By Judson Rollins
June 10, 2021, © Leeham News: Residual values and lease rates have plummeted to record lows for previous-generation widebodies like the A330, 767, and 777. Inventories continue to build around the world, and prices appear set to fall even further.
At the same time, business travel ground to a near-halt in most regions. Even in countries where domestic leisure travel rebounded, like the US or China, average fares are down 20%-40%.
Southwest Airlines describes itself as a “low-fare carrier.” With business and premium-cabin traffic expected to take 3-4 years to return and be permanently impaired to some extent, every airline may be a low-fare carrier for years to come.
With higher-density seat configurations, more flexible scheduling – and, most importantly, the lower capital costs of used aircraft – new low-cost carriers (LCCs) could break even on long-haul routes with materially lower revenue than their predecessors.
This confluence of events has created a once-in-a-generation, perhaps once-in-a-lifetime, opportunity for new airlines to achieve a sustainable cost advantage over legacy carriers weighed down by capital-intensive aircraft, expensive crew contracts, and record-high debt service costs.