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Why Long-Haul Low-Cost Airlines Always Go Bankrupt 

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Writing by Sam Denby
Research by Sam Denby and Tristan Purdy
Editing by Alexander Williard
Animation by Josh Sherrington
Sound by Graham Haerther
Thumbnail by Simon Buckmaster

Select footage courtesy the AP Archive

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3-Dek, 2020

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MEDICINA EM DIA
MEDICINA EM DIA 3 kun oldin
Considering Azul has lie flat beds should it still be considered low cost ???
Shaun81000
Shaun81000 10 kun oldin
12:53 what place is this? Looks cool
Goytá F. Villela Jr.
Since when is Azul a low-cost airline? Well, even mainline carriers are adopting low-cost methods, but being low-FARE is a different story. Azul may have slightly lower fares in its few long-haul routes (VCP to LIS, FLL, and seasonally OPO and MCO, as well as seasonal flights to these same destinations from other Brazilian airports), but Azul is a full-service carrier that competes with LATAM on those routes. Occasionally, LATAM can be even cheaper, and many passengers from São Paulo, by far the largest Brazilian aviation market, find it a nuisance to take a 1:30-2 hour road trip to distant Viracopos Airport, Azul's main base. However, everybody is unanimous that Azul's service is far better once you're on board.
Matheus Bruno
Matheus Bruno 16 kun oldin
Never though Azul as low cost cause price is Just 20% cheaper than others (at least flights in Sotheast Brasil), besides it has onboard service. But now I stopped to think and shit#@ they give me chips, soda and gummyes and still 20% cheaper".
jacky mai
jacky mai 17 kun oldin
The garrulous active only thaw because silver cytochemically tempt about a scary angle. vivacious, maddening french
Marc Edward
Marc Edward 20 kun oldin
I love how Cebu Pacific is included #FilipinoGang #Philippines I love both Philippine airlines Cebupacific and Philippine airlinss
Sigen
Sigen 21 kun oldin
The name is Norwegian Air Shuttle. Not Norwegian Airlines.
LawrenceNL
LawrenceNL 22 kun oldin
'Airlines' is a plural. While we're at it, so is 'phenomena'.
TheSquarecow
TheSquarecow 29 kun oldin
I think this video missed that both Tui and Condor are not really "stand alone" airlines, but are heavily intertwined with the german tourism industry. Tui by itself isn't an airline at all, it's a tourism conglomerate that owns hundreds of hotels and also happens to have its own airline. It's customers are mostly generated from package tours sold by TUI where the flight is one component of many and the customers don't care much one way or the other which airline is getting them to their favourite hotel. Condor is the tourism wing of Lufthansa (or at least used to be) and also gets its fair share of package tours. This is different busines model from "we transport passengers from A to B for price X".
Mchannnel
Mchannnel Oy oldin
ZIPAIR is planned to be an long-haul LCC and I'm genuinely worried cuz they're aiming for an model close to Norwegian
fabio cavaleri
I totally agree, Neos, a small liner company in Italy "born by Tui" and one of the few profitable here, work in the same way, few fly weekly and for tourist/low demand area
Davis Byer
Davis Byer Oy oldin
Westjet is no longer a low-cost airline. They abandoned the Southwest model years ago.
Tom D
Tom D Oy oldin
Such an interesting and thorough analysis!
Nick Webster
Nick Webster Oy oldin
Having a high number of hubs only works if the airline is based in an air market with multiple disparate hubs and a high population base. That pretty much means the US, the EU, Brazil, China, India, or Russia. I could definitely see one of the US-based ULCCs (Frontier, Spirit, et al) adding long-haul flights to underserved routes, such as Portland-Quito, Columbus-Seoul, or Buffalo-Lisbon. (I pretty much pulled those city pairs out of thin air.)
Daniel Krajnik
this is amazing also what's happened with the subtitles
S I O M A I
S I O M A I Oy oldin
When I heard Cebu Pacific, I looked
carl rowland
carl rowland 2 oy oldin
Not really fair comparisons as condor and tui’s passengers are mainly from the companies own travel agents.
