If there is going to be a European LF airlines "Blood Bath", who wont survive?
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Just some inside information from within the SAS Group, there are no plans for the Snowflake brand to disappear, but instead Snowflake branded service is being rolled out across the SAS mainline (and some SK Commuter) flights. The idea is that SAS can offer business class, full-fare economy, and budget class (snowflake) on all flights, and therefore being able to attract the business passengers in business & full-fare economy, and the budget & leisure travellers Snowflake has attracted in the new budget cabin. All-Snowflake flights will remain on routes with strong leisure traffic, like AGP. This is no different than to what Air Canada did to their Tango brand.
Personally, I doubt that we'll be left with just two no-frills airlines. Europe is far too big for just two. I think it'll be left to six.
Most likely, EasyJet & Ryanair, as the big Pan-European major no-frills airlines. Air Berlin/Niki serving the German/Austrian market. Wizz Air or SkyEurope in Eastern Europe. FlyBe as a hybrid no-frills/regional. And then a big no-frills airline owned by a major or group of majors. My guess ... a merger between WW/4U.
Personally, I doubt that we'll be left with just two no-frills airlines. Europe is far too big for just two. I think it'll be left to six.
Most likely, EasyJet & Ryanair, as the big Pan-European major no-frills airlines. Air Berlin/Niki serving the German/Austrian market. Wizz Air or SkyEurope in Eastern Europe. FlyBe as a hybrid no-frills/regional. And then a big no-frills airline owned by a major or group of majors. My guess ... a merger between WW/4U.
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With the way things have been going over the last few days, is it possible that the demise of low fare carriers is the last thing that people should be worried about.
The high fare carriers are having problems and some of them are the ones that people should be worrying about.
The high fare carriers are having problems and some of them are the ones that people should be worrying about.
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What is a Low Fare Airline?
Not to long ago a Lo-Co was very easy to identify - they had a fares structure that was very (clearly) considerably cheaper than the main operators.
Now that does not appear to be the case - EZY and FR are exceptions but they can still be quite expensive - but many of the other Lo-Co's have very odd fare structures.
There are some I never fly with as the fares are to high - the difference between their cheap fare and a getting a decent normal fare journey is not enough!
The usual Lo-Co trick is to advertise a cheap fare but on checking further it is at such stupid times that no-one could ever want to take it up (i.e last one out of BHX and first one back so you are out of the country for 8 hours which is pointess for sight seeing!) so it's worthless OR the outward fare is 49p (and advertised as such) but the inbound fare is £160. This is not Lo-Co - it's variable fares some of which are cheap!
For many of the Lo-Co's to survive they are going to have to clearly differentiate themselves as the mainstream offer cheaper fares. I'm off to Frankfurt in a couple of weeks with Lufthansa for £104 all in - FR from STN worked out at nearly that (£90) by the time I'd added in the shuttle bus - That does not include the parking st STN. The difference was not sufficiently high enough to have the hassle of the inconvenience!
Bernie
Now that does not appear to be the case - EZY and FR are exceptions but they can still be quite expensive - but many of the other Lo-Co's have very odd fare structures.
There are some I never fly with as the fares are to high - the difference between their cheap fare and a getting a decent normal fare journey is not enough!
The usual Lo-Co trick is to advertise a cheap fare but on checking further it is at such stupid times that no-one could ever want to take it up (i.e last one out of BHX and first one back so you are out of the country for 8 hours which is pointess for sight seeing!) so it's worthless OR the outward fare is 49p (and advertised as such) but the inbound fare is £160. This is not Lo-Co - it's variable fares some of which are cheap!
For many of the Lo-Co's to survive they are going to have to clearly differentiate themselves as the mainstream offer cheaper fares. I'm off to Frankfurt in a couple of weeks with Lufthansa for £104 all in - FR from STN worked out at nearly that (£90) by the time I'd added in the shuttle bus - That does not include the parking st STN. The difference was not sufficiently high enough to have the hassle of the inconvenience!
Bernie
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I hadn't forgotten about V-Bird, unfortunately it's another one that's destined for failure due to a lot of low yielding traffic and a fiar number of routes with low load factors.
Easy and Ryan will survive long term. They may well have issued profit warnings, but they have enough money in the bank and investors to afford a re-structure if it's needed in the future. FlyBE will survive longer term than 2006 but not much longer, last years profits were due to their engineering business and the sale of the LHR slots. The biggest battles are now where low cost airlines are starting to directly compete against each other and this will determine who survives.
Abeam Points - BACX aren't in the low fares arena and don't have to pay Franchise Fee's to BA as they're a wholly owned subsidery so have plently of financial backing from their parent company.
