From today's Scotsman:
Budget airlines launch dogfight for Scotland
ANALYSIS
TODAY marks the opening salvo in the war to control Scottish skies. No-frills carriers Ryanair and its rival easyJet will this morning launch their inaugural flights from Edinburgh to the Emerald Isle within hours of each other. First off the blocks at Turnhouse will be Ryanair’s debut flight to Dublin, quickly followed off the runway by easyJet’s maiden voyage to Belfast.
And the rush to get flights on and off Scottish soil to Ireland will be matched in a few weeks by rival budget carrier Go.
Suddenly, Scots business travellers and holiday makers have found themselves at the centre of the price war between the no-frills airlines, and are set for a bonanza of low flights after the decision by the three principal budget carriers to use Scottish skies as a testing ground for their services.
Today Ryanair and easyJet will have their big guns in Edinburgh for their respective launches, ready to go head to head to capture the limelight. Rumour has it that Ryanair chief executive Michael O’Leary will be in attendance wearing a kilt. Not to be outdone, easyJet will be represented by commercial director Mike Cooper, doubtless wearing one of the airline’s famous orange sweatshirts as he stands in for chairman Stelios Haji-Ioannou.
Go, the former British Airways subsidiary, is ducking out of the first bout, opting to fly solo when its launches its new routes to Dublin from Edinburgh and Glasgow on 19 September.
But behind the bluster and the bravado, a deadly game is being played. The three-way dogfight in Scotland will put a large dent in the balance sheets of the airlines.
All three carriers are using Scotland as a testing ground to see how they fare when competing directly against each other.
Chris Avery, an aviation analyst at JP Morgan in London, said: "It is significant that these new routes are being launched in Scotland, and not at Stansted. The low-fare carriers are not risking any core route.
"The three-way battle in Scotland represents a skirmish. It will not seriously hit their financial position."
And away from their heartlands, the three carriers can afford to cut prices for the foreseeable future. Whichever one blinks first will give away a key psychological advantage to its rivals. As networks expand, their paths will cross more frequently in the future, and business models will be tested to breaking point.
It is difficult to determine which carrier will emerge triumphant in Scotland, but the war of words has already started. Go, which offers the most direct threat to Ryanair, claims that the Irish carrier is running scared.
"Ryanair always stated it wouldn’t fly out of Edinburgh. It only changed its business model on a whim, whereas ours was a planned move," a Go spokesman said.
Ryanair’s O’Leary, famed for his uncomplicated way with words, and loaded with a soundbite for every occasion, is determined to send Go packing. His airline claims it makes a profit with lower customer yields than its rivals, because its operating costs are smaller.
Industry watchers believe as long as the Go challenge does not extend to other routes, Ryanair can continue to offer cheaper tickets than the opposition. Ryanair has already sold 100,000 seats for its Edinburgh-Dublin route at £5 (including tax) each way. Although this is significantly cheaper than Go’s £35 return (including tax), both carriers could fill their aircraft by creating a new market, as demonstrated by previous expansions.
However Go is fighting a war on two fronts, by competing against Ryanair on its Dublin routes and easyJet on its Belfast routes. This might turn out to be a crucially expensive decision.
Ryanair believe its new routes from Edinburgh will add 200,000 Scottish passengers to its current total of one million per year.
Go believes it can achieve a similar increase and points to its good punctuality record as a potentially deciding factor. It compares favourably with easyJet’s performance on routes to London.
A total of 79 per cent of Go flights from Edinburgh to Stansted and 81 per cent from Glasgow to Stansted landed on time. EasyJet can only manage 73 per cent on its Edinburgh to Luton route and 81 per cent for Glasgow to Luton. It believes that for a few extra pounds customers will choose it over Ryanair if there is a better chance of landing on time.
EasyJet has hinted in the past at big plans for its Scottish operations. Earlier this week it announced its intention to build a centre at Paris Orly Airport.
If it gets regulatory approval from the French authorities, direct flights from Scotland to Paris should follow next year. That would place it in competition with Ryanair, which flies from Prestwick to Paris Beauvais, and add another dimension to the three-way tango for supremacy of the skies.
Full-fare carriers operating on these routes are understandably nervous. Aer Lingus, along with BA, its code sharing One World Alliance partner, has enjoyed a monopoly on its routes to Dublin from Edinburgh and Glasgow. From having no opposition it will now have to confront two hungry upstarts.
"Experience suggests that mature carriers retain some traffic, but some portion of leisure and business travellers will switch to low cost alternatives," Avery said. "There is no doubt that no-frill carriers represent a significant competitive threat."
EasyJet chief executive Ray Webster is adamant in his opinion of what will happen.
"British Airways has undoubtedly made plenty of money from its Scotland to Belfast routes but its fares haven’t done anything to grow business traffic.
"For the first time ever business travellers can get their hands on £25 day return fares and get from airport to airport in under 50 minutes."
Given the flair for publicity demonstrated by easyJet and Ryanair in the past, today’s launches will go with a bang.
Andrew Murray-Watson Senior Business Reporter
Thursday, 30th August 2001
The Scotsman