Battle For The Atlantic

Low-cost carriers are providing serious competition to traditional airlines in the all-important transatlantic market

- Alex McWhirter

As I write these words in late September, investment bank Morgan Stanley has downgraded British Airways owner IAG. Why? Because the outlook for traditional airlines plying the Atlantic has seldom been gloomier.

Back in 1977, Sir Freddie Laker’s Skytrain broke the transatlantic cartel of British Airways, Pan Am and TWA by ushering in a low-fares revolution. Oneway tickets from London Gatwick to New York JFK with Skytrain cost £59 on a first come, first served basis. At the time, I remember people from the regions travelling to London on overnight trains and buses so they could obtain a good place in the queue at Victoria station.

Laker was followed a few years later by US low cost carrier People Express – I remember buying a Gatwick-New York Newark flight (with confirmed seats) in September 2004 for about £130 return. Bear in mind that taxes, fees and charges in those days were just a few dollars.

Back then, it was thought that low transatlantic fares were here to stay. But we were wrong. Skytrain and People Express messed up their sums. Both failed for a variety of reasons, one of which included predatory pricing by rivals. For decades thereafter, cheap fares were only available if you travelled out of season and met restrictions. Those fairly flexible Skytrain/People Express fares never returned.

Some 30-plus years later, it’s all change. The environment for budget airlines is benign. Low fuel prices, liberal aviation treaties and the advent of smaller, more economical aircraft mean the low-cost carriers (LCCs) and other budget operators have returned in a big way.