Maximus
Maximus 2 oy oldin
WestJet wasn’t a low cost airline in my opinion. They’re the second largest airline in Canada
jeturner99
jeturner99 2 oy oldin
4 ads during one video... Wendover what are you doing??
Arvind
Arvind 2 oy oldin
I like Half as Interesting more for the humor content
YourPalAL
YourPalAL 2 oy oldin
Suspiciously low prices make me nervous, especially when flying.
2 8
2 8 Oy oldin
Why?
Robert Michaels
Robert Michaels 2 oy oldin
Because fuel costs money
Mudhaffar Adhwa
Mudhaffar Adhwa 3 oy oldin
"stimulate demand on routes with low demand* Low cost, long haul airlines: opens Pyongyang to Washington DC route
QuarioQuario54321
The captions think he’s speaking Vietnamese
Alestra
Alestra 3 oy oldin
Im sure TUI and Condors passengers are around 80% people who booked a whole Holiday with TUI or another company. Only a little percentage is booking only the flight which is why i wouldnt call them low-cost Airlines
DOM solanke
DOM solanke 3 oy oldin
As a Canadian we all know Westjet is not a low cost longhaul Airline, its literally the same prices as the legacy carrier Air Canada
Matthew Riege
Matthew Riege Kun oldin
Yeah, I feel like Air Transat would have been a much better candidate for this video.
NekoRocket
NekoRocket 3 oy oldin
Aircraft Utilization also has a high R2 at 0.1439. Is there a reason this isn't considered in this analysis?
Noah
Noah 4 oy oldin
More ✈️ Plane ✈️ Videos!!! ✈️
Serg
Serg 4 oy oldin
"statistics" on a dozen of observations
Arya Pourtabatabaie
Please do a collab with TIK on the logistics of the WWII Eastern Front.
aswler
aswler 4 oy oldin
So interesting and clearly explained! I stopped travelling on a few European low-cost carriers because they started charging even for your standard-sized carry-on bag, only allowing a "purse" for free. I do not like this approach that they force me to reduce the size of my baggage even more. I am talking about Wizzair and Ryanair.
jasonsuresh
jasonsuresh 4 oy oldin
Norwegian made this mistake in the north of the UK. They started flights from Manchester, the most saturated market in the north of England, rather than going to nearby big cities that had no long haul flights (Leeds/Liverpool) where they could have swept up a burgeoning market. The airline industry is often held back by not enough out the box thinking and too much focused on the tried and tested - where success has been achieved it has been through changing the system like with Ryanair going into all the smaller airports that flag carriers hadn't even given a second thought to.
Milan Svitek
Milan Svitek 4 oy oldin
R.I.P. Wow Air... Flying between Canada and Europe for a hundred bucks... Was nice while it lasted :(
Chris Rebehn
Chris Rebehn 4 oy oldin
Loving this video, but you should have had a look at ownership and alliances, which appear to be a huge success factor besides network design. What sets TUI and Condor apart is that they are part of massive, fully integrated tourism companies. That means that when you go to a TUI travel agent, they will likely book you into a TUI-owned hotel and in a chartered seat on a TUI flight. Now, logically, the flights will go from where their customers are to where their hotels are while schedules and capacities are closely linked. I would assume that they fill most if not all of their seats throught this channel; I've literally never seen a TUI flight publicly sold online, you have to get a charter seat from your travel agent. Consider also that the highly profitable Condor had to be bailed out when their parent company (with its tour operators, hotels, and travel agencies) went out of business and the charter seats were lost. They also don't really have a hub model, they just depart from as close as they can to as many of their customers as possible. At the same time, Scoot, Jetstar, Azul and WestJet have codeshare and interline agreements with mainline carriers (the parent companies for the former two, and a whole lot of international airlines for the latter) which creates synergies between both business models and gifts the LCC with additional passengers who use them to connect to their final destination; the LCC owned by full service carriers are even strategically used to service low-frequency routes or leisure destinations to expand the mainline network. Lufthansa has used this logic to cut cost (and prices!) in the short-haul market when it transferred all routes outside their main hubs to Eurowings and had them open some to holiday destinations. Other LCCs partner with foreign airlines looking to expand their market access in certain regions without having to open new routes themselves - Air Berlin's fateful Etihad partnership was one of those. AirAsia X likely tried to emulate that model trusting in their own substantial route network in the region but failed to take into account that most of their feeder markets already have direct long haul flights (from BKK, SIN, CGK, HKT, DPS, etc.)
