity will be even more relevant. And big aircraft flying empty seats or stimulating demand by offering very low prices are yield killers that luxury operators cannot afford.
“So, if low-fare airlines want to keep their competitiveness they need to adapt, and the new generation of crossover jets presents a compelling solution. These airlines don’t need to change the focus on low seat cost, since a crossover jet like the E195-E2 offers similar seat costs to the A320neo, but they can add flexibility to adapt to the new world trends that will demand a smaller aeroplane,” Galhardo states.
As for how the attributes of crossover jets can overcome the single fleet type strategy, Galhardo acknowledges that preference by low-cost carriers, but contends that they did so to avoid fleet complexity, not due to their network needs. “Intuitively and in practice, there is no question – one size does not fit all,” he adds.
“The Covid crisis should have taught us all an object lesson regarding the need to build resilient operations; this is a cyclical industry and other crises are certainly ahead,” he stresses. “Airlines that operated regional and crossover jets in their fleet during the pandemic were able to navigate the challenge better during those difficult times. They maintained operations on a level that others could not, because their aircraft were right-sized unlike large narrowbody aircraft.
“More importantly, where will LCCs find the growth they desire? The reality is that growth lies in the underserved/unserved secondary destinations – addressing those routes with the E2 family delivers the frequencies required to sustain the route, posing a much smaller risk than doing so with the only large aircraft that you have, due to the misguided belief in the infallibility of the infamous ‘single fleet strategy’,” Galhardo remarks. “While LCCs remain mostly wedded to the fallacy of the single fleet construct, we also know LCCs understand how compelling the metrics are.”
Assessing the market features that might provide the external pressure for low-fare airlines to consider a second fleet type, Debeauquenne keeps his responds simple. “Any carrier looking to serve lower-demand destinations,” he emphasises.
When it comes to the size of crossover jet fleet required to deliver the economies of scale needed in a second fleet type for low-fare airlines, the Airbus exec is more expansive. “Every airline is different and their underlying characteristics, cost structure, and more will dictate what fleet size makes sense for them. Whatever number of aircraft they decide on, Airbus will remain a strong, committed and proud partner supporting them in their operation in order to ensure that they are successful,” he comments.
Regarding the external factors which might make a low-fare airlines add a second fleet type, Galhardo returns to the effects of recent events and trends. “These are fundamentally changing air transportation and passenger traffic will flow differently when volumes eventually return to pre-pandemic levels. We expect demand to be less concentrated as people move away from large cities and work from home,” he observes.
“Instead of pushing growth and market share at any cost, airlines are focusing more on how to grow sustainably, both financially and environmentally. Higher prices, for example, impede demand growth rates to some degree, lowering the upgauge pressure, as we’re already observing,” says Galhardo. “The financial situation at many airlines remains difficult. However the pandemic is not solely responsible – profitability, yield, and margins were already huge issues before the crisis. Aircraft with up to 150 seats have always been instrumental in helping airlines navigate weak-demand periods.
“Before the pandemic, markets that employed small regional jets and crossover aircraft delivered consistently higher yields than those dominated by the larger narrowbodies – and even during easier times, RJs and crossover jets tended to produce higher revenues. Given the current debt levels of the industry, producing steady, profitable revenues is more pivotal than ever – and crossover jets are critical enablers in this growing and more profitable industry segment,” Galhardo declares.
As for how big a fleet of crossover jets would need to be to get the necessary economies of scale for a low-fare airline’s second type, Galhardo replies: “This is a difficult question, because it really depends on how each airline’s operations are structured, and the outcomes may vary greatly. If we were to give you a ballpark based on our previous and current discussions with low-cost carriers, that number would be around 20 aircraft.”
Getting crossover jets into a low-fare airline as a second fleet type is one thing, but perhaps the OEMs would also appreciate more carriers following airBaltic. It has followed the old low-fare airline maxim of a single-fleet type, but its fleet is composed only of crossover narrowbody jets. The original plan for Breeze was also this strategy.
According to Debeauquenne, Airbus sees addressable A220 demand for more than 7,000 aircraft over 20 years. “With over 50% market share as at the end of May 2022, we see significant potential for more carriers in this [low-fare] space,” he reports.
