View Full Version : Lo-Cost Gone Mad!!
LGW Vulture
30th Oct 2002, 21:18
I think this thread might have been started elsewhere but, how many operators can this sector sustain, especially in the UK and indeed, Europe?
easyjet, Ryanair, Buzz, MYT, BMI Baby, Channex and now EAL....where will it all end and this is in the UK alone?
Let us take as an example, the US. Since the originators were born - Southwest - how many are left. In the true spirit of Lo-cost, only AirTran and Jet Blue along with the leader, remain.
Surely this cannot go on for long in Europe. This must be a last ditch attempt for survival for certain carriers.
I know I am going to be p*****g on many peoples chips but, out of the seven I named previously, I predict only easy and Ryanair to survive.
Interestingly enough, four of the Lo-cost boys named above have entered the market post 9/11.
Sorry this smacks of desperation, but please someone get a handle on things.......Many many years of research has led me to believe that being first in the market is essential.
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......I'm glad life's only Bizjets.................
Unwell_Raptor
30th Oct 2002, 21:28
Surely that is how competition works?
There will be no return to the old days of big fat bureaucratic flag carriers, trying to be all things to all men. Some of the new breed will succeed, some will fail. That's a market for you.
It can be harsh, but it's what has made most of us richer by far than our grandparents.
slater6000
30th Oct 2002, 23:51
Personally, I think it will end up something like this:-
Top End - exclusive and expensive (a bit like gucci or chanel)
Mid Range - handy destinations and good time slots (Marks & Spencer)
A plane to take you on holiday - a.m. departures, land in the middle of nowhere, no meals, drinks or service...(think Kwik Save)
Price is not the key to succes in all markets.
Torquelink
31st Oct 2002, 12:01
There is bound to consolidation but this doesn't necessarily mean bankruptcies - although wouldn't rule some out where their hub catchment area is too small or they are starting in direct competition to established players. However, if the likes of bmiBaby at EMA and J2 at LBA establish themselves at their hubs with lots of frequencies to their chosen destinations and can keep their costs under control while generating enough traffic/revenue to be profitable, it would be difficult - and expensive - for even Ryan or Easy to break in. And provided they don't go tramping on Ryan's/Easy's toes elsewhere they could be left alone in their niche. The most likely outcome then would be for the shareholders eventually to sell out to Ryan/Easy etc when they want to get their cash out - just as profitable Salt Lake City-based Morris Air was sold to Southwest a few years ago.
Only Ryanair is a low cost carrier. You look at the others' unit costs, and its more like a full service carrier.
I'd say easyJ and Ryan left in the longer term. With Ryan still the only "pure" lowEST cost guy.
The likes of Buzz and baby's - well, whilst the two biggies are concentrating on growth in a largely untapped market (Euro scale) they are ok. However, if the small guys tread on toes, or when the big guys get bored, it'll only take a few months of loss leading by FR/EZE to force them out.
Failing that, they'll use their high share price to buy 'em. (Look at the trading multiples of Ryanair and Eze compared to the full service guys: 15 - 20x forward earnings comapred to 8x).
Goforfun
31st Oct 2002, 20:15
One things for sure BMI can't keep it up at LHR. Nor BA once the gulf kicks off again (end of shorthaul and another swissair- close down one day- restart the next). Lots of consolidation in the major sector before the Low Cost starts to be defined.
5 years from now? Only Ryanair, easyJet will be the fish- the rest are fry.
That's my bets- any advances?
Only Ryanair is a low cost carrier. You look at the others' unit costs, and its more like a full service carrier.
I'd say easyJ and Ryan left in the longer term. With Ryan still the only "pure" lowEST cost guy.
The likes of Buzz and baby's - well, whilst the two biggies are concentrating on growth in a largely untapped market (Euro scale) they are ok. However, if the small guys tread on toes, or when the big guys get bored, it'll only take a few months of loss leading by FR/EZE to force them out.
Failing that, they'll use their high share price to buy 'em. (Look at the trading multiples of Ryanair and Eze compared to the full service guys: 15 - 20x forward earnings comapred to 8x).
prob30
1st Nov 2002, 10:38
Changing the direction of the topic slightly...
In times of recession, 'luxury' industries such as air travel, car manufacture etc etc all tend to take a dive as people dont have the same disposable income as before, and become even more cautious with the cash they do have...
In this situation the likes of Ryanair and Easy must be even stronger players as joe public will only take the best price....or am I barking up the wrong tree?? Recession doesnt seem to be a consideration that comes up in looking at LCC's in the future.