GoinManta
GoinManta 4 oy oldin
Got a question I havent seen answered yet.. In June ticket to Berlin is a one stop for $800 DC thru Frankfurt. Frankfurt Nonstop from DC is $1800. Guess what ?? Same flight to Frankfurt. Also when I try to get a one way ita cheaper to get a round trip... Can you Explain that..?
fighter5583
fighter5583 4 oy oldin
So from my understanding, when Norwegian tried doing Low cost long haul flights, they were setting themselves up to fail given the numerous carriers flying those same routes. Not to mention dealing with 3 huge airline groups.
Gregor Alexander
Gregor Alexander 4 oy oldin
Damn, watching this in 2029 remembering when covid was harmless compared to now. 2020- the good ol’ days
Serenity17
Serenity17 4 oy oldin
I'm so sad wow air went out of business. The cost to go to Amsterdam is now 2.5x what is used to be... I didn't know how good I had it back then.
LMLMD
LMLMD 2 oy oldin
Yep. It's like when Air Asia X pulled out of Europe. London to Perth via KL for under £300? Happy days...
Tekno77
Tekno77 2 oy oldin
Wait you're alive!! Bro I miss your r6 vids even though I don't play r6 anymore.
karebu2
karebu2 4 oy oldin
So low cost long haul airlines are just messing with passengers by selling them food on a cart when it actually doesn’t cost them much
tim berry
tim berry 4 oy oldin
Tui Is not really an airline. The vast majority of tui passengers are on package holidays booked with TUI therefore generating passengers that generally wouldn't exist without the package holiday.
henanigans
henanigans 4 oy oldin
3:15 why are all of these regressions linear? I would think you'd get a better r²-value for at least some of them if you tried different graphs (exponential for example)
Remco F. Gerritsen
So much math
Cássio Lins
Cássio Lins 4 oy oldin
The fun thing is that Azul is actually the most expensive (in average) airline for domestic flights in Brazil.
Double - You
Double - You 4 oy oldin
The sole reason West Jet is profitable is because Air Canada is just so damn bad, the could serve shit sandwiches for lunch and people would still fly West Jet.
Jack McLane
Jack McLane 4 oy oldin
TUI is also a full scale vacation corporation with travel agencies, resorts and everything related to (upper) middle class vacationing. They can fill their planes also with their own customers. You can see that they primarily connect semi-exotic vacation destinations to europe. Other than vacationing, long haul flights are MOSTLY for business travellers... those that don't ultimately care about 50€ cheaper ticket prize, because it's not them that pay it. They prefer a juicy bonus program, lounge access and status miles. There are not that many people with intercontinental family ties.
Thomas G
Thomas G 4 oy oldin
Ryan air??? Low cost????????
Sailor
Sailor 4 oy oldin
tl;dr, blue ocean strategy good.
Robert Andrews
Robert Andrews 4 oy oldin
What's the point of these subscription based learning programs? If passing a class doesn't help get a job, how can it benefit someone taking the classes? I'm guessing it's just if you want to learn something, if only the classes would help with credential.
Charlie
Charlie 4 oy oldin
Jet star is owned by QANTAS, and does both long and short haul flights in Australia. It also helps that the biggest competitor to Qantas went under first with Ansett and then Virgin
Aviraj Singh Mehta
The R square values are a joke All the variables are not at all useful
Kevin Lombardo
Kevin Lombardo 4 oy oldin
In the time since this has come out, norwegian has also gone under for long haul.
