The global low-cost airline movement has undergone a fundamental change of direction in the past two years, but the biggest shifts in the model are coming, according to a landmark new study by the Centre for Asia Pacific Aviation (CAPA).

Looking to the future, “in most of the more likely scenarios, yield will become increasingly attractive as a refuge for all but the lowest cost operators,” said CAPA.

“High fuel prices the main threat are the most likely catalyst of change in the short term. With the unlikely levels already experienced despite the global financial crisis, speculative activity is tipped to push prices even higher as the economy improves."

CAPA noted that surges in price can be highly destabilizing and one of the few risk management options that most low-cost operators have to guard against this is to search for higher yields.

“This and other uncontrollable externalities both in cost and demand will relentlessly force most low-cost airlines towards reconstituting the network model, domestically and internationally.”

According to the report, the new network version will differ in two main ways: It will use unbundled pricing methodology and low-cost mentality will pervade all phases of the operation.

“Perhaps the most marked example of this evolution is found in the AirAsia/AirAsia X short haul-long haul combination. It is early days to pronounce this a format which can be imitated everywhere, but it does have characteristics that point the way to building an international network system."

"Virgin Blue is following a more conventional, but still expansive, full service approach in its New World Airline model.”

“Other, more tentative steps are being undertaken by carriers such as JetBlue, partnering and code-sharing with Lufthansa, Southwest and others code-sharing with foreign LCCs and going international. There is a common theme in much of this evolution, so a pattern develops."

“In turn this drives suppliers such as GDSs and IT providers to explore new lower cost, stripped-down initiatives. Airports and airways systems feel the pressure to drive costs down and cooperate progressively in innovating all of which supports the need to find more environmentally friendly ways of maintaining the global tourism and travel industry." (EHL)