Power players: Turbulent times for budget airlines

**Rahul Tandon** (0:00)
Budget Airlines have been having a turbulent time lately, and if you've tried to book a short haul flight recently, you probably felt it, I know I have. Fuel costs are high, travel habits are shifting, and the business model that often saw flying cheaper than train travel, well, that is under pressure. So, what's going on, and what does it mean for the way we travel in future?
This is today's episode of Power Players from Business Daily. I'm Rahul Tandon.

**Will Bain** (0:30)
And I'm Will Bain.

**Rahul Tandon** (0:31)
Will, have you felt this yourself? I've just come back from India, and I was looking to book some internal flights there. They've often been quite cheap. I was quite surprised when I added my baggage and food and everything else to it. It didn't feel low cost anymore.

**Will Bain** (0:46)
No, I know. I never want to feel like the Grandpa Simpson mean shouting at the clouds, like you've become some old guy, but I'm sure it was a lot cheaper 10 years ago. And actually, if you look at your bills, I think you probably work out that it was a lot cheaper, as well, and it's that finding anything that feels like a good deal anymore, much more difficult than it used to be.

**Rahul Tandon** (1:05)
Yeah, I spend all my time looking for deals. And when it comes to these airlines, I'm struggling. In this program, we're going to hear a lot about budget, low cost airlines and legacy airlines. I'm a little bit older than Will. We're not going to get into how much older, but I remember Freddie Laker, who launched SkyTrain in 1977 That was a revolutionary moment for the airline industry. Really cheap fares from London to New York, unheard of. So that was what I remember of the low cost airline scene beginning. But when did it actually happen, Will?

**Will Bain** (1:38)
Yeah, well, you can trace it right back really to Pacific Southwest Airlines in the United States in the sort of 40s and 50s. You then get Southwest Airlines to the really big one, aren't they, in the 70s who do that, eliminating assigned seating and then brings it right up to today, where Europe has kind of led the way really on these models with the likes of Ryanair, the Irish airline in particular, turning into what people call not just low cost anymore or budget, but ultra low cost, ULCC carriers.

**Rahul Tandon** (2:06)
ULCC, yeah, I've seen that all over the place. We're talking about it on the program though, because we're all feeling that it's not so low cost flying anymore. So, how have they managed in the past to keep things so low cost?

**Will Bain** (2:21)
Well, you talked about turbulence, didn't you, right at the top? And that's certainly the case, I think, for the first time, it's been a relatively straight up and to the right line, if you like, on a graph for this, since that little bit of history that we were doing there, where more and more players have come in, it's become a bigger and bigger deal, huge explosion, obviously, through the kind of 90s into the 2000s, particularly in Europe, because obviously the continent is much smaller than elsewhere, but then you've seen it in the United States with people like Spirit and Frontier come in, and then in Asia too, particularly in China, as you would know about Indigo as well in Asia too. So this explosion really of lower cost, lower frills, and they did it by stripping back on what your old-fashioned airline would have done. So no more free cokes and pretzels when you sit down, less leg room, pile them high, get you on, get you there, and really working on the basis that all you care about is getting to where you're going to go for as cheap as possible, and you don't care about anything else in between, and that model actually kind of exploding, really, and turning out that a lot of people really wanted that. They're worried about having a nice time when they get there, but actually the hour and a half, two hours, on a short-haul flight across Europe or across to another state in the United States, they're not as bothered about, and so they're willing to pay lower fares to have less frills, as the airlines used to call it.

**Rahul Tandon** (3:40)
In a way, it's sort of, I hear this phrase a lot in India, democratized travel. When you go to an airport in India, I've been going to India since I was a young child. 20 years ago, there was a couple of airlines, airports were pretty empty. I just came back from India yesterday. I took a flight from Delhi in the morning and I could see the queues for the low cost airline. India is a huge country. Before people had to go by train from one part to the other, it would take days. So not only is it allowed people to travel, in India it's had incredible economic benefits because businessmen can get to another part of India a lot quicker now. You mentioned it there that we've had these years these airlines have been doing really well, not so much now.