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Low-Cost Pioneers
Last updated 2019 For ordinary domestic traffic, Eastern Air Lines introduced in 1961 with Lockheed Constellations a shuttle service between Boston, New York and Washington, cheap and successful. In 1988 Donald Trump took over the shuttle and the TRUMP label appeared on the B.727, but in 1992 it was swallowed by US Airways. Low-cost carriers (LCCs) changed also regular flights beyond those shuttles into a means of transport targeting the middle-class market. In 2011, analyst Jens Flottau (Sueddeutsche Zeitung, Jan28) could write about Europe’s typical low-cost carriers Ryanair and easyJet that they “were successful in halving the cost, compared to the traditional providers such as Lufthansa or Air France-KLM”. In Asia, the number of cheap short flights between cities is also growing.
Laker, People Express and others When IATA still has fought the transatlantic charter traffic during the 1960s and 70s, non-members Loftleidir of Iceland and Air Bahamas offered regular low-fare transatlantic flights from Luxemburg. Freddie Laker, the former managing director of British United Airways, has started Laker Airways in 1967. Despite the opposition by the British Labour government trade secretary, U.S. President Carter signed the legislation for the start of Laker’s Skytrain in 1977, providing regular “no reservation” no-frills flights London Gatwick – New York with the DC-10 at a sensational fare of $135 in 1973. He was knighted, to become Sir Freddie Laker. In 1982 he got an offer to be saved by ‘Tiny Rowlands’, who seven years before had announced to build a railway Egypt – Sudan, never built. In 1983 however, Laker Airways had to be closed down. Competitors “have persuaded his bank to foreclose his account”, reported Davies, continuing: “He later sued those airlines under American law. The case was settled out of court for several million dollars.” In 1992 Sir Freddie made an unsuccessful attempt with Laker Airways (Bahamas). Laker’s low-cost North Atlantic services were followed in 1979 by World Airways’ transcontinental low-fare flights. In 1983 the authorities allowed People Express Airlines, founded by Donald Burr and labeled PEOPLExpress, to start regular “no-frills” services from Newark to London with the Boeing 747 at a one-way fare of $140. Burr acquired Frontier in 1985, stopped in 1986. Frank Lorenzo, founder of Texas International Airlines and majority-owner of Continental Airlines, has bought People Express in 1986 and merged it completely into Continental in 1987. A new People Express was a completely different initiative. In 1978 American Airlines has started its low-fare subsidiary Trans-Caribair, a successor of Trans Caribbean Airways. The largest standard carrier with low fares (and “no frills” on domestic flights) has been Aeroflot until the collapse of the Soviet Union in 1991. It was the only airline with the privilege to sell international tickets for (unconvertible) rubles. Even now, on certain transcontinental routes the cheapest way is flying via Moscow. When at the end of the ‘80s LOT and Pan Am have opened up transatlantic services to Warsaw, Polish citizens were allowed to pay half the fare by (worthless) zloty currency. In some countries military transport services, such as Saha in Iran with its 707-tankers, TANS in Peru or LADE in Argentina, were opened to the public at affordable fares. North America: Southwest, JetBlue and competitors Texas International Airlines of 1977 under Frank Lorenzo, America West, Pacific Southwest Airlines, California Central and AirCal were pointed out (by R.E.G. Davies) as early pioneers on the US domestic market. The success story of Southwest Airlines under Herb Kelleher began with the carrier’s start in Texas in 1971. Morris Air, built up by David Neeleman, was integrated in 1995. But also other companies, such as Alleghany Airlines and Eastern Air Lines, started offering cheap fares.
According to reports, in 2005 already a quarter of the passengers within the USA used LCCs. When the low-cost market boomed, traditional leader Southwest Airlines occupied rank 13 global in the year 2000. America West Airlines, described as a low-fare and full-service airline, followed on rank 25. Other big LCCs emerged as AirTran (which absorbed Valujet and saved ATA), a new Frontier Airlines (founded in 1994, saved by the Republic Airways Holdings, in Dec 2013 sold to Indigo Partners), Allegiant of 1998, Spirit Airlines, created in 1992 out of Charter One. JetBlue started in 2000, founded by David Neeleman, helped with capital by George Soros and the Chase Manhattan Bank. JetBlue Airways spent 5.9 cent to fly one passenger one mile, whereas United was estimated to spend 10.8 cent. In late 2007 JetBlue was participated temporarily by Lufthansa. In 2015 a group around Neeleman was allowed to enter TAP of Portugal. And in 2018 an additional domestic airline was planned by Neeleman for 2021. LCC leader Southwest Airlines has become the largest airline in the United States by the number of domestic passengers, carried by its B.737 fleet and it leapt forward by passenger kilometers to rank 4 global e.g. in 2015. It has taken over AirTran as a subsidiary in 2012 and it can be considered a mega carrier. But also LCCs could disappear, the end of Western Pacific in 1998 being among the best-known examples. In Canada the low-cost leader has become WestJet, founded in 1995, operating international services within the Americas. Also David Neeleman has been involved with WestJet. And in 2017 it announced its subsidiary Swoop.
