Your Opinions on No-Frills Growth ...
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Your Opinions on No-Frills Growth ...
I remember about a year ago on PPRUNe there was a poll & topic with regards to where people thought the no-frills airline portion of the airline industry was headed & whether the bubble had burst?
What I'm quite interested to see are people's general opinions of the no-frills sector at the moment.
Which airlines do you think are most likely to survive & which do you think will fade away?
Do you think the present growth rate will be sustained?
Do you think there will be many more start-ups, and if so where?
For employees of no-frills airlines, where do you think your airline is headed?
My opinion as a crewmember at bmibaby, is that the airline will continue with its partnership with Germanwings, and possibly increase this to sign some sort of partnership with the Snowflake brand from SAS. I think that the three airlines will eventually have similar route networks, possibly co-operating in local markets with regards to ground handling & local marketing. Like the Star Alliance do. I do see a strong future for baby, especially with our own AOC, but I believe this has to be with the co-operation from our Star Alliance counterparts.
What I'm quite interested to see are people's general opinions of the no-frills sector at the moment.
Which airlines do you think are most likely to survive & which do you think will fade away?
Do you think the present growth rate will be sustained?
Do you think there will be many more start-ups, and if so where?
For employees of no-frills airlines, where do you think your airline is headed?
My opinion as a crewmember at bmibaby, is that the airline will continue with its partnership with Germanwings, and possibly increase this to sign some sort of partnership with the Snowflake brand from SAS. I think that the three airlines will eventually have similar route networks, possibly co-operating in local markets with regards to ground handling & local marketing. Like the Star Alliance do. I do see a strong future for baby, especially with our own AOC, but I believe this has to be with the co-operation from our Star Alliance counterparts.
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I think that EasyJet & Ryanair are the obvious contenders as the carriers that are most likely to remain as the major no-frills operators in Europe.
Although, I doubt there will only be two carriers, as many of the airline executives believe there will be. In the USA, there are six major no-frills airlines; Southwest, AirTran, JetBlue, Fronteir, Spirit & ATA. I see no reason why there would only be two carriers, there is enough market, like in the USA, for there to be maybe four or five major no-frills airlines across Europe.
There will still be upstarts. There've been many failed upstarts in the more mature US no-frills airline industry, most notably PEOPLExpress, Vanguard Airlines, Air South & EastWind. We have already seen some no-frills airlines come & go, either through take-overs or financial failures such as Go, Buzz, Debonair & Color Air.
As a former MyTravel employee from East Midlands Airport, I believe that MyTravelLite is going to become a key part of MyTravel. The Lite section is performing most strongly on sectors down to Spain & Portugal and that the airline is not most strong on business routes - with the failures of BVA/BFS/AMS.
I hope that they're able to expand on these holiday routes both from BHX & possibly other MYT bases in the UK & perhaps Scandinavia.
Although, I doubt there will only be two carriers, as many of the airline executives believe there will be. In the USA, there are six major no-frills airlines; Southwest, AirTran, JetBlue, Fronteir, Spirit & ATA. I see no reason why there would only be two carriers, there is enough market, like in the USA, for there to be maybe four or five major no-frills airlines across Europe.
There will still be upstarts. There've been many failed upstarts in the more mature US no-frills airline industry, most notably PEOPLExpress, Vanguard Airlines, Air South & EastWind. We have already seen some no-frills airlines come & go, either through take-overs or financial failures such as Go, Buzz, Debonair & Color Air.
As a former MyTravel employee from East Midlands Airport, I believe that MyTravelLite is going to become a key part of MyTravel. The Lite section is performing most strongly on sectors down to Spain & Portugal and that the airline is not most strong on business routes - with the failures of BVA/BFS/AMS.
I hope that they're able to expand on these holiday routes both from BHX & possibly other MYT bases in the UK & perhaps Scandinavia.
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Speaking as a pax and interested observer I think they face some challenges in the next few years. Once the route networks have matured (there are only so many secondary or smaller less congested airports you can get to in order to do your 30 min turnaround) it will be interesting to see what the yields/load factors are on a like for like basis. My guess is that a lot of the so called growth is being hidden in the numbers with fleet expansions and new routes. Once you have a relatively fixed route network and a mature business then the challenge will be for them to improve overall profitability.
This will all need to be achieved in the face of any airport subsidies ending and the possibility of competition from other airlines and LCC's. The LCC's have been pretty smart so far at generating profits from other lines of business such as rental cars, advertising on their aircraft etc so perhaps they will transform their profit generators into other parts of the business? Be interesting to see how they fare.