Easy and Ryan will survive long term. They may well have issued profit warnings, but they have enough money in the bank and investors to afford a re-structure if it's needed in the future. FlyBE will survive longer term than 2006 but not much longer, last years profits were due to their engineering business and the sale of the LHR slots. The biggest battles are now where low cost airlines are starting to directly compete against each other and this will determine who survives.
Abeam Points - BACX aren't in the low fares arena and don't have to pay Franchise Fee's to BA as they're a wholly owned subsidery so have plently of financial backing from their parent company.
HLX update
According to ATW online, HLX is launching a 'major expansion' in November by adding 18 flights a week into Salzburg.
They expect to break even in the third quarter, but their CEO acknowledges that there will be a 'brutal price war' this winter and some LCCs won't survive.
HLX plan to add 2 East European destinations next year. They operate 11 737s.
Comments:
It will have taken them 2 years to break even.
Their 'major expansion' equates to less than one additional aircraft.
They have obviously been haemorraging money for two years. They will continue to do so this winter.
One (peak) quarter at 'break even' is not enough.
Their strategy has changed (from inter-city to leisure destinations)
I wonder how long TUI will bankroll them?
They expect to break even in the third quarter, but their CEO acknowledges that there will be a 'brutal price war' this winter and some LCCs won't survive.
HLX plan to add 2 East European destinations next year. They operate 11 737s.
Comments:
It will have taken them 2 years to break even.
Their 'major expansion' equates to less than one additional aircraft.
They have obviously been haemorraging money for two years. They will continue to do so this winter.
One (peak) quarter at 'break even' is not enough.
Their strategy has changed (from inter-city to leisure destinations)
I wonder how long TUI will bankroll them?
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One of the things that my studies have shown is a marked (and early) differentiation between the low cost carriers.
If you go back just a few years, your choices for flying around Europe were pretty limited -
- Major carrier (BA, AF, LH etc)
- Second tier (BD, Air Inter etc)
- Charter
What we have seen develop quickly is a three tier low-cost sector - with increasing blurring between the tiers:
- Major carrier (BA, AF, LH etc)
- Second tier (BD, Air Inter etc)
- Charter
- Wannabe low cost (eg flybe)
- Quality low cost (Go, easyJet, bmiBaby)
- Bargain basement (Ryanair)
My take on this is that there will always be space in the market for the lowest price. Ryanair are therefore pretty secure (barring, god forbid, any accidents, but that applies equally across the industry)
The qualities, I think, will start pushing more and more upmarket, as an air ticket becomes a more and more commoditized product. I think you will see a major squeeze on the wannabes and the second tier carriers, making the likes of flybe and bmi mainline more vulnerable than they would like to believe. I think you are also going to see a scrap in the quality section - but not for a few years yet; they will have enough on their plates as they improve the product and take on more and more of the established players.
So - short term, I'd be worried for flybe (their niche status won't help them, the locos have proved adept at developing the most unlikely bases and city pairs - Bournemouth to Hahn, Cardiff to Prague!!?!) and the likes of bmi regional.
Medium term - there will be a cleaning out of the quality sector - likely to be by acquisition and withdrawal, rather than bankruptcy - although acquisition has been an issue - easy still seem to have major indigestion with Go (the best loco by far, for all sorts of reasons - well done to BC, my role model!), and I can't see any of them swallowing up any of the others without pain. Jet2 is pretty vulnerable I would guess, due to its size.... they will disappear smallest first.
Barbara Cassani's comment (is that really you??) about easyJet not being as secure as you'd think may well be true. They are building capacity at a phenomenal rate, and I have seen loads of businesses going tango-uniform like this. Hope that RW knows what he is doing, but at $50 a barrel for oil, he may be in for a tough time.
Ryanair is already showing signs of going a bit upmarket (no, don't laugh) - but provided they stick with their strategy of "never undersold" they will be fine.
The likes of Wizz should be fine - for a bit - since they are on virgin territory to a large degree. I tend to agree about ThomsonFly, who seem to have an identity crisis (charter or loco?) and MyTravelLite (who again seem to want to be charter when it suits them).
TA
If you go back just a few years, your choices for flying around Europe were pretty limited -
- Major carrier (BA, AF, LH etc)
- Second tier (BD, Air Inter etc)
- Charter
What we have seen develop quickly is a three tier low-cost sector - with increasing blurring between the tiers:
- Major carrier (BA, AF, LH etc)
- Second tier (BD, Air Inter etc)
- Charter
- Wannabe low cost (eg flybe)
- Quality low cost (Go, easyJet, bmiBaby)
- Bargain basement (Ryanair)
My take on this is that there will always be space in the market for the lowest price. Ryanair are therefore pretty secure (barring, god forbid, any accidents, but that applies equally across the industry)
The qualities, I think, will start pushing more and more upmarket, as an air ticket becomes a more and more commoditized product. I think you will see a major squeeze on the wannabes and the second tier carriers, making the likes of flybe and bmi mainline more vulnerable than they would like to believe. I think you are also going to see a scrap in the quality section - but not for a few years yet; they will have enough on their plates as they improve the product and take on more and more of the established players.