Europe: Ryanair, easyJet and others Ryanair, founded in 1985 by the late Dr. Tony Ryan in Ireland (not to be confused with Ryan International of the USA), had broken the BA/Air Lingus cartel on London – Dublin flights. It started short-to-medium distance international flights, in many cases from cheap airports. Ryanair has acquired a 30% share in Aer Lingus, but the EU prevented a merger and in 2012 Etihad offered to acquire Rynair’s share in Aer Lingus. Ryanair, since 1993 under Michael O’Leary, has become Europe’s biggest low-cost airline and in 2015 long-haul services were announced. But in late 2017 media reported a shortage of pilots, forcing to cancel many flights. In 2018 Ryanair entered Laudamotion of famous Niki Lauda with a 75% share. It started with A320s in the colors of Air Berlin, Niki’s former owner, with a Laudamotion label, then presenting a LAUDA label. Ryanair had become confronted with strikes and in late 2018 chief executive O’Leary, holding a 4% stake (according to Financial Times, Sept21, 2018) “has faced demands from pilot unions to stand down…” But then accords were achieved. The other large discounter became Luton-based easyJet, in 1995 created by Stelios Haji-Ioannou, a shipowner’s son from Cyprus. He acquired TEA Switzerland, Go and GB Airways. After the first decade of the 21st century still a 33% shareholder, he was reported avoiding over-investment. Nevertheless after the Brexit votum, easyJet.plc founded in 2017 esyJet Europe in Vienna, a subsidiary. Under the new boss Johan Lundgren, successor of honored Carolyn McCall, it proved a cautious step. The “no-frills” subsidiaries of standard carriers were not always successful, due to their high costs. British Airways has got rid of its Go and KLM sold its Buzz to Ryanair. In Germany in 2003 leftist politicians demanded to go the other way by stopping cheap flights, whereupon Bild and Sonntag asked its million readers: “Are only the rich allowed to jet towards the sun?” In the Netherlands, Transavia of 1966 became an important KLM subsidiary after the Royal Nedlloyd shipping group has sold its share. In 2014 Dutch media announced a fleet of 200 aircraft and a merger with Transavia France. For Air France’s Joon and Lufthansa’s Eurowings compare the chapter Mega Groups. Air One has become Alitalia’s low-cost subsidiary, dissolved. Iberia acquired a stake in Vueling Airlines, which had absorbed Clickair. Volotea started in 2012 as a competitor. Lufthansa’s low-fare subsidiary Germanwings started in 2002. When it had approached LOT-daughter Centralwings, some sort of LCC alliance was imagined. The first LCC in that formerly communist part of Europe was SkyEurope from Slovakia, then out. Smart Wings started in 2004 as the low-cost daughter of Travel Service Airlines. Wizz Air, formed in Poland by former Malev CEO Varadi and registered with Hungary, started in 2004. It showed ambitions with subsidiaries even in Ukraine and Georgia. It became participated by Indigo Partners of the USA. In 2011 OLT Express started in Poland, formed by a German-Polish enterprise out of Ostfriesische Lufttransport – and closed down. Belle Air, started in Albania in 2006, has announced even flights to the USA, but in 2013 it ceased operations. Blue Air of Romania started in 2004, connecting Athens with Cyprus in 2016 after interruption of Cyprus Airways.
In Russia and CIS countries, a multitude of newcomers opened up the skies, in many cases beginning with old Yak planes. In the Western literature they are not registered as LCCs. A short-lived Avianova was mentioned, founded under participation of the Texas-Pacific Group, out in 2011. Sky Express, 40% owned by Kras Air, was a low-cost carrier, in 2011 its operations being taken over by Kuban Airlines, both owned by the group of oligarch Deripaska. Russia’s conventional long-distance trains were still running, but in 2013 Aeroflot founded low-cost daughter Dobrolet. The Ukraine conflict caused a boom in flights to Simferopol on Crimea, reportedly subsidized. Dobrolet was considered to profit and Western sanctions banned it, whereupon in 2014 it was renamed Pobeda, what means “victory”.
