Sky’s the limit: analysts predict that there’s still a great deal of mileage in the no-frills market
DEBONAIR’S decision to call in the administrators last Thursday has raised fears that the low-cost, no-frills airline market has reached saturation point (see front page story).
While few, apart from Ryanair, can be claiming to make a profit from the venture, the number of airlines entering the market is still growing.
KLM’s Buzz is the latest to enter the fray with plans to launch flights from Stansted early next year.
Just two years ago, the only low-cost airline plying its trade at Stansted was Ryanair.
Now we also have British Airways’ Go and Virgin Express.
If this is not enough, over at Luton you have BA’s nemesis EasyJet, headed up by the Greek entrepreneur Stelios Haji-Ioannou, and Debonair, chaired by the wily Italian Franco Mancassola.
All six account for around 10m passengers a year from the UK and the sector is easily the fastest growing in the market. But, surely the market is now saturated?
Not so says investment bank ABNAmro. The company’s European aviation analyst Damien Horth said we are still lagging way behind the US, where the low-cost option has been around for almost 30 years, thanks to the grandfather of them all – Southwest Airlines.
Horth said: “The low-cost market will grow substantially over the coming years. Look at the US, it is 10% of the total traffic, but only 1%-2% in Europe. There is plenty of room for short-haul not long-haul growth.”
The same sentiment is expressed by the man who has the job of satisfying the demands of most of the carriers.
Stansted’s managing director John Stent believes there is room for more start-up low-cost carriers, even at his airport.
“Risks are high, but with open skies in Europe, and if they pick the right moment, there is still a lot of demand,” he said.
Stent highlighted Germany and eastern Europe as destinations ripe for more low-cost traffic.
He argued low-cost airlines, like Ryanair, do not saturate the market but expand it. “Ryanair, and to some extent Go, have created demand that was not being exploited,” he added.
Stent is implementing a £150m expansion project which includes £50m to extend Stansted’s main terminal.
But, warns ABNAmro’s Horth, this is where the market may encounter problems.
“If there is a crossover on routes there could be problems,” he said.
This is clearly backed up by the demise of Debonair which competed on key routes with EasyJet and Go.
Currently there is very little crossover, although this is starting to increase as the airlines chase passengers to key cities. Go and KLM UK/Buzz fly to Milan and EasyJet and Debonair go to Barcelona.
Horth said it was also vital the low-cost airlines continued to have a low-cost base like EasyJet and Ryanair. They encourage direct bookings through Web sites and have almost no in-flight service.
Without this they will fall prey to the expansion of no-frills airlines set up by mainline carriers, which benefit from deals on fleet and information technology because of their size.
RYANAIR
Launched: 1985.
Headquarters: Stansted.
Network: Stansted-Glasgow, Oslo, Stockholm, Aarhus (from November), Kristianstad, Ancona, Rimini, Venice, Pisa, Genoa, Turin, St Etienne, Frankfurt, Biarritz, Carcassone, Dinard, Dublin, Derry, Kerry, Knock and Cork; Glasgow-Paris; and UK regions and Gatwick to Dublin. Dublin-Paris and Brussels.
Fleet: 26 Boeing 737s (orders and options for additional 40).
GO
Launched: 1998.
Headquarters: Stansted.
Network: Edinburgh, Copenhagen, Prague, Munich, Venice, Rome, Bologna, Milan, Barcelona, Bilbao, Madrid, Malaga, Faro and Lisbon.
Fleet: 12 B737s (15 by mid 2000).
BUZZ
Launched: 2000.
Headquarters: Stansted.
Network: Milan, Frankfurt, Paris, Vienna, Lyons, Berlin and Dusseldorf.
Fleet: eight BAe 146s.
EASYJET
Launched: 1995.
Headquarters: Luton.
Network: Luton-Inverness, Aberdeen, Edinburgh, Glasgow, Belfast, Liverpool, Amsterdam, Barcelona, Malaga, Palma, Madrid, Zurich, Geneva, Nice and Athens. Liverpool-Belfast, Amsterdam, Geneva, Nice, Barcelona, Madrid and Malaga.
Fleet: 18 B737s by November.
DEBONAIR
Launched: 1996.
Headquarters: Luton.
Network: Luton-Paris, Dusseldorf, Nice, Barcelona, Madrid, Munich, Perugia and Rome; Gatwick- Barcelona.
Fleet: 12 BAe146s; two B737s.
VIRGIN EXPRESS
Launched: 1996.
Headquarters: Brussels.
Network: Stansted-Brussels, Shannon and Berlin (from November); Heathrow-Brussels; Gatwick-Brussels (ends October 31). Mainland European network from Brussels.
Fleet: 21 B737s, one Airbus A320s.