So - short term, I'd be worried for flybe (their niche status won't help them, the locos have proved adept at developing the most unlikely bases and city pairs - Bournemouth to Hahn, Cardiff to Prague!!?!) and the likes of bmi regional.
Medium term - there will be a cleaning out of the quality sector - likely to be by acquisition and withdrawal, rather than bankruptcy - although acquisition has been an issue - easy still seem to have major indigestion with Go (the best loco by far, for all sorts of reasons - well done to BC, my role model!), and I can't see any of them swallowing up any of the others without pain. Jet2 is pretty vulnerable I would guess, due to its size.... they will disappear smallest first.
Barbara Cassani's comment (is that really you??) about easyJet not being as secure as you'd think may well be true. They are building capacity at a phenomenal rate, and I have seen loads of businesses going tango-uniform like this. Hope that RW knows what he is doing, but at $50 a barrel for oil, he may be in for a tough time.
Ryanair is already showing signs of going a bit upmarket (no, don't laugh) - but provided they stick with their strategy of "never undersold" they will be fine.
The likes of Wizz should be fine - for a bit - since they are on virgin territory to a large degree. I tend to agree about ThomsonFly, who seem to have an identity crisis (charter or loco?) and MyTravelLite (who again seem to want to be charter when it suits them).
TA
wow!!
after that damning verdict, as i belong to a company that, in everyones opinion is at best "unlikely to survive" and at worst "going under next year" i'd better dust off the ol'CV.
Now where's that large queue of MyTravel pilots, i'll go wait behind them.........
after that damning verdict, as i belong to a company that, in everyones opinion is at best "unlikely to survive" and at worst "going under next year" i'd better dust off the ol'CV.
Now where's that large queue of MyTravel pilots, i'll go wait behind them.........
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I cant understand all this talk about fly be getting axed. I remember them as jersey european and british european and i can see the massive differences they have made to them selves since those days.
I think they will survive this time round because they serve a different variety of destinations than EZY or RYR, I think this suits them because they fly to areas that passengers want to travel to for other purposes than buisness and holidays, like second home destinations and quieter short brakes. Hey but what do I know
I think they will survive this time round because they serve a different variety of destinations than EZY or RYR, I think this suits them because they fly to areas that passengers want to travel to for other purposes than buisness and holidays, like second home destinations and quieter short brakes. Hey but what do I know
stilljustanothernumber
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I think EasyJet and to a lesser degree, Ryanair, have painted themselves into a corner with their massive aircraft orders. They have no choice now but to keep expanding. Each new aircraft is a liability! In the whole history of European aviation, has any airline ever planned to expand at this rate and survived?
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unwiseowl,
I would actually argue the opposite.....that in the newly enlarged EU and with the freedom to operate anywhere within Europe (unlike other carriers in the past such as Air Europe which were in a different era!), then it is the size which will 'carry the big boys through' the tough market at present. It's the smaller airlines which are likely to suffer by not having a critical mass in a given market.
I would actually argue the opposite.....that in the newly enlarged EU and with the freedom to operate anywhere within Europe (unlike other carriers in the past such as Air Europe which were in a different era!), then it is the size which will 'carry the big boys through' the tough market at present. It's the smaller airlines which are likely to suffer by not having a critical mass in a given market.
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Unwiseowl,
Isn't the problem with massive expansion having the cash to pay for all the new equipment? That shouldn't be a problem for EZY & RYR, with the cash reserves they have. These markets will only open up once, so first mover advantage really counts.
I agree with terrier21 about flybe. Their strategy may appear muddled, but they do have a clear niche in smaller airports, where either the market, or facilities, is not big enough to support larger aircraft / airlines. Surely, they will maintain a stronghold at JER, GCI, EXT, SOU & BHD? Their only other major presence at BHX might not be so secure, but here they can offer frequency to appeal to business pax, which baby can't.
Isn't the problem with massive expansion having the cash to pay for all the new equipment? That shouldn't be a problem for EZY & RYR, with the cash reserves they have. These markets will only open up once, so first mover advantage really counts.
I agree with terrier21 about flybe. Their strategy may appear muddled, but they do have a clear niche in smaller airports, where either the market, or facilities, is not big enough to support larger aircraft / airlines. Surely, they will maintain a stronghold at JER, GCI, EXT, SOU & BHD? Their only other major presence at BHX might not be so secure, but here they can offer frequency to appeal to business pax, which baby can't.
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In trim, you are right about critical mass. But critical mass in markets like Exeter means nothing. What does matter is critical mass in big markets because it is only those markets which can generate the traffic to fill all those future aircraft orders. RYR and EZY are both big in London which is the largest air transport market in the world. That does not guarantee success but it sure helps. Dominating Exeter, for example, is a niche which may or may not be profitable but in overall terms it is irrelevant.