AirAsia, Jetstar and others Mainly in the Asia-Pacific region a multitude of low-cost carriers emerged, not all of them to be mentioned here. Air Japan was founded in 1991, like Air Next being a subsidiary of ANA, followed by Skynet Asia. JAL Express of Japan Airlines started in 1998, followed by Air Do and other low-cost airlines. Largest low-cost carrier, developing into a mega group, has become AirAsia, started in 2002, built up originally as Tune Air by Tony Fernandes out of an unsuccessful national startup of 1996 in Malaysia. Reportedly this leading low-cost carrier in Southeast Asia spent to fly one passenger one kilometer roughly half as much as Ryanair and a third of the cost by Southwest. Then it expanded in an amazing way with its international participations in the Asia-Pacific region. Thai AirAsia, AirAsia Philippines, a short-term AirAsia Japan (with ANA, in 2013 becoming Vanilla Air) and taking Awair of Indonesia was reported (by B.I. Hengi), becoming AirAsia Indonesia. In 2013 the intention of founding an airline in India together with the Tata Group was reported and in 2014 AirAsia India started. At the same time an AirAsia project in Turkey had been rumoured. In 2017 a subsidiary in Vietnam was founded, Air Asia China was announced and a new AirAsia Japan started. Low-cost subsidiaries were established by standard airlines, such as One-Two-Go by Orient Thai of the past, Nok Air by Thai Airways, Thai Smile of Thai International or Tiger Airways by Singapore Airlines, then labelled Tigerair. The group added Tiger Airways Australia, but then it was banned from Australian domestic services with dubious arguments. The story continued with participation of Virgin Australia in Tiger Airways Australia. In 2012 the Tiger Aviation Group took a 40% share in South East Asian Airlines of the Philippines, its A320s being initially intended for entering Mandala Airlines of Indonesia. In 2017 Tigerair became the combined Scoot Tigerair and a Value Alliance was founded to comprise also Cebu Pacific, Jeju Air, Nok Air, Tigerair Australia and Vanilla Air. A country of pioneers starting competition against the traditional airlines became Indonesia with its large newcomer Lion Airlines of 2000 and its subsidiaries Wings Air, then also Malindo Air in Malaysia, renamed Batik Air Malaysia, and Thai Lion Air. In 2019 Citilink of Garuda intended even A330 flights to Europe. A large airline on the Pacific Rim has become Jetstar Airways, started in 2004 as a low-cost subsidiary of Australian flag carrier Qantas, which has purchased Impulse, extending its activities optimistically to a “mega” multi-national. In the same year 2004 Jetstar Asia started international services from Singapore, participated by Temasek Holdings, then joined by ValuAir. In 1990 the market liberation in Vietnam has allowed to found Pacific Airlines, in 2007 entered by Qantas with a 30% stake, then renaming it Jetstar Pacific. In 2012 state-owned flag carrier Vietnam Airlines got a major share and so it became a joint-venture. When original Qantas was almost killed by strikes in 2011, it proved a wise decision to build this foothold on the wide Pacific Rim. In 2005 strictly regulated China allowed the start of privately-owned Okay Airways for mixed traffic in competition to the standard carriers, to be followed by other ones. China West Air of 2007 was classified as a typical low-cost airline, then named West Air. In 2017 also a West Air with HNA label was watched. West Air had been surpassed by Spring Airlines of 2005 and by Capital Airlines of 2010, emerged out of Deer Air. For HNA see the chapter Mega Groups. Standard carriers were the leaders and China built world’s longest high-speed rail network.
Indian Subcontinent In India the boom came later. Privately-held Air Deccan was the first low-cost airline, founded by Captain Gopinath, starting in 2003. India’s failed newcomer Kingfisher Airlines had taken over Deccan, becoming its low-cost subsidiary Kingfisher Red. IndiGo started in 2006, founded by InterGlobe Enterprises and Rakesh Gangwal. It targeted to surpass Air India Express of Air India, JetLite of Jet Airways (which took over Air Sahara), GoAir and others. Another expanding low-cost carrier emerged with SpiceJet, its roots going back to Modiluft. But in 2018 Financial Times reported losses of IndiGo and SpiceJet and informed: “Analysts say Indian airlines have so many aeroplanes on order they dare not rise ticket prices…” In Sri Lanka, Mihin Lanka of 2007 was classified as low-cost. Latin America In Mexico, Interjet started in 2005, Volaris in 2006, MexicanaClick of Mexicana (originally Aerocaribes) in 2008. Volaris, having been founded originally as Vuela under participation of TACA, expanded its services internationally and started Volaris Costa Rica. In 2007 VivaAerobus has been founded under participation of Tony Ryan, opening also services to Texas. The Irelandia Group of the Ryan family was reported having left Viva Aerobus, raising its share in Viva Colombia and starting Viva Peru. Traditional Copa Airlines of Panama, owning Copa Colombia, the former Aero Republica, introduced a Wingo branding. Indigo Partners, a private firm of the USA, had entered Volaris. A sensation had become the success of GOL in Brazil. Created in 2000 by 32 years old Constantino de Oliveira, son of a bus entrepreneur, GOL has achieved a profit margin of more than 20%, thus beating Ryanair and Southwest. GOL became described as the second largest airline in Latin America, while traditional carriers went bankrupt. In 2009 Varig operations were fully integrated. In 2011 GOL acquired Webjet, possibly on account of its Sao Paolo slots, and closed it down. A competitor became Azul, started in 2008 by Brazilian-born David Neeleman, who already had founded JetBlue in the USA. JetSmart emerged, owned by Indigo Partners.
