I was on a Debonair flight just a few weeks ago and now they are no more. Such is life in the travel industry. You never know when it’s going to be you. Margins are so slim, you only need one error.
A few bad weeks and that’s enough to turn a profit into a loss. When you are up against a low-cost airline like Go, which actually uses the British Airways name in its advertising, then what chance have you really got? In fact, this collapse will further strengthen Go because the public will feel safer booking with them than with names which do not have the same backing.
Don’t expect any help from the British competition authorities, either. They are always on the side of the big players, are too slow to react and are singularly incapable of looking into the future. Mind you, the low-cost airlines are really digging their own grave.
Instead of allowing some seats to go empty and maintaining low, yet understandable prices, they are busy educating the public into expecting £30 to £50 fares anywhere in Europe. They are thus playing into BA’s hands because, when it comes to it Go can always beat them on price yet stay in business.
No matter how many millions you have, money doesn’t last long when you are messing about with such expensive toys. And it won’t just be BA they will be up against. KLM has already made its move and, sooner or later, Lufthansa and Swissair will join the fray, plus the likes of Alitalia, Olympic, Air France and so on.
Low-cost airlines such as Ryanair and EasyJet have drawn attention to themselves. They have shown they can be profitable and have affected the revenues of the giants.
So far they have been playthings, a novelty in an industry where truly gargantuan (government) pockets are needed. We’ve all had it very good over the last five years but I doubt the boom will last forever.
Those of us who’ve been at it for some years will remember the miners’ strike, the three-day week, the high fuel prices and the Gulf war. And remember how many low-cost airlines are left in the United States – and that was where the concept was fathered.
That reminds me. Any tour operator costing for next year and using charter airlines which do not guarantee fuel and currency surcharges should check with those airlines before costing their brochure.
Fuel prices have gone up, and you might well find the actual seat rates are a few pounds up on those quoted using the FTO costing date and rates. Let’s hope sterling remains strong. Should it weaken, then there will be no currency credits to counterbalance the fuel increases.
Anyway, back to low-cost airlines. No matter how much Branson and Stelios shout about free markets and unfair competition, the European member states will not allow their national carriers to flounder when they have to sell at a loss to match the low-cost airlines.
Governments may pay lip service to the free market theory, but it’s a matter of national pride to keep state airlines flying whether they are privatised or semi-privatised.
The low-cost airlines are playing in a man’s game now and they should watch out. Unfortunately, all they can offer is cheap fares and that is n’t any basis on which to build a long-term business.