http://www.businessweekly.co.uk/
20 October 2003
Latest News In Academia
Warning on low fares airlines
A potential over-supply of airline seats could take some of Europe's scheduled low-cost carriers under, according to new research from Cranfield University’s Air Transport Group.
The report highlights the differences between the business models of the two most successful European no-frills airlines, EasyJet and Ryanair, and analyses the economic performance of over 20 of Europe’s charter and no-frills scheduled operators, benchmarking these against low-cost carriers in the US.
Although the no-frills sector has "revolutionised short-haul air travel in the UK and Western Europe", as the sector matures, it is feared that some of the airlines will struggle to survive.
The rapid growth of low-cost scheduled carriers in Europe is in sharp contrast to the charter airlines who have seen traffic stagnate or even decline.
The report is titled: 'Market analysis of Europe’s low-cost airlines: an examination of trends in the economics and operating characteristics of Europe’s charter and no-frills scheduled airlines' and follows on from the first Cranfield report, published at the beginning of 2000.
"In our first report we speculated that no-frills scheduled carriers would account for 12 per cent and 15 per cent of the intra-EU air market by 2010," said Dr George Williams, senior lecturer in air transport and co-writer of the report.
"But, like most forecasters, we underestimated the scale of transformation that has been occurring in the provision of short haul service in Europe. We now believe this market share will be achieved four to five years earlier.
"The air transport sector in Europe has been totally transformed as a result of the activities of no-frills airlines and the implications for full service providers have been dramatic.
"Around 40 per cent of passengers travelling within the UK and between the UK and European Economic Area countries now use low-cost scheduled airlines. In all, there are now some 500 routes in Europe served by 20 no-frills carriers."
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A repost from August from
"Sydney Morning Herald"
Soaring budget airlines are no flight of fancy
By Kirsty Needham, Consumer Writer
August 22, 2003
Pack your bags, and lunch . . . Qantas's Geoff Dixon at a news conference yesterday to announce the plan to launch a no-frills airline. Photo: David Moir
Plans by Qantas to introduce a low-cost domestic airline to compete with Virgin Blue come as no-frills airlines revolutionise air travel worldwide.
With no tickets, seat allocation, frequent flyer points, refunds or free meals, and turn-around of aircraft within 30 minutes, the services can seem more like a bus shuttle.
According to the website lowcostairlines.org, there are 34 no-frills airlines in Europe, 13 in the United States and five in Asia, and the list is growing.
Air New Zealand introduced a no-frills service to Australia last week, due to begin in October.
Passengers have been warned to "bring a good book" because there will be no free newspapers and magazines. Children's meals and infant supplies also will not be available. The cheapest "use it or lose it" fares mean passengers who miss their flight have to pay for another ticket. No changes can be made to fares.
Since Air New Zealand started a domestic no-frills service a year ago, passenger numbers had risen 23 per cent, the airline said.
In the United States, Delta Air Lines introduced its Song service in April, with self-service kiosk check-in or the option of passengers checking in at home up to a day in advance and printing their own boarding pass. Free soft drinks and water are available, but passengers pay for food.
No-frills JetBlue and budget pioneer Southwest were reported to be the only US airlines to make a profit last year. JetBlue enjoyed passenger growth of 71 per cent.
In Europe, passenger numbers on ticketless, foodless easyJet rose 75 per cent last year with a service that sells one-way fares online, and does not offer refunds or alterations.
A downside for passengers is that many low-cost airlines avoid hefty landing fees by choosing small airports that may be far from the destination city. In Europe, Ryanair has attracted complaints because its flights to Frankfurt land in Hahn, about 100 kilometres from Frankfurt.
Flight Centre's managing director, Graham Turner, said the international experience showed there was a big opportunity for new-style airlines to make money.
Regardless of whether they had to pay for food, consumers would book with discount airlines if they met basic requirements on leg room, and the food was edible, Mr Turner said.
"Many so-called full-service carriers have coffee that is undrinkable," he said.
But he questioned whether the Qantas proposal was "mutton dressed up as lamb".
"It has to be a new model, not the old Qantas model without the unions."
Qantas frequent flyers travelling on Australian Airlines - its Asian "low-cost carrier" - have found themselves refused entry to Qantas Club lounges.
Qantas said that apart from this, and restrictions on earning points, the service on Australian Airlines was no different to that on regular Qantas flight.
Analysts believe Qantas will be more ruthless in reducing onboard and other services on a domestic discount carrier.
The founder of frequentflyer.com.au, Clifford Reichlin, said it was likely a no-frills Qantas domestic airline would not cater to frequent flyers.
"Competition is always a good thing, provided they lower their cost structure to offer competition on fares. Otherwise they will recoup it somewhere else. Qantas travel will become premium paid."
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