Mideast Turkish Airlines started in 2008 its low-cost subsidiary Anadulu Jet. A low-cost pioneer has become Air Arabia of Sharjah, starting in 2003, expanding with subsidiaries in Morocco, Egypt and Jordan. MenaJet of Lebanon, starting in 2004, and Jazeera Airways of Kuwait were among the low-cost pioneers, too. In 2006 Nasair started in Saudi Arabia, then labelled FlyNas. Al Maha Airlines, a Qatar subsidiary, and Saudi Gulf Airlines started in 2016, though Saudia daughter FlyaDeal followed in 2017. In 2009 FlyDubai, the low-cost subsidiary of Emirates, launched services from Dubai, expanding its network. In Israel, El Al started low-cost daughter Up. Africa Flag carriers’ subsidiaries and other low-cost airlines followed also in countries of Africa. Nigeria’s first low-cost carrier Dana Air, started in 2008, is just one example. In South Africa, Kulula, created by Comair in 2001, became the well-known low-cost carrier. South African Airways started Mango in 2006. 1time Airlines of 2004 was the main competitor. When it collapsed in 2012, omnipresent Stelios Haji-Ioannou took over. He had tried already to enter Fly540 of Kenya and then he established FastJet Tanzania, in 2012 planning international services, described as the start-up arm of a growing pan-African regional low-cost airline. ATR.72 of Fly540 Angola appeared with the fly540africa label. But the group “has scaled back its growth targets amid lack-lustre passenger numbers”, as Financial Times stated it in 2016.
Long-haul Expansion There had been earlier long-haul initiatives, some ones rather unknown. In 1953 TREK Airways was founded in South Africa, flying to Europe with Vickers Viking turboprops, including overnight stays in hotels. In 1964 flights to Luxembourg were started, connecting there with Luxair. Being interrupted on account of ‘apartheid’ politics only temporarily, the low-fare service was maintained until 1994. In 2004 Phuket Airlines from Thailand has introduced London – Dubai – Bangkok flights for $250. However, on account of faults with its old 747, Phuket was expelled from London. Flyglobespan with flights from England to North America disappeared in 2009. An example of long-haul budged services in the early 21st century has become AirAsia’s participation in Haj pilgrims’ flights with 747s from European Aviation. AirAsia X, with a minor participation by AirAsia and by the Virgin Group, started in 2007 international long-haul services. In 2012 however it stopped its A340 flights to London Gatwick and Paris Orly, targeting a concentration on the Pacific Rim and Australia with Thai AirAsia X. Indonesia AirAsia X stopped flights to Tokyo in 2019, while Jetstar Japan announced long-distance flights. In 2011 Singapore Airlines has announced a long-distance low-fare subsidiary in order to compete with AirAsia X and Jetstar Asia. In 2017 this Scoot selected Athens as its first European destination with the B.787. Kingfisher Airlines of India had “put on hold” international long-distance flights, before it collapsed. AirBlue of Pakistan launched in 2007 flights to Manchester via Ankara. Air Arabia has started operations in 2003 with flights from Sharjah to Pakistan, the home country of migrant workers. Bahrain Air launched flights to India, like also FlyDubai, targeting an extension to Europe and to Africa. Wow Air of Iceland offered in 2015 almost daily flights to the USA, in 2018 it announced flights Kevlavik – New Delhi with the A330 and Icelandair tried to save it. More serious appeared the assumption by Flight Intl (in Jan 2019) that JetBlue contemplated North Atlantic services. Azul of Brazil opened scheduled services to the USA with the A330 in 2015. Norwegian Air Shuttle has roots going back to 1993 with regional services. International flights started in 2003 with B.737s, remarkable for their stylish portraits on the tailfin. Fly Nordic was taken over. Norwegian’s footholds anywhere were reported, North Atlantic and B.787 South Atlantic flights, and in 2018 it started Norwegian Air Argentina. Norwegian, 27% owned by founder Bjorn Kjos and chairman Bjorn Kise, has become flashy for the media with its courageous investments. In April the share price soared when British Airways-dominated IAG bought a minuscule 4.6% stake in Norwegian. All these stories are just a few examples out of the confusing low-cost market, not to be updated continually. And all the insolvencies cannot be listed here.
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