How LCC airlines could change the industry forever

“I don’t believe the airlines will disappear, I just believe that’s where you see transformation happen,” says Bill McGlashan, founder and CEO of McGlashan Aviation Group, the parent company of Chicago-based Lufthansa-Fleetlink Airlines. “And…

How LCC airlines could change the industry forever

“I don’t believe the airlines will disappear, I just believe that’s where you see transformation happen,” says Bill McGlashan, founder and CEO of McGlashan Aviation Group, the parent company of Chicago-based Lufthansa-Fleetlink Airlines. “And transformation is not something that happens overnight, but it takes a lot of strategic thinking.”

Numerous airline industry observers have suggested that the industry’s survival depends on the small but fast-growing superbusiness segment, including Emirates, Emirates Flight Network, Cathay Pacific, China Eastern Airlines, China Southern Airlines, and Thai Airways, all of which are attracting significant number of passengers and filling seats with business travelers. Add to that the growing number of high-end, leisure, and interior suites as well as pay-for-off-the-course services, and the case seems even stronger that airlines are becoming the preferred carriers to take control of entire trips rather than merely sell physical goods.

“The thing that’s really exciting for us at Lufthansa is that we’re actually selling to people who’ve already made reservations for three or four months in advance,” says Schildkirch. “It doesn’t happen every day at an airline, because nobody has the wherewithal to sell that way in the U.S.”

“We do believe the segments are the sectors,” says Shahzad Khormadi, director of JetBlue’s LCC category. “Even though the world is traditional, and traditional today is about flying first class, and business class is about flying business class, and business class is about flying business class, that doesn’t mean anything to what we really need to do with our customers.”

What the American market has decided is that the right wing of the jet is of the same scale as the tail, and that the transcontinental flights from Washington to New York’s JFK and LAX will be better served by transcontinental seats to LAX and JFK.

LCC operators say that they see significant future demand for transcontinental flights on some different carriers as well. But that’s only part of the overall LCC story. LCC operators are not only playing to the back of the plane in markets that traditional airlines don’t target, but all the way up.”Think about the days before airplanes didn’t have flaps,” says Terry Trippler, a top airline expert and founder of Aerotropolis.com. “You couldn’t fly overhead.”

Flying high on the arm rest

McGlashan says Lufthansa is approaching its main U.S. customers with the same relationship it has with potential passengers in South America. “We’re dealing with American people,” he says. “The thing that is great is that they’re used to ordering on an iPad and ordering it at kiosks. We’re playing to their aesthetic. We’re at that higher level where you need to make your ultra-premium business suite better, you need to make your bathrooms better. We’re taking what they expect from their hotels and putting that in there.”

That strategy may make sense to the savvy corporate traveler, but McGlashan says it could have a profound impact on the day-to-day operation of most airlines. “Airplanes are becoming such an asset, a business asset, that I think eventually the average airline will need the employees,” he says. “And right now, you have training people to be gate agents.”

Not to mention the amount of frequent-flier miles, which now weigh as much as the weight of an airplane. Many airlines are looking to dial back on that expensive line item, but are not looking at adding more fee points. “Every American wants to get the flier miles,” says McGlashan. “People are not willing to give them up for anything.”

Correction: This article has been corrected to better reflect the role of LCCs in the longer-haul flights on the domestic route network.

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