This will all need to be achieved in the face of any airport subsidies ending and the possibility of competition from other airlines and LCC's. The LCC's have been pretty smart so far at generating profits from other lines of business such as rental cars, advertising on their aircraft etc so perhaps they will transform their profit generators into other parts of the business? Be interesting to see how they fare.
Success on some routes can also depend on frequency and timings of services. MyTravel Lite probably failed with AMS because they only offered two flights per day both poorly timed (because of the company's need to obtain maximum aircraft utilisation) - which is why I for one never used them.
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More than two 4sure
I think there is another 2-3 years of growth left in this sector and no doubt some will come and some will go the likes of Mytravellite &TUI at Coventry aren't really loco's but more of an hybrid.
Off the rest for sure Easy & Ryan will be around in 5 years time and baby have a good chance to really grow if they can get a foot in the South East market with Gatwick but any time soon they are going to have to order some more aircraft if they want get through the 5 million pax market. as for the rest of the loco's alot will depend on what Ryan & Easy do all the more so with Donny soon to open and this could have a big impact on both baby at Teeside & EMA & JET2 at LBA.
I think the next 5 years will see launch of locost to the USA out of either Donny or Stanstead
Off the rest for sure Easy & Ryan will be around in 5 years time and baby have a good chance to really grow if they can get a foot in the South East market with Gatwick but any time soon they are going to have to order some more aircraft if they want get through the 5 million pax market. as for the rest of the loco's alot will depend on what Ryan & Easy do all the more so with Donny soon to open and this could have a big impact on both baby at Teeside & EMA & JET2 at LBA.
I think the next 5 years will see launch of locost to the USA out of either Donny or Stanstead
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Ryanair and easyJet will dominate. jet2, Baby, FlyBe and the like will go to the wall lacking as they do a unique selling proposition.
In Europe HLX and GermanWings and Volare might stand a chance as will AirEuropa and Air Berlin.
All the other continental low cost pretenders are whistling in the wind frankly.
Of all of them I give easyJet the best chances of making their business model work. There really is a sustainable all year market for a no frills reliable service between major airports.
Thomsponsfly? Sounds like a disease mate?!?
Monkey.
In Europe HLX and GermanWings and Volare might stand a chance as will AirEuropa and Air Berlin.
All the other continental low cost pretenders are whistling in the wind frankly.
Of all of them I give easyJet the best chances of making their business model work. There really is a sustainable all year market for a no frills reliable service between major airports.
Thomsponsfly? Sounds like a disease mate?!?
Monkey.
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I think that flybe. might have some form of survival because their business model seems to be rather similar to AirTran in the USA. Both carriers are using smaller aircraft than the major no-frills operators, which means they can go into a number of markets where a 148-seat 737-300 would not be able to make money. AirTran have become the second largest operator at ATL, flybe. use a number of a major airports for their domestic operation which could be expanded to flying to more international cities also. Like AirTran also, the airline has stated their intention for larger aircraft to be able to serve the bigger markets.
flybe. has shown they are flexible, so I don't see them going down the tubes. Although I don't think carriers like Thomsonfly or MyTravelLite have much hope. It would be better for the major charter operator to simply introduce no-frills-type ticketing on the mainline product from regional airporrts
flybe. has shown they are flexible, so I don't see them going down the tubes. Although I don't think carriers like Thomsonfly or MyTravelLite have much hope. It would be better for the major charter operator to simply introduce no-frills-type ticketing on the mainline product from regional airporrts
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While I cannot speculate on who might or might not survive I can give you something to think about. The first is that more than 99.9% of all British airlines ever formed have failed. It will continue to be thus. The reason for that is that ALL airlines in the world fundamentally have the same cost structure. It may be high or low but the structure is the same. It is called a front end loaded marginal cost structure. Front end loaded because there have to be large committments to aircraft, crews, reservations systems, marketing, cost management etc before any revenue can be earned. Marginal because there are costs that are only incurred if the flight actually takes place. Things like fuel, landing fees etc. It is exactly the same sort of cost structure that applies in railways. It is always an unsound and risky cost structure.
All airlines are risky businesses. There are two many factors outside managemnet control for it to be otherwise. How an airline manages those risks is a crucial guide as to whether it will be successful. It is not a matter of opinion, it is a matter of fact. The biggest risk of all is excess capacity. If you have excess capacity it is almost impossible to control the price at which you can sell tickets. Too many seats and the price comes down. It can easily come down to the point at which the marginal round trip costs are not covered. That is always the start of the slippery slope.
