Point-to-point airlines will lead industry recovery

The point-to-point airline business model is likely to benefit extensively from the change in traveler habits as a direct result of the Covid-19 pandemic. Credit: NicoElNino / Shutterstock.

With an increasing desire from consumers to travel closer to home and budget constraints beginning to show, point-to-point airlines, especially low-cost carriers (LCCs), will be well-positioned to lead post-Covid recovery over their hub carrier competitors.

The point-to-point airline business model is likely to benefit extensively from the change in traveller habits as a direct result of the Covid-19 pandemic. Point-to-point airlines focus on serving two points directly, whereas their hub airline counterparts seek to feed traffic through their respective hubs. With consumers now wanting to travel closer to home and limit their interaction with others, airlines offering direct connectivity will be seen as a superior travel option.

Travellers are likely to opt for trips closer to home and choose point-to-point airlines

A GlobalData poll revealed that 43%* of respondents will consider taking a domestic trip in the next 12 months, and 27% will consider an international trip on the same continent.

Domestic travel and short-haul destinations are set to dominate in 2021 as travellers seek destinations that are closer to home. With substantial demand for short-haul flights, many travellers will be seeking the most direct option. Airlines with a robust domestic and short-haul network will benefit from an increase in demand. Furthermore, flying long-haul is often more costly. Some travellers will be looking to curb spending and those operating short-haul, direct routes will win customers in the immediate recovery period.

Low-cost carriers set to benefit the most

GlobalData’s latest consumer survey has revealed that many consumers are concerned about their financial situation with 87%** of respondents ‘extremely’, ‘quite’, or ‘somewhat’ concerned about this. Furthermore, 50% of respondents in the same survey ‘somewhat’ or ‘completely’ agreed that their household budget had reduced in the last year.

Many travellers will be looking to cut costs and LCCs will likely benefit from this. Cost-cutting measures including streamlining operations and salary reductions will allow LCCs to push ticket prices to new lows to win over budget-conscious travellers that historically would have used FSCs (Full Service Carriers).

Legacy airlines will have the advantage by deploying higher-capacity widebody aircraft onto short-haul routes in response to surges in demand. However, widebody aircraft are often configured for long-distance routes, with low-density seating not as well suited for short-haul flying. Furthermore, the cost per seat will be higher for airlines opting for this strategy and it will result in LCCs being in a stronger position.

Bypassing a hub could be considered safer

Flying via a hub airport will offer a greater selection of destinations, but with Covid-19 still widespread, it presents an increased risk of contracting the virus. By flying directly, travellers will eliminate any unnecessary stops where they could inadvertently mix with passengers from around the world, which would notably increase the risk. With point-to-point carriers eliminating the unnecessary stopover and offering the quickest journey time, travellers will be more likely to pay extra to guarantee a perceivably higher level of safety.

With safety still a top deciding factor for travel, many travellers will seek the quickest and most secure travel option. Additionally, financial concerns are still present and LCCs will be in a strong position to attract budget-conscious travellers whilst benefiting from the high levels of pent-up demand as restrictions begin to ease in some parts of the world.

*  GlobalData live tracker Verdict poll of 1,160 respondents, live since 17th November 2020.

** GlobalData’s Q1 2021 consumer survey, 21,768 respondents.

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