This week's Economist magazine has a good story on long haul LCCs. The correctly point out that Sir Freddie laker was the pioneer of this business. But they forgot People Express.

Their premise is the long haul LCC will not work and is no threat:

• Passengers enduring a 12-hour flight are less willing to skimp on food and legroom.
• Setting up a long-haul network also takes tiresome negotiations with aviation authorities in many countries.
• Most long-haul routes still rely on connecting traffic to fill seats, whereas low-cost airlines offer point-to-point routes.

These are good points. But the economics of the industry has changed since Freddie Laker's days. For a start LCCs forced massive increases in efficiency among legacy carriers. Note that long haul LCCs such as Hong Kong's Oasis is focused on point to point traffic and therefore is not concerned with hubs. Further, we have suggested that Oasis will connect its Hong Kong-Oakland flight with JetBlue's US system, giving it the reach of any network carrier. Similarly, on the East Coast, JetBlue is doing this exact move with Aer Lingus.

By connecting LCC networks, LCCs avoid the big hurdles they face. They do not have to scrimp on service or space – they will simply charge for it more effectively (see Ryanair). They do not have to worry about "aviation authorities" as much because the world is moving to open skies wherever you look (yes, even the EC & US will get there).

Moreover, the first batch of long haul LCCs have gone for the legacy airlines sweetest spot, the business traveler. Over the North Atlantic, you can now choose from three between the US and UK and one from the US to France. Fragmenting markets is an LCC specialty. Having started this and gaining traction, they will continue to do so. There will be failures, but LCCs will persist because they are run by people whose vision is correct. Airline travel is an old, mature and often poorly run industry.

By breaking all sorts of "rules" that legacy carriers created and still live with (i.e. labor rules that are an anachronism) LCCs are more nimble and consequently more efficient. The Economist ends its piece with these words "For bigger carriers, the new entrants are not yet much of a threat. The most profitable business-class travellers will be loth to give up either frequent-flyer miles or the convenience of a full timetable." Not much of a threat? The "big" carriers have already learned to ignore LCCs at their peril. The "big" carriers are frantically trying to slim their waists because they see the fragmenting market and know they will have a much smaller role ahead unless they re-engineer their costs and business.

This week's Economist magazine has a good story on long haul LCCs. The correctly point out that Sir Freddie laker was the pioneer of this business. But they forgot People Express.

Their premise is the long haul LCC will not work and is no threat:

• Passengers enduring a 12-hour flight are less willing to skimp on food and legroom.
• Setting up a long-haul network also takes tiresome negotiations with aviation authorities in many countries.
• Most long-haul routes still rely on connecting traffic to fill seats, whereas low-cost airlines offer point-to-point routes.

These are good points. But the economics of the industry has changed since Freddie Laker's days. For a start LCCs forced massive increases in efficiency among legacy carriers. Note that long haul LCCs such as Hong Kong's Oasis is focused on point to point traffic and therefore is not concerned with hubs. Further, we have suggested that Oasis will connect its Hong Kong-Oakland flight with JetBlue's US system, giving it the reach of any network carrier. Similarly, on the East Coast, JetBlue is doing this exact move with Aer Lingus.

By connecting LCC networks, LCCs avoid the big hurdles they face. They do not have to scrimp on service or space – they will simply charge for it more effectively (see Ryanair). They do not have to worry about "aviation authorities" as much because the world is moving to open skies wherever you look (yes, even the EC & US will get there).

Moreover, the first batch of long haul LCCs have gone for the legacy airlines sweetest spot, the business traveler. Over the North Atlantic, you can now choose from three between the US and UK and one from the US to France. Fragmenting markets is an LCC specialty. Having started this and gaining traction, they will continue to do so. There will be failures, but LCCs will persist because they are run by people whose vision is correct. Airline travel is an old, mature and often poorly run industry.

By breaking all sorts of "rules" that legacy carriers created and still live with (i.e. labor rules that are an anachronism) LCCs are more nimble and consequently more efficient. The Economist ends its piece with these words "For bigger carriers, the new entrants are not yet much of a threat. The most profitable business-class travellers will be loth to give up either frequent-flyer miles or the convenience of a full timetable." Not much of a threat? The "big" carriers have already learned to ignore LCCs at their peril. The "big" carriers are frantically trying to slim their waists because they see the fragmenting market and know they will have a much smaller role ahead unless they re-engineer their costs and business.