One way to avoid excesss capacity is to use small but efficient aircraft. This is clearly part of the Easy Jet model. Another is to avoid head to head competition with another low fare airline on the same airport pair. It is much easier to compete with a high fare airline than with another low fare airline. In the school playground bullies do not bully each other.
In all industries that grow rapidly painful consolidation follows. This is like night following day and it applies everywhere. In the low fare airlines in Europe capacity has been growing far faster than the average long term growth in passengers. It is inevitable that saturation will be reached in many markets, probably quite soon. BFS is a good example of a market where saturation is approaching. BCN/UK might be another. VCE seems tempting to the airlines just now but for the life of me I do not know why so many people want to go to such a scruffy expensive place. But there are stlll many markets which could take more service. AGP in the summer is one. ATH is another. There are stlll no low fare services to SKG, for example. LBA is the second largest conurbation in Britain and the level of air service it has is pathetic. Does this mean that Jet 2 will be the subject of a takeover by someone wishing to dominate that market?
To try and make a judgement about who will fail, and failures or take-overs are inevitable, look for weaknesses. Typical examples of weaknesses are unfocused managements, perhaps trying to do too many disparate things. By contrast Ryanair is dominated by Dublin and STN. It dominates the Irish sea routes and no one else comes anywhere near them at STN. That is why GO was so vulnerable. Critical mass is always important in any significant business. As example of what I mean here is that Baby are starting LGW/PRG at the same time as BA and EZY. Why? What will they uniquely bring to the market in these circumstances?
Then look at aircraft operated. A320/319, 737 and 738 have unmatched low seat mile costs. Airlines having any of those types will always have the upper hand. Anything else is struggling. You cannot compete in a ruthless low fare market unless you can get up there with the very best on costs. That requires a huge front end investment of the kind that Easy and Ryan have made.
Alliances in the air transport industry have always been fragile. Ask yourself why the customer should care about them. if he/she wants to go from EMA to AGP he/she does not care what the airline is called. The best combination of fare and schedule is what matters. If the airline cannot meet that requirement profitably it is going to have a tough future.
There is a future for full service airlines and there is a future for low cost airlines and also for specialist holiday airlines(the old charter airlines), but to succeed each has to have management that is passionate about that sector and that sector alone. I cannot recall a case where a low cost airline owned by a full service airline has succeeded. But if there is one please let me know.
All airlines are risky businesses. There are two many factors outside managemnet control for it to be otherwise. How an airline manages those risks is a crucial guide as to whether it will be successful. It is not a matter of opinion, it is a matter of fact. The biggest risk of all is excess capacity. If you have excess capacity it is almost impossible to control the price at which you can sell tickets. Too many seats and the price comes down. It can easily come down to the point at which the marginal round trip costs are not covered. That is always the start of the slippery slope.
One way to avoid excesss capacity is to use small but efficient aircraft. This is clearly part of the Easy Jet model. Another is to avoid head to head competition with another low fare airline on the same airport pair. It is much easier to compete with a high fare airline than with another low fare airline. In the school playground bullies do not bully each other.
In all industries that grow rapidly painful consolidation follows. This is like night following day and it applies everywhere. In the low fare airlines in Europe capacity has been growing far faster than the average long term growth in passengers. It is inevitable that saturation will be reached in many markets, probably quite soon. BFS is a good example of a market where saturation is approaching. BCN/UK might be another. VCE seems tempting to the airlines just now but for the life of me I do not know why so many people want to go to such a scruffy expensive place. But there are stlll many markets which could take more service. AGP in the summer is one. ATH is another. There are stlll no low fare services to SKG, for example. LBA is the second largest conurbation in Britain and the level of air service it has is pathetic. Does this mean that Jet 2 will be the subject of a takeover by someone wishing to dominate that market?
To try and make a judgement about who will fail, and failures or take-overs are inevitable, look for weaknesses. Typical examples of weaknesses are unfocused managements, perhaps trying to do too many disparate things. By contrast Ryanair is dominated by Dublin and STN. It dominates the Irish sea routes and no one else comes anywhere near them at STN. That is why GO was so vulnerable. Critical mass is always important in any significant business. As example of what I mean here is that Baby are starting LGW/PRG at the same time as BA and EZY. Why? What will they uniquely bring to the market in these circumstances?
