The airline industry is known for its razor-thin profit margins. In 2012, for instance, airlines made only $4 in profits for every passenger they carried. Despite the fact that this is an industry that rakes in over a trillion dollars annually, it’s a constant struggle to turn a profit. That’s why few airlines enter the market and why far fewer survive. Level and Joon are two new airlines aiming to be part of the latter group. While not completely “new” airlines, these low-cost, incumbent carriers aim to disrupt the industry by segmented new target markets.
Joon, The Millennial-inspired Airline
Enter Joon, a new incumbent airline developed by Air France, aimed at the Millennial market. The term “Millennial” is often used as a blanket statement, used to describe someone between the ages of 18 and 35, although Joon does not have such a narrow definition in mind. Joon––which means “young” in French––will be “more than just an airline.” Dominique Wood, VP Brand and Communications at Air France says, “Designed for our millennial customers, it will offer more than just a flight and a fare, it will offer a global travel experience.”
Her final word sums up the goal of Air France’s project: to focus on the experience. Age aside, one of the most telling characteristics of Millennials is the desire for experiences over things. A departure from the “Keeping up with the Jones’” mentality the Baby Boomers were raised with, Millennials care less about luxury cars and watches and more about authentic, memorable experiences. This could be backpacking around Thailand, growing their own organic produce with friends, or just enjoying the moment, whatever moment that might be.
Joon believes they can capitalize on these Millennial attributes. Air France VP of Brand Caroline Fontaine speaks about millennials: “epicurean and connected, they are opportunistic in a positive sense of the word as they know how to enjoy every moment and are in search of quality experiences that they want to share with others.”
The 83-year-old Air France has been facing stiff competition from discounters such as Gulf carriers and Norwegian Air, and hopes that Joon will help it stave off the competition. Wood says, “With Joon, we have created a young and connected brand that will give the Group a new impetus.”
If Joon can occupy a significant percentage of the 18-35 year old market, it will pose a threat to its competitors across Europe. Alongside Air France’s recent move to buy stake in Virgin Atlantic, the airline is taking aggressive moves to secure a new portion of the European-North American market. Joon is expected to take off this fall with medium-haul flights from Air France’s Paris-Charles de Gaulle airport. Long-haul flights are expected to begin in summer 2018.
Level, British Airway’s Disruptor
Air France isn’t the only incumbent with a new airline in the market. British Airways parent company, IAG, has announced its own upstart, Level. Level, which took its inaugural flight from Barcelona to Los Angeles in June, will be Barcelona-bound, for now. While Joon will be targeted specifically to price-conscious millennials, Level’s target of low-cost aficionados is a bit broader.
CEO Willie Walsh explained its target market: “The brand has resonated with a new audience, many of whom are flying long-haul for the first time.” Hoping to capture these newcomers is pivotal to their success. Also pivotal is regaining ground after British Airline’s recent IT troubles stranded 75,000 passengers. Likewise, they’re looking to combat Norwegian Airlines, who are offering ticket prices under $70 around Europe. Their routes were particularly designed to steal a chunk of the market share from their Norwegian competitors. And as of right now, the airline is still in its “virtual” state, with all of its flights operated by Iberia. Their aim is to take a share of the market without investing in every aspect of a brand new airline.
“The creation of Level is a recognition that the brands we have today could not compete in that [low-cost, long-haul] segment,” said Walsh at the CAPA Airline Leaders’ Summit in May. With direct flights between Europe and Argentina, Level is the first to offer a budget air bridge between Europe and the most exotic locales for holidaymakers. Furthermore, Level is making ground in its partnerships. Working with American Airlines, Level is set to launch two routes to America’s West Coast, Los Angeles and Oakland (from Barcelona).
So far, it’s been a success. At the launch of the flights between Barcelona and San Francisco, Walsh said, “Sales are well ahead of our expectations in all markets. The brand has resonated with a new audience, many of whom are flying long-haul for the first time.” In their first day, they sold over 52,000 tickets.
Soaring for Success?
While both Joon and Level have strong, well-implemented strategies in place, they have significant obstacles to overcome. One of the greatest is the “airlines within airlines” hurdle. Often times, when an airline launches a low-cost subsidiary, they end up losing. Between TED, Song, and MetroJet, the United States saw its fair share of this failing trend in a short amount of time.
But with the hyper-targeted low-cost “Millennial” and “newcomer” markets, Joon and Level have placed themselves in a disruptive position. In addition, Joon has its newfound share in Virgin and Level is launching its assault on Norwegian Airlines. With expansion possible in the future, these incumbent airlines will surely be worth following. If they see success, will more incumbents be emulating Air France and British Airways? Only time will tell.