Low Fare Airlines to Dominate But....

An interesting report from the ELFAA and York Aviation titled European Low Fares Airline Association: Forecasting the Market Share of Low Fares Airlines in Europe.

its only 15 pages and well worth the read. But I will challenge the presumed results.

What the report fails to acknowledge is the maturity of the Southwest Model. Also it fails to consider that there will be a capacity constraint problem in Europe. It also doesn't give any allowance for the opening of the European market to non-EU based carriers.

With Stansted Airport - Europe's largest Low Fare airport experiencing traffic declines - these numbers may be hard to sustain. But in my view this discounts entirely the hyrbidization of the airlines - particularly Easyjet and Norwegian. I predict that by 2020 Easyjet will be a legacy looking carrier with full service amenities just like jetBlue and to some extent Southwest have become in the USA. Norwegian will have also LONG HAUL flights as it has purchased at least 2 787s.

Further I believe that Ryanair cannot continue to expand using secondary airports and therefore must adopt some full service ancillary service capability. Indeed just like Southwest has experienced in the USA market.

I believe that we will have had a total breakdown of the legacy GDS model and a replacement of so many options of distribution that there will be a whole new class of Air Find services. More implicit than explicit type interfaces.

Finally I predict that the long shadow of Emirates and to a lesser extent the other Gulf carriers and the removal of competitive barriers will mean a great deal of additional competition of different characteristics. We can look to the EK Trans Tasman flight extensions as a model for increased competition inside Europe. Of course this assumes that the legacy EU carriers are not successful in bringing barriers to entry through regulation.

Food for thought.

Cheers

Where Have All The Low Costs Gone?

I must be having a fit of deja vu or something even worse. I thought LCCs were supposed to be about low cost and eschewing the trappings of conventional airline services such as Big PSS systmes, Interline, FF marketing partners, Interline, Codeshare, Legacy GDS etc etc.

Here are the bigger news items:

WestJet, JeBlue and Volaris are all migrating (or have migrated) to Sabre from Navitaire.
jetBlue is doing a deal with AA and BA for codeshares and feeders.

Gol is joining IATA. It already participates in ARC.

So let's talk about interline...

Not content there:

Air France-KLM and Jetstar sign interline agreement. Agreement covers the 60-odd destinations served by Jetstar, Jetstar Asia/Valueair and Jetstar Pacific, as well as Air France and KLM gateways Paris and Amsterdam.

Jetstar has also announced deals with LH

Virgin Blue are sharing across the Tasman sea with ANZ

Even Air Asia and Jetstar are doing deals with Delta for FF use. Check this out!!!



Am I missing something or is there a quiet revolution going on....

What I find interesting here is that there is a downside to all of this - the use of the more expensive distribution tools such as these things are beginning to drag down the profitability of the LCCs. Yet this week LCC champ Ryanair once again showed us that the true LCC model is very much alive. And very profitable now thank you very much.

Perhaps now that everyone is flush with cash they will spend a little to assess the true cost of these programs.

iPads all round anyone?

Cheers

jetBlue Completes Migration To Legacy Carrier

In the recent years - airlines have fallen in love with the Low Cost Carrier model - LCC. But more recently as the strictures of the model start to constrain the growth of the business - the startup LCCs are started to adopt more hybrid like characteristics. At the same time the legacy full service network airlines have adopted many of the LCC characteristics. This dual trend - big airlines becoming hybrid and LCCs becoming hybrid has now passed a formal milestone. The first LCC to become a full service legacy carrier.

Welcome to the old boy club JetBlue.

In the past 3 years jetBlue has undergone a radical transformation. Here are some of the things it now does:

1. Participates in ARC
2. Participates in GDSs
3. Interlines
4. Hosted in Sabre
5. Is partially owned by LH

Etc etc

So as you can now see - jetBlue has become a full service network carrier just like all the others. Voila - completing its transition.

Seems like the LCCs are the dying breed despite their greater profitability.

Hmmm food for thought.

Cheers

So A Quiz - Which EU Based Flag Carrier Is Weakest in Its Home Market

So let me be specific.

Which European based airline that is a legacy/flag carrier is weakest in its home market? For many years this used to be KLM.

So lets use the metrics that we know and love - I will cheat and use the share of scheduled flights. This means that there is a considerable amount of capacity that is not included in our search - but lets press on.

Lets start with the 5 top markets to simplify matters:

These are for originating traffic:

UK
Germany
Spain
France
Italy.

1. Lets now look at which airlines enjoy a dominant position in that market - IE 50% of total capacity. Answer? Just one - Air France (excluding KLM).
2. Now lets look at which Flag carriers are bigger than their low cost rivals. Answer all but the UK where BA is now relegated to second place behind Ryanair. Indeed at just 17% it is the lowest market share of any airline.
3. Where do all LCCs form bigger than Legacy airlines? Add Spain and Italy although Spain doesn't really count because New Vueling is mostly controlled by Iberia.

Still this is an interesting trend!!!

If we look at the next tier of markets (12 in all) then the numbers have the same characteristics, so for the following markets:

Norway
Greece
Netherlands
Switzerland
Sweden
Portugal
Ireland
Austria
Finland
Belgium
Denmark
Poland

1. Of Flag carriers only one has a Flag Carrier rate higher than 50% (Finland)
2. Countries where Flag Carrier is smaller than one LCC alone (Ireland - Ryanair, Greece - Aegean, Norway - Norwegian, Poland - Wizz)
3. Countries where Flag Carrier is smaller than combined LCCs (above plus Sweden)

Fun to think of this right? Oh yes the answer in case you missed it was BA.

Cheers

Source OAG Max w/c 7 Sept 2009.

Is this the Zenith of the US Legacy Carriers?

The French have this wonderful expression Plus Ca Change. Roughly translated it means the more things change the more they stay the same. However we could be seeing the end of the US Traditional Full Service Model, it has passed its zenith and we are headed for a different world.

Here is some interesting backup to this supposition from Anna.aero.

http://www.anna.aero/2008/10/10/the-big6-us-legacy-airlines/?utm_source=anna.aero+newsletter&utm_campaign=a43c266e4c-week_63_October_2008_anna_aero_newsletter&utm_medium=email

Frankly it really does show that there is only one way to go - and that is down.

Interestingly they don't make the connection that I think is likely to happen - namely that now is a great time to think about starting an airline.

We have been approached by several players some funded - some not - who are looking to fill in the gaps where the existing players have pulled out or where the service models just are not working economically.

The Western USA for example is taking the brunt of the withdrawal of United's 737 fleet.

So onward and upward - the new UPC airline revolution is with us. Sadly if there was any nostalgia for the the romance of aviation from a bygone era - it is well and truly now dead.

Cheers