The rules that have workred for decades are that dominance works, so do niches. Try to jump out of a niche and get into something bigger is almost always a disaster. RYR is probably the only European airline that has succeeded at this. But it has had two advantages. It dominates the important Irish Sea routes ans it got unlimited access to STN when that airport was empty and desperate for traffic.
The rules that have workred for decades are that dominance works, so do niches. Try to jump out of a niche and get into something bigger is almost always a disaster. RYR is probably the only European airline that has succeeded at this. But it has had two advantages. It dominates the important Irish Sea routes ans it got unlimited access to STN when that airport was empty and desperate for traffic.
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Thanks for agreeing flight mapping.
But Flybe have seen their success at Brs grow recently and will hopefully continue to grow all of that along side easyjet who now have the largest uk presense in britain outside of london here at Brs.
But Flybe have seen their success at Brs grow recently and will hopefully continue to grow all of that along side easyjet who now have the largest uk presense in britain outside of london here at Brs.
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Terrier21
A quick jump to the piccy on the following home page will show that you might just be a little premature with your statement....
www.nwan.co.uk
A quick jump to the piccy on the following home page will show that you might just be a little premature with your statement....
www.nwan.co.uk
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FlyBe claims to be the 3rd largest European low fares carrier, but only because they consider for their statistics only the Air Berlin City Shuttle service.
AB will carry about 12m pax this year, I doubt FlyBe could carry half of AB pax....
AB will carry about 12m pax this year, I doubt FlyBe could carry half of AB pax....
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What many people fail to realise (including the so-called "expert" analysists on this thread) is that flybe aren't trying to compete with the likes of easy-ryan. Anyone can see that, if you look at their routes and the markets they are aimed at, mainly 2nd home-owners who live in Southern UK who are not short of a few bob. They have also opened up Europe to the regions at not necessarily the cheapest, but still reasonable prices considering the convenience of flying from a local airport. Their other market of course is linking the regions of the UK offering better prices and more convenience than catching a train (e.g. SOU-EDI).
Flybe are beginning to send back some of their 146's, but this does not mean the end of their jet ops. My bet, and rumour is that when they have sent back the old leased ones and sold off those remaing that they own, they will be in a prime position to ask Mr Airbus for a deal, before getting rid of the 146 altogether.
An "expert" mentioned earlier in this thread that the Bombardier Q400 is not the a/c for a low-fare airline. On the contrary- the Q400 is so cheap to run that it only has to be half-full to break even, based on each seat being £75 (They are often more expensive than that, too). Every other seat filled after that is pure profit. On most of the sectors operated by the Q400, 97% of the seats are filled.
The Q400 flies almost as quick as a jet, and can operate comfortably to/from some of the smaller airfields in France they fly to with full loads in hot n' high conditions.
Using the Q400 on regional UK routes means that they only have 78 seats to fill instead of a 737's 150+ seats, and again making profit after the 50% load factor mark. Buying the Q400 wasn't a stupid idea, it was an intelligent one.
Analyse that, "experts"!
Flybe are beginning to send back some of their 146's, but this does not mean the end of their jet ops. My bet, and rumour is that when they have sent back the old leased ones and sold off those remaing that they own, they will be in a prime position to ask Mr Airbus for a deal, before getting rid of the 146 altogether.
An "expert" mentioned earlier in this thread that the Bombardier Q400 is not the a/c for a low-fare airline. On the contrary- the Q400 is so cheap to run that it only has to be half-full to break even, based on each seat being £75 (They are often more expensive than that, too). Every other seat filled after that is pure profit. On most of the sectors operated by the Q400, 97% of the seats are filled.
The Q400 flies almost as quick as a jet, and can operate comfortably to/from some of the smaller airfields in France they fly to with full loads in hot n' high conditions.
Using the Q400 on regional UK routes means that they only have 78 seats to fill instead of a 737's 150+ seats, and again making profit after the 50% load factor mark. Buying the Q400 wasn't a stupid idea, it was an intelligent one.
Analyse that, "experts"!
Fimbles,
i think terrier was just saying that flybe have grown in bristol (which they have) operating on different routes to easy.
I don't think he was suggesting to flybe being BIGGER than easy at bristol.
So why the link to the picture on www.nwan.co.uk?
Everyone with a brain knows that Easy are the biggest operator at BRS.
Many thanks for pointing it out though.
i think terrier was just saying that flybe have grown in bristol (which they have) operating on different routes to easy.
I don't think he was suggesting to flybe being BIGGER than easy at bristol.
So why the link to the picture on www.nwan.co.uk?
Everyone with a brain knows that Easy are the biggest operator at BRS.
Many thanks for pointing it out though.