Embraer’s Galhardo highlights the need to emphasise that the segment capacity is no stranger to low-cost carriers. “Southwest Airlines, for instance, has based its fleet around the 737-700 (143 seats), and they demonstrated that this size of aircraft still works for the future when they chose the 737 MAX 7 (150 seats). There are other examples, such as the pivotal function the A319 (156 seats) has in easyJet’s fleet. They are a statement to the segment’s capacity relevance for the low-cost business model. And the upgauge strategy that everyone was deploying expecting strong demand growth rate is no longer in place,” he posits.
“Additionally, it’s critical to remember that Breeze is not a single fleet carrier. Breeze was launched in May 2021 with a fleet of first generation E-Jets. Now the A220 has begun operations, it may be a starting point for operating a multi-type fleet,” Galhardo muses.
Whether providing connections on lower capacity pairs as a low-fare airline’s second fleet type or being the sole type on networks like airBaltic’s, the spread of crossover narrowbody jets in the low-cost arena will surely spread to geographical regions beyond North America and Europe, just as the original low-fare airline model did.
Whether you refer to them as low-fare airlines or low-cost carriers, operators using this business model have been the growth engines for air transport this century. In terms of their fleets, the original premise was simple – a single type.
There have, of course, been exceptions to that rule, most notably JetBlue Airways which has successfully operated a two-type fleet since September 2005. In the main though, the single fleet type strategy has received strong adherence.
The re-emergence of passenger service – at different rates depending on geography – following the heights of Covid-caused restrictions has been led by domestic and short/medium-range flights, with a noticeable right-sizing of aircraft to routes. The attributes of crossover narrowbody jets – such as the Airbus A220 and Embraer E-Jets E2 families – have thus received increased attention, to the point of them becoming stronger candidates to play a greater role with low-fare airlines.
Claude Debeauquenne, head of single-aisle market development at Airbus, tends to agree, especially as the two A220 models have “25% lower fuel burn and CO2 emissions and a 25% cost advantage per seat” compared with previous generation aircraft. “The A220 offers the right blend of capacity, passenger comfort, performance and economics, making it the perfect complement to any larger single-aisle aircraft,” he states. “The smaller gauge size allows an airline to better match capacity to demand without sacrificing performance or economics.”
Such attributes, he argues, will help to overcome the idea of sticking to a single fleet type. “The A220’s smaller gauge allows airlines to match capacity to demand better without sacrificing performance or economics,” Debeauquenne emphasises.
Daniel Galhardo, strategic marketing director for Embraer Commercial Aviation, recalls that crossover narrowbody jets in the pre-Covid world were used “to provide more flexibility – opening new markets, complementing narrowbody operations with more frequencies off-peak, increasing network connectivity and as a tool to increase yield”.
The post-pandemic world will have fewer business passengers, Galhardo believes. “Demand will be less concentrated since working from home is enabling people to move away from large cities. Also, the climate crisis is a huge concern that will change passenger behaviour and force new airline fleet strategies.
“In this context, the benefits of the crossover jet will be even more relevant. Increasing the relevance of medium and smaller cities increases the need for more regional operations, where smaller aircraft are more profitable,” he continues. “Fewer business travellers means the battle for their business is even tougher, and frequency and connectivity will be even more relevant. And big aircraft flying empty seats or stimulating demand by offering very low prices are yield killers that luxury operators cannot afford.
“So, if low-fare airlines want to keep their competitiveness they need to adapt, and the new generation of crossover jets presents a compelling solution. These airlines don’t need to change the focus on low seat cost, since a crossover jet like the E195-E2 offers similar seat costs to the A320neo, but they can add flexibility to adapt to the new world trends that will demand a smaller aeroplane,” Galhardo states.
As for how the attributes of crossover jets can overcome the single fleet type strategy, Galhardo acknowledges that preference by low-cost carriers, but contends that they did so to avoid fleet complexity, not due to their network needs. “Intuitively and in practice, there is no question – one size does not fit all,” he adds.
“The Covid crisis should have taught us all an object lesson regarding the need to build resilient operations; this is a cyclical industry and other crises are certainly ahead,” he stresses. “Airlines that operated regional and crossover jets in their fleet during the pandemic were able to navigate the challenge better during those difficult times. They maintained operations on a level that others could not, because their aircraft were right-sized unlike large narrowbody aircraft.
