Too some extent, I disagree with the Economist and firmly believe that budget airlines will increasingly go global.
Look at the evidence of Air Asia, which is my favorite budget airline. Air Asia has already secured a massive share of the Australia/Asia market.
The issue is that full-service traditional airlines, with their heavily unionized staff are an anachronism. Brands like Lufthansa have been destroyed by strikes. If you book a flight on Lufthansa to Canada, you may actually be travelling with Air Canada – Air Canada is another airline where effective customer service is relegated below clumsy business business processes negotiated by powerful unions.
Let’s face it, consumers are more economically savvy now, and are prepared to pay for carefully calibrated services.
The only reason that full-service airlines survive is that they have valuable route concessions – this is historical and perpetuated by powerful political lobbying. But traditional carriers, like British Airways (BA), are also continuously rationalizing routes because their business model is no longer viable – these are cost-plus dinasaurs.
Let me ask an open question:
Do you agree that full-service airlines, like BA and Lufthansa, will eventually be replaceed by budget airlines, like AirAsia, offering wider services on an incremental cost basis?