While some would argue the trend has long been apparent, with the launch of Level and growth of Norwegian low-cost flights, a new study by Skyscanner has found a the potential opportunity for trans-Atlantic low cost routes between Europe and the US.
The new report highlights the impact of price elasticity on demand, while pointed to the increased demand for the routes among travellers.
Traditionally, many airlines’ attempts to introduce low-cost long haul services have fallen flat.
However, recently the trans-Atlantic market has seen renewed competition from several carriers, argues Skyscanner.
The analysis, derived from Skyscanner’s extensive traveller search and pricing data, shows this market has the potential to be popular for carriers willing to drop their prices due to strong passenger intent for low cost tickets on transatlantic routes.
The study demonstrates the importance for airlines to consider price elasticity: an economic term meaning the ability to understand and measure passenger intent to know how many more passengers would fly if the prices were to drop.
Skyscanner is in the unique position of being able to access data on travellers’ intent by measuring completed bookings on given routes, as well as at what point travellers dropped out the search process, enabling them to draw insights on price preferences.
The report found that compared to other route groupings, the transatlantic market is especially price elastic with ample demand from travellers, which will come as good news to several airlines taking interest in the market, including Norwegian who just announced the launch of a new Rome to New York route at the end of last month.
Skyscanner found that route in particularly has the potential to be popular, however to be profitable, airlines will need to operate under a significantly lower cost or increase ancillary revenues.
Faical Allou, head of business development for Skyscanner’s industry Travel Insight product said: “Low cost long haul has been a segment that carriers have found challenging in the past, however our study underlines the importance of having data to understand price elasticity: being able to consider traveller intent and how this links to pricing on demand for routes.”