Tim Thompson
Tim Thompson 4 oy oldin
Low cost in words! A myth, but not in price!...All added extras/baggage/food/seating...etc...Adds up to high cost scheduled travel.. Reason for Banktruptcy!
Tegos
Tegos 4 oy oldin
Azul Airlines operated long-haul flights at reduced costs until 2019, I believe. I remember their flight from São Paulo to Fort Lauderdale was a lot cheaper than other flights from Brazil to the US. But from what I've seen in 2019 and 2020, they raised their prices to match other airlines in Brazil. I'm pretty sure the lower prices was a wonderful PR move for them, though. They've been regarded as the best airline in Brazil for a while now. PS: good job on your pronunciation of "Recife".
Khalid Abdulghani
Ironic how after this video was released Norwegian has permanently suspended long haul operations with their Dreamliner. 😢 hopefully not more to come though 🤞
Shian
Shian 5 oy oldin
3:15 Label your damn axes 🤦‍♀️
hitempguy
hitempguy 5 oy oldin
While the r2 of a linear regression can vary in the result, anything as low as 15% is for all intents and purposes useless. Not that I'd expect anything less from this channel. Pushing pseudo-knowledge of topics is not the same as being an expert, always hilarious when you run off the cliff of not knowing shit from shinola
Lee247
Lee247 5 oy oldin
I see a Tui 787-9 every month at kingston BA competes with them with the 777 200ERs i would rather fly tui to where it goes in UK rather than BA
Sergei Garbar
Sergei Garbar 5 oy oldin
Only Sami Puro knows the answer. )))
ChrisYeoh
ChrisYeoh 5 oy oldin
Norwegian Long Haul is now kaput! The next one would be AirAsia X.
LP Pokefan
LP Pokefan 5 oy oldin
Who is here after Norwegian decided to cancel it's long-haul business?
tuban body slammer
R^2 of .36, .16 or .15 is not correlated at all, also the .36 you should remove the high leverage point at the top right. this video is rediculus
Guilherme Moritz
Guilherme Moritz 5 oy oldin
By Brazilian standards AZUL is not a low-cost carrier, it is actually the expensive one, even in the long haul market. Brazilian's low-cost carrier is GOL.
Pétrou Velteau
Pétrou Velteau 5 oy oldin
9:58 what the hell is that woman doing
WithTheWorks
WithTheWorks 5 oy oldin
Recognizing that 'data' is plural and using the appropriate grammar is my kink
Lars Gravdal
Lars Gravdal 5 oy oldin
Here after Norwegian quitting long-haul to even stay afloat. Take a look at its share price to see how much they're struggling, efficiently bankrupt.
Roberth Sjonøy
Roberth Sjonøy 5 oy oldin
Norwegian has just announced that they getting out of the long -haul business.
Jim Heeren
Jim Heeren Oy oldin
damn shame
Violan Miro
Violan Miro 5 oy oldin
Your method in using statics is fundamentally flawed. A R2 of 0.36 is not conclusive. Linear regression with only one variable is not the standard procedure. If you absolutely want to make a regression, you should do one with multiple variables and try different models. But you shouldn't even try using regression methods first, because you can't be sure that your variables are independent. Onr method that would be the more adequate if you think that your meaningful variables are linear dependent would be PCA. And even that would not be conclusive, bexause the size of the sample is so small. I am not an expert in statistics (geometric toplogy which is far off), but I am quite sure that what you did is a mathematical nonsense. You should read undergrad level statistics and you woukd understand what are the issues and with postgraduate books I am sure that you can find a method more effective.
Shinbaal99
Shinbaal99 5 oy oldin
I really miss long haul travel corona be damned!
