Speaking at the Capa Acte Global Summit in Amsterdam, Wizz Air founder and chief executive Jozsef Varadi said the low-cost sector currently accounts for more than 40% of short-haul capacity at the moment.
However, he argued that this could increase to between 60% and 70% within 10 years, forcing legacy carriers to rethink their business models in order to survive.
Wow Air founder and chief executive Skuli Mogensen agreed that any new airlines launched within the decade are unlikely to be legacy ones due to the success of the low-cost model which regularly records profits.
While AirAsia group chief executive Tony Fernandes also agreed the model will continue to grow in success, he argued it will polarise the market.
He said: “The reality is in the short-haul market, airlines will gravitate towards full service or low-cost.
“Low-cost will be the demand provider in the short-haul market and low cost will be the driving force in long haul.
“For the first time full service airlines will make money doing what they do best, which is serving premium passengers.”
Ryanair chief commercial officer David O’Brien said LCCs in Europe will need to maintain cost discipline to stop new ones coming in beneath them
He agreed legacy carriers will not find it plain sailing, adding: “Quite a few legacy carriers around the edges, particularly central and eastern Europe, are on shaky ground but the large ones, in my view, will still be there for political reasons if nothing else.”
Fernandes added one market that he believed LCCs were yet to fully corner was the business travel market for SMEs.
He said: “The reality is we’ll go over that market but I don’t think we would change our model to serve business customers; there are many price-sensitive business customers that are growing all the time [in number], especially in the short-haul market.”
He added the LCCs were attractive to the sector not just because of the pricing but also because of the frequencies they offer.
Fernandes said: “The market is there and we want to go after it and be a part of it.”
By keeping its current business model, he added AirAsia could avoid the fate of LCC Virgin Blue which made itself vulnerable to its bigger local competitor Qantas when it decided to go upmarket.
And he argued AirAsia X had been successful as it was properly differentiated from parent company AirAsia.
“AirAsia X is Air Asia on steroids, good steroids,” Fernandes said. “We’ve taken it, pumped it up by a few degrees and put some nice seats at the front.”