Then look at aircraft operated. A320/319, 737 and 738 have unmatched low seat mile costs. Airlines having any of those types will always have the upper hand. Anything else is struggling. You cannot compete in a ruthless low fare market unless you can get up there with the very best on costs. That requires a huge front end investment of the kind that Easy and Ryan have made.
Alliances in the air transport industry have always been fragile. Ask yourself why the customer should care about them. if he/she wants to go from EMA to AGP he/she does not care what the airline is called. The best combination of fare and schedule is what matters. If the airline cannot meet that requirement profitably it is going to have a tough future.
There is a future for full service airlines and there is a future for low cost airlines and also for specialist holiday airlines(the old charter airlines), but to succeed each has to have management that is passionate about that sector and that sector alone. I cannot recall a case where a low cost airline owned by a full service airline has succeeded. But if there is one please let me know.
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Here Here, an excellent post. Nice to see someone has spotted that Jet2s move into hell on t' hill will pay dividends even if it's a takeover by one of the big 2 LoCo's. Personnaly I hope not they're an excellent airline and long may they shine in the skys over Yorkshire. Oh and no I don't work for them, well not yet any way!
Colegate - I can think of one; Go Fly. Hugely popular, awarding winning low cost airline with tremendous growth and profitability.
As Rod said, somedays he wishes he'd sold BA and kept Go.
That is why Go was so vulnerable
I hate to quibble but Ryanair at STN had no effect on Go at all. We only competed on one route (Rome) and the marketing, product and customer were quite different.
Go was vulnerable after Bob Ayling was ousted because the Board of BA was scared that the Pilot and Cabin Crew unions in BA would take action when they saw Go Fly expand and - as they would phrase it - 'take their work'. BA was and is vulnerable to its unions and any hint of another Cabin Crew strike would have sent the share price tumbling at a time when the Index had already seen massive drops.
With cashflow starting to look tight and an air of crisis post Sept11th descending the management took to the bunker. A quick disposal of Go would take away a potential Union conflict and raise enough capital to replenish nearly all the staplers in Waterside.
Despite Stelios offering nearly £300m for it in the form of a few quid and lot of easyJet share options they sold it some bloke with three eyes for £110m which indeed was enough to do the staplers and also give the cappuccino bar in Waitrose a fresh lick of paint.
A year later the man with three eyes decided he's quite like a couple of hundred million quid himself and flogged it to Stelios who by this time was rolling around on a King-size bed of cash inside a house made of gold.
Meanwhile the passengers flocked to Go who literally couldn't find new aircraft fast enough and who were literally about to sign on the line for a fleet of new Airbus 318/319/321 with which they were going to take over Europe and slightly beyond.
Luckily for easyJet they were able to stop that, lock the brand in the broom cupboard, repaint all the aircraft and concentrate fully on their unique Orange culture - which, I believe, is some form of fruit yogurt popular with management.
Cheers
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As Rod said, somedays he wishes he'd sold BA and kept Go.
That is why Go was so vulnerable
I hate to quibble but Ryanair at STN had no effect on Go at all. We only competed on one route (Rome) and the marketing, product and customer were quite different.
Go was vulnerable after Bob Ayling was ousted because the Board of BA was scared that the Pilot and Cabin Crew unions in BA would take action when they saw Go Fly expand and - as they would phrase it - 'take their work'. BA was and is vulnerable to its unions and any hint of another Cabin Crew strike would have sent the share price tumbling at a time when the Index had already seen massive drops.
With cashflow starting to look tight and an air of crisis post Sept11th descending the management took to the bunker. A quick disposal of Go would take away a potential Union conflict and raise enough capital to replenish nearly all the staplers in Waterside.
Despite Stelios offering nearly £300m for it in the form of a few quid and lot of easyJet share options they sold it some bloke with three eyes for £110m which indeed was enough to do the staplers and also give the cappuccino bar in Waitrose a fresh lick of paint.
A year later the man with three eyes decided he's quite like a couple of hundred million quid himself and flogged it to Stelios who by this time was rolling around on a King-size bed of cash inside a house made of gold.
Meanwhile the passengers flocked to Go who literally couldn't find new aircraft fast enough and who were literally about to sign on the line for a fleet of new Airbus 318/319/321 with which they were going to take over Europe and slightly beyond.
Luckily for easyJet they were able to stop that, lock the brand in the broom cupboard, repaint all the aircraft and concentrate fully on their unique Orange culture - which, I believe, is some form of fruit yogurt popular with management.
