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Is New Low-Cost, Long-Haul Airline ‘Level’ a Cynical Ploy by IAG?

Is New Low-Cost, Long-Haul Airline ‘Level’ a Cynical Ploy by IAG?

Is New Low-Cost Airline 'Level' a Cynical Ploy by IAG? - International Airlines Group, owner of British Airways Aer Lingus, launches a new low-cost long-haul airline called Level. Will fly from Barcelona and be operated by Iberia

Yesterday, International Airlines Group (IAG) – the company behind famous airline brands that include British Airways, Iberia and Aer Lingus – announced a new low-cost, long-haul airline. The carrier, named ‘Level’ promises to “bring a stylish and modern approach to flying at prices that are even more affordable.”

At the official unveiling of the new airline, Willie Walsh, the chief executive of IAG said: “LEVEL is an exciting new IAG airline brand,” he continued: “It will benefit from having the strength of one of the world’s largest airline groups behind it.”

Level will start flying in June 2017 with services operating from Barcelona to Los Angeles, Oakland (San Francisco), Buenos Aires and Punta Cana in the Dominican Republic.

One-way fares to Los Angeles and Oakland are being advertised from €99.  Punta Cana and Buenos Aires can be reached for as little as €149 on a basic economy, one-way fare.

The airline will initially operate two Airbus A330 aircraft fitted with 293 economy seats and 21 premium economy seats.  As a low-cost airline not much is included in the advertised fare with add-ons available to purchase.

For example, travellers who choose a basic economy fare will have to pay for hold luggage, seat selection, food and beverages and access to the aircraft’s in-flight entertainment system.  Even a blanket, pillow and amenity kit are extras available for purchase.

Like many airlines, Level has introduced different fare types that bundle extras into the price.  Buy a ‘Basic +’ ticket and you get one piece of hold luggage and a hot meal included in your fare.  Choose ‘Optimal’ and advanced seat selection is added.  With a ‘Flexible’ ticket you get preferential seat selection and the option to change or cancel your booking at no extra charge.

Passengers who upgrade to a premium economy seat get to take 2 pieces of hold luggage at no extra charge.  Complimentary food and drink are included.  The airline also promises “super-fast onboard wi-fi” available at an additional cost for all passengers.

The economy section will have a 2-4-2 seat layout. Photo Credit: International Airlines Group
The economy section will have a 2-4-2 seat layout

But why has IAG suddenly launched this ‘new’ airline now?  Only last week, Akbar Al Baker, the CEO of Qatar Airways – which owns a 20% stake in IAG – claimed the long-haul, low-cost business model “doesn’t work.  They will not succeed.”

Yet not all airline chiefs are quite as bullish about the threat posed from low-cost carriers (LCC’s).  Tim Clark, the longtime President of mega-airline Emirates, has warned of a “gathering storm,” – in part because of the pressures his airline is feeling from long-haul LCC’s.

And when we talk about the threat from ‘low-cost, long-haul carriers’ in Europe, what we actually mean to say is “the threat from Norweigan Air Shuttle.”

Norwegian is on a collision course to revolutionise the long-haul airline business in Europe –  Whether we like it or not.  And guess what, Norweigan has already announced plans to start flying long-haul routes from Barcelona.

Norwegian CEO Bjørn Kjos has said. “Norwegian’s transatlantic offering is not only great news for the travelling public, but also for the local U.S and European economies, as we will bring more tourists that will increase spending, supporting thousands of local jobs.

“Our low-cost long-haul flights to and from the U.S. are only the beginning, as we have ambitious plans to continue offering passengers affordable high-quality transatlantic flights, to a range of other global destinations.”

Norwegian has already flown more than 4 million passengers between Europe and the U.S. Photo Credit: Norwegian
Norwegian has already flown more than 4 million passengers between Europe and the U.S. Photo Credit: Norwegian

The new direct flights will serve New York City, Fort Lauderdale, Oakland (San Francisco), and Los Angeles.  Launch fares to Oakland and Los Angeles are being advertised for $199 USD one-way – that’s approximately €185.

Qatar Airways boss, Al Baker has cast doubt on the long-term success of Norweigan, saying its “nose is just above the water.”  It now looks certain that IAG is readying itself to take on Norweigan at all costs.

At the end of March, British Airways will launch flights from London Gatwick to Oakland (San Francisco).  Fort Lauderdale will also be served by BA from Gatwick in July.  Willie Walsh has made no secret of the fact these routes are being launched in direct competition with Norwegian.  Even the Boeing 777 aircraft being used on these routes will be reconfigured to a more low-cost standard.

“Maybe long-haul low-cost will work when the fuel price is 30 dollars a barrel. But once it goes beyond 50 dollars I guarantee it is not feasible. The cost to operate becomes so high that the yield you get from low-cost long-haul will not cover the cost,” said Al Baker at a recent press conference.

That’s where ‘Level’ comes in.  A ‘new’ airline brand that will actually be using Iberia aircraft, Iberia crew and even selling tickets under the Iberia terms and conditions.

Advertised fares to Oakland and Los Angeles are nearly half the price of Norweigan.  Even its A330 aircraft aren’t fuel efficient (Norwegian is hoping that the efficiency of its new Boeing 787’s will give it an edge when fuel prices rise).  Is ‘Level’ a crude attempt to halt Norweigan in its tracks without a long term strategy?

Is IAG serious about its new airline and low-cost, long-haul travel?  Or is ‘Level’ simply a temporary airline to win a short-term battle? IAG claims “Barcelona has been chosen as the first European city for the launch of IAG’s new operation but LEVEL will look to expand its flights from other European cities,” (warning: PDF link).

“This is just the start. We’re really excited about the opportunities for expansion and we plan to bring LEVEL to other European destinations” – Willie Walsh, chief executive of IAG.

More details about International Airlines Group can be found here.

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