There is a race on in Europe to offer discount fares between that continent and the U.S. So far the move has received little attention or concern from U.S. carriers, mostly because they gain most of their revenue from domestic routes.
This could change as competition in Europe heats up and is worth watching, especially for investors in both overseas and domestic airlines.
Recently British Airways became the latest full-service airline to offer low-price flights across the “pond.” Also, International Consolidated Airlines Group SA (IAG) said Friday it was creating a Barcelona-based budget carrier to fly between Europe and the U.S. West coast.
Others in the mix include Air Canada, Deutsche Lufthansa AG and Air France-KLM SA. These and other budget carriers offer tickets as low as half the cost of traditional fares. Norwegian Air Shuttle ASA, for example will offer fares as low as $69 one way between New York and London in 2017.
Method And Madness
For these cross-Atlantic low fare carriers, cheap tickets come at a price (so to speak). If you want a hot meal on that Norwegian flight, it will cost $31.50 for service for 2 on the 7-hour journey.
Willie Walsh, IAG Chief Executive, who has been watching Norwegian’s progress said, “They have actually demonstrated that consumers will accept some things that people questioned whether they would work on long-haul.”
U.S. Carriers Say ‘Ho Hum’
So far, for the most part U.S. carriers have taken a ‘no big deal’ approach to the low cost trans-Atlantic fares. Delta Air Lines Inc. (NYSE:DALC) President Glen Hauenstein said he believed the routes were “probably the least impactful” of a number of headwinds in that market, in the short term.”
Neither American Airlines Group Inc. (TSX:AALC), Delta nor United Continental Holdings Inc. (NYSE:UALB) have taken steps to combat the low fares although Delta did begin offering “Basic Economy” fares on some overseas flights.
Looking Toward The Future
With American, Delta and United all seeing excess unused capacity in the transatlantic market some say it’s only a matter of time before the U.S. ‘big 3’ jump into the low-cost market.
Southwest Airlines Co. (NYSE:LUVC) has indicated transatlantic flights are a future possibility. For the immediate future, however, Southwest is expected to concentrate on Latin America and the Caribbean.
One U.S. airline, JetBlue Airways Corp. (NASDAQ:JBLUC) is seen as the one carrier most likely to try low-cost transatlantic fares sooner rather than later. Analysts and experts point to the fact JetBlue has expanded service to dozens of Caribbean destinations as evidence the company is ready to take on Europe. Recently JetBlue’s Mint premium cabin provides a product similar to that of global carriers on international routes.