Cheers
WWW
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Colegate
Brilliant post! To me this is what PPruNe is about! Inciteful, intelligent, interesting comments!
If only the "Route Wish List" kids had another forum to play "fantasy regional airport" in.
Thanks again Colegate
e
Brilliant post! To me this is what PPruNe is about! Inciteful, intelligent, interesting comments!
If only the "Route Wish List" kids had another forum to play "fantasy regional airport" in.
Thanks again Colegate
e
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Wee Weasley Welshman
Have you read Barbara Cassani's book on Go?? Fascinating read, OK it's told from her point of view, but shows the struggles and victories of Go from its conception to becoming orange.
The culture of Go was unlike ezy or the Fr's of this world - a breath of fresh air. No wonder the management didn't want to let it go!
Have you read Barbara Cassani's book on Go?? Fascinating read, OK it's told from her point of view, but shows the struggles and victories of Go from its conception to becoming orange.
The culture of Go was unlike ezy or the Fr's of this world - a breath of fresh air. No wonder the management didn't want to let it go!
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Colgate,
You are saying that for each successful British airline, over one thousand other British airlines have started and failed. So if we decide that BA, Bmi, Britannia, Easyjet, Monarch, and Virgin (to name but a few) are successful airlines, then 6,000 other airlines have failed. While the list of failures may indeed be long, it is certainly not that long.
You have written an intelligent post, but damaged your creditability with a daft opening statement.
The first is that more than 99.9% of all British airlines ever formed have failed.
You have written an intelligent post, but damaged your creditability with a daft opening statement.
simonwa - I know, I worked there and talked to Babs many times.
Cheers
WWW
Cheers
WWW
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"Ryanair and easyJet will dominate. jet2, Baby, FlyBe and the like will go to the wall lacking as they do a unique selling proposition."
Jet 2's usp - "we fly from Leeds, no-one else does". As said, a big catchment area (although not sure about 2nd largest connurbation - this is always open to boundary judgements. I'd always say London, then West Mids, Manchester & Merseyside could be seen as one, as could Scotland's Central belt - which has a massive propensity to fly c/f other parts of the UK).
Baby's usp? They certainly don't have a stronghold at any airports, but I need to go to Edinburgh next week, and they only want £129 for 2 tix - compared to BA wanting £600+. Is that enough of a usp for you?
Flybe - if over capacity / high fixed costs are the two biggest concerns, then using small planes has to be a pretty good way round. Surely the Q400 is way better than the 717 for cost/seat/mile. Why are there no 717's in the UK?
Jet 2's usp - "we fly from Leeds, no-one else does". As said, a big catchment area (although not sure about 2nd largest connurbation - this is always open to boundary judgements. I'd always say London, then West Mids, Manchester & Merseyside could be seen as one, as could Scotland's Central belt - which has a massive propensity to fly c/f other parts of the UK).
Baby's usp? They certainly don't have a stronghold at any airports, but I need to go to Edinburgh next week, and they only want £129 for 2 tix - compared to BA wanting £600+. Is that enough of a usp for you?
Flybe - if over capacity / high fixed costs are the two biggest concerns, then using small planes has to be a pretty good way round. Surely the Q400 is way better than the 717 for cost/seat/mile. Why are there no 717's in the UK?
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The Boeing 717 is an excellent aircraft, however it does not really fit in with the needs of many of the UK-based operators.
The type would have been a perfect replacement for for Fokker 100 over at bmi, and I believe they even looked at the aircraft around about 1999, but it makes more sense for bmi to look at the A318/A319 (which they have subsequently done) as bmi try to position themselves as an all-Airbus operator.
UK no-frills airlines prefer to fly larger aircraft in the 150/180-seat range, and as a result the 100/120 seat 717 is too small for their operations.
I do believe though that the tyoe could be an effective replacement for the BAe 146, as the aircraft have similar capacities, but the 717 offers a much better performance and is a more economic aircraft.
Just my $0.02
The type would have been a perfect replacement for for Fokker 100 over at bmi, and I believe they even looked at the aircraft around about 1999, but it makes more sense for bmi to look at the A318/A319 (which they have subsequently done) as bmi try to position themselves as an all-Airbus operator.
UK no-frills airlines prefer to fly larger aircraft in the 150/180-seat range, and as a result the 100/120 seat 717 is too small for their operations.
I do believe though that the tyoe could be an effective replacement for the BAe 146, as the aircraft have similar capacities, but the 717 offers a much better performance and is a more economic aircraft.
Just my $0.02