XL Airways seems to have joined the unfortunate club of French airlines that won’t operate flights after the summer. The long-haul low-cost airline, which operated mainly from Paris Charles De Gaulle International Airport (CDG), will join Aigle Azur, which also stopped operations in September 2019. According to XL Airways’ website, the airline stopped selling tickets on September 19, 2019, and will cancel “some flights” starting September 23, 2019, due to “financial difficulties”.
XL operated flights from Paris CDG and Lyon Saint Exupery Airport (LYS) to China, the Caribbean, New York (EWR) and to the French overseas department, Réunion Island. The airline carried passengers on four Airbus A330 aircraft: one A330-300 and three A330-200s, which were configured in an all economy-class, seating up to 408 and 361 passengers, respectively.
Aigle Azur and XL Airways’ financial difficulties seem eerily similar – both airlines swayed towards long-haul flights and at different points in time, they had the same man at the executive table, Frantz Yvelin. While recently he was ousted from Aigle Azur in a coup, Yvelin led the merger of La Compagnie and XL Airways in 2016 to “democratize” air travel in economy and business class. Yet Aigle Azur and XL Airways have failed to make the model sustainable, with the latter declaring bankruptcy and, most likely, without an investor from the side, the former will also fold in the coming days.
So, why did XL Airways flew into financial turbulence?
Dashed long-haul dreams
There is no denying that the low-cost long-haul business model boomed in popularity over the past few years. Many carriers have attempted to offer cheap tickets between continents, yet many have failed, or are struggling. Especially Europe-based budget airlines – WOW Air and Primera Air have collapsed, Norwegian Air Shuttle is barely limping on, Lufthansa (LHAB) (LHA) gave up on Eurowings and repositioned the airline – the list of brand names that are unable to make the business model work goes on and on.
But on the other side of the globe, in Asia-Pacific, low-cost long-haul is blossoming. AirAsia Group, Jetstar Group and Lion Air all have successfully established themselves in the continent and are dominating both domestic and long-haul international flights.
However, the case with XL Airways is an interesting one. It clearly positioned itself as a budget carrier, while La Compagnie, its partner in travel, catered to the business traveler. When looking from the side, it seems like a bulletproof plan – both airlines would offer cheaper prices than Air France on the same routes to different target audiences, as a homogenized model allows them to limit their costs to a minimum, driving Air France away from their own territory.
Yet XL Airways was unable to make it work and there are a few reasons why.
A very complex model
Long-haul flights put no-frills carriers in a difficult position, as refueling and other ground services take more time to complete compared to short-haul flights. For XL Airways this meant that their aircraft could complete two flights per day when they flew to China or the Caribbean. One example is F-HXXL, the airline’s Airbus A330-200 – the aircraft departed Jinan (TNA) for Paris (CDG) at 11:49 AM (local time) and arrived in Paris at 5:44 PM (local time). The same A330 then flew to Saint-Denis (RUN) in Réunion only six hours later, at 11:54 PM (local time), completing only two flights on September 18, 2019, according to flightradar24.com data. On September 17, it operated no flights, while it flew back from Réunion to Paris on September 19, 2019. Even going further back on the aircraft’s flight history, data reveals that the aircraft completed a maximum of two flights per day.
For a low-cost carrier, that is sub-optimal, as every minute counts as lost money due to the fact that budget airlines are able to make a profit with the addition of ancillary revenue. In contrast, a short-haul LCC like Wizz Air averages 12 block hours per aircraft per day, according to their FY2019 report, while Norwegian Air Shuttle, a long-haul LCC, averages 12.5 block hours, according to the airline’s data. Unfortunately, XL Airways do not disclose their financial information publicly, thus the French carrier’s block hour data is unavailable. Nevertheless, the rather infrequent flights point to the fact that XL’s aircraft utilization was rather poor.
Secondly, no-frills airlines operate on a point-to-point basis, with no stops in between. Every stop between points equals time lost, as landing, refueling, boarding/deboarding and taking off again takes time and costs money. For example, F-GSEU, XL’s A330, departed Lyon Saint Exupery Airport (LYS) for… Paris (CDG). Six hours later, it took off from De Gaulle International Airport (CDG) and then landed in Punta Cana (PUJ) in the Dominican Republic. Not only the aircraft utilization was poor with a six-hour arrival and departure window, but the airline operated a domestic route with a wide-body that in their own configuration can seat 361 passengers. The same Lyon (LYS) – Paris (CDG) route is served by seven additional daily flights, all served with narrow-bodies like the A320 or the 737, hindering the chance of making a profit on the route for XL Airways.
Furthermore, the airline is based at Paris Charles De Gaulle Airport (CDG), which is far from being a low-cost airport – landing, parking and passenger fees are very expensive compared to the cheaper airports in Paris, like Beauvais-Tille (BVA) or Le Bourget (LBG).
Meanwhile, La Compagnie managed to sustain their business by not stepping over the line of operating too many scarce routes – it only operates flights to New York’s Newark (EWR) from Paris Orly (ORY) and Nice (NCE), allowing the airline to utilize its aircraft much better. The self-proclaimed boutique airline flies two daily flights between destinations without any gaps between days. In addition, it operates the far more efficient Airbus A321neo, saving on fuel and landing fees, as the A321neo is lighter and creates far less noise pollution.
Simply put, XL Airways bit off more they can chew – the airline operated too many routes that were too far apart, making the already complex low-cost long-haul model even more complex. A La Compagnie spokeswoman noted that while the “situation is very unfortunate”, the difficulties at XL will not impact the boutique airline, as the two airlines “have different targets, different operations, organizations and financial structures” even if they belong to the same group. XL Airways catered to the economy class leisure market “which is affected by a fierce competition”, she added.
“In other words, La Compagnie is not impacted and running business as usual.”