Alex Zetsu
Alex Zetsu 5 oy oldin
P-values not R squared should be used. An extreme case is if you only had 2 airlines to study, everything would be perfectly correlated. Likewise, as you get more data (or... maybe not since that would mean more low-cost airlines opening up and that would distort data by adding competition and making existing airlines less profitable rather than complementing existing data) other factors you dismissed as unimportant like GDP per capita of origin, aircraft utilization, aircraft capacity, might actually turn out to be important. Or maybe you'll find they still aren't imporant.
Jake Day Williams
All in on charters.
Douglas
Douglas 5 oy oldin
Latam is a merge between TAM and LAN Airlines. TAM was always about quality, so you could consider it a full service. LAN I don't know since its from Chile. But one thing I can say for sure: LATAM is none of them: neither quality or cost, that is why Azul is growing a lot. Azul is cost AND quality. With a horrible competitor like that you definitely gets a fair share of the market.
Douglas
Douglas 5 oy oldin
To summarize: flying still very expensive for a lot of people and they are already talking about tourism to Mars.
Jordan
Jordan 5 oy oldin
Where did you find the dataset? Is it publicly available anywhere?
Nihonium Mapping
Nihonium Mapping 5 oy oldin
It's pronounced Cebu Pacific, not Ceebu Pacific. Sorry, I can't stand it when the city I'm in is pronounced wrong.
Nerte
Nerte 5 oy oldin
The auto-generated subtitles are completely messed up and unusable. Please, add actual subtitles to your videos - you probably read your script from the written form anyway.
Zhi Han Lee
Zhi Han Lee 5 oy oldin
Scoot does short-haul low-cost flying too, after TigerAir in Singapore was merged into it in 2017 (it's Australian & Taiwanese subsidiaries were sold to VA & China Airlines respectively IIRC, who continue to retain it's original branding). Also Scoot might be relatively more financially secure as it's under SIA, with it's financial backing, & their low-cost & full-service flights respectively are also more co-ordinated, reducing canibilisation of each other's markets for flight routes e.g. Scoot flies from SIN to numerous smaller cities not (or formerly) served by SIA e.g. Nanjing
Fernando Campos
Fernando Campos 5 oy oldin
Simply nailing the pronunciation of "Recife", I'm impressed! Hahaha
DELICIOUSCHEESE999
R^2 values are extraordinarily low to draw strong conclusions here my dudes
Allie Gottuso
Allie Gottuso 5 oy oldin
The distinct tomato minimally squeak because jute proximately chop alongside a delicate whorl. bawdy, slippery bail
pipiligrama
pipiligrama 5 oy oldin
Can’t even imagine how would it be to fly NY to Sidney with a fucking mask on...
Max M.
Max M. 5 oy oldin
Great Video
Shivang Yadav
Shivang Yadav 5 oy oldin
This person sounds like half n intersting channel person but with not humour
Agon G
Agon G 5 oy oldin
I wouldn't call westjet "low cost" given for all their routes I've flown they are exactly the same cost as air canada or even more expensive sometimes.
Isip
Isip 5 oy oldin
Cebu Pacific: does everything that they should not do Also Cebu Pacific: profit
Maximiliano Leon
Maximiliano Leon 5 oy oldin
So its more profitable to find your niche than to compete with the big boys
Artur Castro
Artur Castro 5 oy oldin
Calling R squares of 0.16 and 0.36 very significant is a bad analysis at best
AleParmi
AleParmi 5 oy oldin
I'm not entirely sure that creating demand is the only key factor for success in this case. Condor and TUI have a very strong connection to tourist platforms and agencies. People buy holiday packages with the flight included. This is proven by the fact that buying a flight tickets only, with TUI and Condor, is much more expensive than purchasing it within a package.
