Budget carriers likely to weather high oil prices

Istanbul: Even as aviation experts voiced concerns that low-cost carriers (LCCs) could 'disappear' given surging fuel costs, Tim Clark, president of Emirates airline, took a divergent view saying that LCCs would continue to 'thrive' although the pricing structure could see some increase.

"But the fares still represent an enormous value for money," said Clark.

Mainstream carriers spent 29 per cent of their operating costs on fuel in 2007 while LCCs spent over 35 per cent in the same period.

Clark accepted that LCCs will have to deal with issues of cash flow and consolidation, but they will survive. These comments come at a time when Giovanni Bisignani, director-general and CEO of the International Air Transport Association (IATA), announced that 24 airlines went bust in the last six months. He also said ticket prices would have to rise to match the cost structure.

British business-class airline Silverjet has already suspended operations after running into serious funding problems. British Airways CEO Willie Walsh also said fares will have to increase.

Jean-Cyril Spinetta of Air France-KLM expected some low-cost carriers to bow out, especially in Europe.

Outlook

"I'm not saying the low-cost model will disappear, but in Europe lots of low-cost [carriers] will disappear," he said.

Clark chose to focus on the benefits offered by emerging markets. "Travel in the 21st century is all about a new breed of travellers trying to take the opportunity that presents itself in places like India, China, South America and Africa," he said.

"I don't think the fares that LCCs offer will be a hindrance to people wanting to travel. Sure, there will be slower growth, but the sector will continue to operate."