“More importantly, where will LCCs find the growth they desire? The reality is that growth lies in the underserved/unserved secondary destinations – addressing those routes with the E2 family delivers the frequencies required to sustain the route, posing a much smaller risk than doing so with the only large aircraft that you have, due to the misguided belief in the infallibility of the infamous ‘single fleet strategy’,” Galhardo remarks. “While LCCs remain mostly wedded to the fallacy of the single fleet construct, we also know LCCs understand how compelling the metrics are.”
Assessing the market features that might provide the external pressure for low-fare airlines to consider a second fleet type, Debeauquenne keeps his responds simple. “Any carrier looking to serve lower-demand destinations,” he emphasises.
When it comes to the size of crossover jet fleet required to deliver the economies of scale needed in a second fleet type for low-fare airlines, the Airbus exec is more expansive. “Every airline is different and their underlying characteristics, cost structure, and more will dictate what fleet size makes sense for them. Whatever number of aircraft they decide on, Airbus will remain a strong, committed and proud partner supporting them in their operation in order to ensure that they are successful,” he comments.
Regarding the external factors which might make a low-fare airlines add a second fleet type, Galhardo returns to the effects of recent events and trends. “These are fundamentally changing air transportation and passenger traffic will flow differently when volumes eventually return to pre-pandemic levels. We expect demand to be less concentrated as people move away from large cities and work from home,” he observes.
“Instead of pushing growth and market share at any cost, airlines are focusing more on how to grow sustainably, both financially and environmentally. Higher prices, for example, impede demand growth rates to some degree, lowering the upgauge pressure, as we’re already observing,” says Galhardo. “The financial situation at many airlines remains difficult. However the pandemic is not solely responsible – profitability, yield, and margins were already huge issues before the crisis. Aircraft with up to 150 seats have always been instrumental in helping airlines navigate weak-demand periods.
“Before the pandemic, markets that employed small regional jets and crossover aircraft delivered consistently higher yields than those dominated by the larger narrowbodies – and even during easier times, RJs and crossover jets tended to produce higher revenues. Given the current debt levels of the industry, producing steady, profitable revenues is more pivotal than ever – and crossover jets are critical enablers in this growing and more profitable industry segment,” Galhardo declares.
As for how big a fleet of crossover jets would need to be to get the necessary economies of scale for a low-fare airline’s second type, Galhardo replies: “This is a difficult question, because it really depends on how each airline’s operations are structured, and the outcomes may vary greatly. If we were to give you a ballpark based on our previous and current discussions with low-cost carriers, that number would be around 20 aircraft.”
Getting crossover jets into a low-fare airline as a second fleet type is one thing, but perhaps the OEMs would also appreciate more carriers following airBaltic. It has followed the old low-fare airline maxim of a single-fleet type, but its fleet is composed only of crossover narrowbody jets. The original plan for Breeze was also this strategy.
According to Debeauquenne, Airbus sees addressable A220 demand for more than 7,000 aircraft over 20 years. “With over 50% market share as at the end of May 2022, we see significant potential for more carriers in this [low-fare] space,” he reports.
Embraer’s Galhardo highlights the need to emphasise that the segment capacity is no stranger to low-cost carriers. “Southwest Airlines, for instance, has based its fleet around the 737-700 (143 seats), and they demonstrated that this size of aircraft still works for the future when they chose the 737 MAX 7 (150 seats). There are other examples, such as the pivotal function the A319 (156 seats) has in easyJet’s fleet. They are a statement to the segment’s capacity relevance for the low-cost business model. And the upgauge strategy that everyone was deploying expecting strong demand growth rate is no longer in place,” he posits.
“Additionally, it’s critical to remember that Breeze is not a single fleet carrier. Breeze was launched in May 2021 with a fleet of first generation E-Jets. Now the A220 has begun operations, it may be a starting point for operating a multi-type fleet,” Galhardo muses.
Whether providing connections on lower capacity pairs as a low-fare airline’s second fleet type or being the sole type on networks like airBaltic’s, the spread of crossover narrowbody jets in the low-cost arena will surely spread to geographical regions beyond North America and Europe, just as the original low-fare airline model did.
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