Max
Max 5 oy oldin
woah you sound just like half as interesting, like literally the same wtf
Lars Vos
Lars Vos 5 oy oldin
Tui has another thing that works in their "favour" the flights they operate are (mostly) part of a package deal they offer, since they also own a lot of the resorts/hotels at their destination. So they are just feeding their own destinations. Yes they also sell seperate tickets but most people fly them because they booked a package deal with them. They kinda create their own demand, and since they oparate all over europe its easy for them to switch/send aircraft to where demand is more needed. (All pre-covid offcourse) during covid they were offering a lot of flights to places where it was still allowed/safe to travel like the Canary islands, Aruba, Bonaire and Curaçao where they would be feeding their own destination. And they could easily adjust demand depening on the status of their destination (green,yellow or red)
Steindele
Steindele 5 oy oldin
Thanks for your awesome videos!!
Šimon Vávra
Šimon Vávra 5 oy oldin
9:48 omg that beautiful Prague!!
Andrey Kelip
Andrey Kelip 5 oy oldin
in 2020 ALL airlines go bankrupt.... ((((
Justice Warrior
Justice Warrior 5 oy oldin
You did better RND than high paid CEOs in these companies!!!
Harsh Deep
Harsh Deep 5 oy oldin
Stat people in the comments: ???? all these correlations are hella weak.
Chris Skuse
Chris Skuse 5 oy oldin
West jet is not low cost or at least they’re trying to leave that market/reputation
little boy man
little boy man 5 oy oldin
and ill KEEP flying westjet because one time a westjet flight attendant complimented my totoro necklace
Stairway to Motivation
I appreciate your efforts put into the research and analysis. It's really great to see the aviation-related topic in the form of substantive video material that others can share and easily understand. However, your work is missing some crucial factors that answer why some airlines are successful, and some are not. Condor and TUI are in fact leisure and charter airlines, most of their seats were sold to tour operators, with TUI Airways (and subsidiaries) being a part of TUI Group, a tourist tycoon. Condor was owned by Thomas Cook, before its bankruptcy, then a new owner was sought, which was not found, the airline also had an affair with LOT Polish Airlines (in conjunction with the Polska Grupa Lotnicza), and 30% of the passengers were delivered by the Lufthansa Group, which was a feeder to Condor. It is not entirely appropriate to compare them with the other low-costs. It is a different business model. Eurowings was looking for its recipe for success, and the Germans did not really know what to do with it. The airline was successful on short-haul routes but unsuccessful on long-hauls. Before the COVID-19, Lufthansa Group was planning to launch new long-haul leisure, charter carrier, to replace Eurowings. Jetstar is a part of Qantas Group, while Scoot of Singapore Airlines Group, they are utilizing budget niche on their markets. Cebu and Azul are successful examples of low-cost airlines, but this is due to the markets they serve. Norwegian and Air Asia X sought success unsuccessfully, with the Norwegians effectively burning money on long-haul routes. WestJet was transitioning to a full-service carrier and launched its ULCC subsidiary - Swoop, flying only short and mid-haul. WOW Air failed, as Iceland market was not enough for two carriers, and they were not able to duplicate Icelandair's hybrid business model and strategy. So that is how it should be described, but you were right in the end. The clue is that the only scalable way for low-costs to succeed on long-hauls was to serve the tourist traffic, with charters and leisure routes, in cooperation with large tourist partners.
Bernard von Schulmann
I think having WestJet on this list is not really correct. WestJet flys almost all its flights within Canada, which by nature makes their flights long but they are the only serious competition within Canada to Air Canada. WestJet uses the low-cost airline model but in this case in a very restricted market. WestJet will add and drop routes within Canada depending on demand, and they do this rather quickly. They will try a route for six months and then drop it, or make it only seasonal. WestJets international flights are almost in the winter months from Canada to warn holiday destinations. This has always been a very large charter market within Canada with low-cost flights. Because of the size of Canada and the linear nature of where the population lives, even with a population of only 37,000,000, the country has a lot of air travel across the nation. The restrictions against non Canadian airlines means the market here is well suited to an airline duoploy
Max T.
Max T. 5 oy oldin
norwegian is blessed honestly
Mads
Mads 5 oy oldin
RyanAir: Are you sure about that???
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