Low-cost carrier bubble to burst

GENEVA, Nov 2 (AFP) - No-frills airlines are jetting off around Europe
while more traditional carriers struggle, but as with the Internet boom of
dot-com ventures, many of these start-ups are in for a hard landing, experts
warn.
In Switzerland, Flybaboo Airways and Helvetic Airways take to the skies
this month, hoping to emulate the success of low cost leaders such as Ryanair
and easyJet while benefitting from a gap in the market left by reduced
services at troubled mainstream carrier Swiss.
And in Britain, Duo -- an independent airline spun off from a franchise
with British Airways (BA) -- is launching a cheap, business class service to
create a new market in between the budget and network fliers.
"We love to see start-ups and we love to see carriers trying things that
others have not tried because it is great to expand the market for everyone,"
said William Gaillard, a spokesman for the International Air Transport
Association (IATA).
Claps and cheers upon touchdown often come from first time fliers who, just
four years ago, would not have been able to afford air travel, said Angelika
Schwaff, spokeswoman for Air Berlin, Germany's largest low cost airline.
But while the cost of flights is falling, the future for many new carriers
looks uncertain.
"You are going to see a lot of them fail," predicted the IATA's Gaillard.
"It is like the time of the dot-com" bubble, which burst in 2000 sending a
lot of new Internet companies under, he said.
Europe's no-frills market is still relatively new, meaning budget airlines
rarely compete directly against each other. But the day they do "there will be
blood on the tracks," warned Gaillard.
Baboo Airways will start cheap flights from Geneva to Lugano -- a route
that Swiss abandoned at the end of last month -- and Venice from November 3.
"In Switzerland you have got the national carrier, Swiss, cutting back
month after month, so there is an opportunity for new carriers," explained
Baboo's British founder Julian Cook.
Across the country in Zurich, Helvetic Airways is due to start flying to
three European destinations from November 28 for a one-way flat fare of 99
euros (116 dollars).
"Our concept is to be very lean, very little and very simple," said the
firm's chief commercial officer, Thomas Frischknecht, when asked why he
thought Helvetic would prosper in an industry that has seen many larger
carriers fail.
Determined not to be left behind by the low cost boom, which already
comprises 25 percent of air travel in the United Kingdom and looks set to
capture the same share Europe-wide, network carriers are also cutting fares.
"We have launched a new concept on European flights where passengers pay
for their food," said Christine Buhler, a spokeswoman for Swiss, which
recently announced a tie-up with BA and the Oneworld alliance.
Since the cheaper service was introduced in August, bookings had risen by
30-40 percent, she said.
But Paul Fitzsimmons, head of communications at Ryanair -- Europe's largest
low cost carrier, which aims to overtake BA to become the biggest European
airline by 2005-2006 -- says success takes more than a good idea.
"We love the competition, but to be a low cost airline you have got to eat,
sleep and drink low fares ... and we do that particularly well," he said.
Over the past two years the number of passengers flying with the Irish
airline grew from 11 million to 16 million. The firm is on target to transport
just under 24 million people in 2003 but is being challenged under EU
competition law over payments from regional airports.
Ryanair and rival easyJet, which has enjoyed a growth rate of between 24
and 40 percent since 1995, based their business models on the US airline
Southwest, which began the world's first low cost service in the 1970s.
Southwest's soaring success inspired other start-ups to enter the budget
market in the United States, but most collapsed within a year. And history
would likely repeat itself in Europe, said the IATA's Gaillard.
Ryanair predicts it will be the ultimate winner, while German Wings, a
one-year-old operator, thinks there is room for three or four cheap carriers.
"There will be a concentration process within the low cost segment," agreed
Philippe Vignon, a spokesman for easyJet.
"What you will see long-term is that the biggest airlines will merge with
the smaller ones."

On Sun, 02 Nov 2003 20:33:36 +0000, FlyBooboo wrote:

[ Snip ]

But Paul Fitzsimmons, head of communications at Ryanair -- Europe's largest
low cost carrier, which aims to overtake BA to become the biggest European
airline by 2005-2006 -- says success takes more than a good idea.

Mr. Fitzsimmons is demonstrating Ryanair's standard poor level of
communication!

He has obviously not heard that the biggest European airline is
AF/KLM... not BA.

"We love the competition, but to be a low cost airline you have got to eat,
sleep and drink low fares ... and we do that particularly well," he said.

Given that the second word is obviously a blatant lie, I suspect the
rest can be taken with more than a grain of salt!

[ Snip ]

Ryanair predicts it will be the ultimate winner, while German Wings, a
one-year-old operator, thinks there is room for three or four cheap carriers.

Malcolm predicts that the EU competition watchdogs will make damn sure
Ryanair *isn't* the _only_ winner...

[ Snip ]

Malc.

In article ,
Malcolm Weir wrote:

On Sun, 02 Nov 2003 20:33:36 +0000, FlyBooboo wrote:

[ Snip ]

But Paul Fitzsimmons, head of communications at Ryanair -- Europe's
largest
low cost carrier, which aims to overtake BA to become the biggest European
airline by 2005-2006 -- says success takes more than a good idea.

Mr. Fitzsimmons is demonstrating Ryanair's standard poor level of
communication!

He has obviously not heard that the biggest European airline is
AF/KLM... not BA.

Only when those two have merged. Still a ways off. BA remains the
largest until the deal is done, barring unforeseen developments.

The biggest threat to the discount carriers was the major carriers.
They used to be able to dump flights on routes the discount carriers
operated on, and they had the resourses to weather out the losses they
incurred on those routes. For example, look at American Airlines fares from
JFK to Oakland and compare them to JFK to San Francisco. Oakland and San
Francisco are only 12 miles apart, and you can now go between them on the
local subway, but American charges signifficantly more to fly into San
Francisco where they have no competition, than to Oakland where they compete
with JetBlue. However, the major airlines no longer have the resoures to
compete in this manner. In the past three years, Continental is the only
major U.S. carrier to post profits, US Airways and United both filed for
bankrupcy protection, and American and Delta both teeter on the edge of
bankrupcy themselves. As for the discount carriers, they are doing
extremely well. Southwest JetBlue, and AirTran all posted profits over the
last year. Frontier posted profits the last two quarters, and their planes
are flying with record occupancies.

The major airlines are starting to formulate a new strategy to compete
in this market. Delta launched Song to compete with JetBlue and AirTran on
the east coast, and United is planning to launch a new carrier codenamed
Starfish to comepte directly with Frontier in Denver. How successful these
carriers will be remains to be seen. This is somewhat based on Air Canada's
launch of Tango which has proved successful so far.

There is a new paradigm in air travel today. Cost containment is the
most critical issue facing the major carriers now. JetBlue (Airbus),
Frontier (converting from Boeing to Airbus), and Southwest (Boeing) operate
only one type of plane saving on spare parts storage and training costs.
They negotiated lower labor costs and more flexable work rules with their
unions. Also, they fly into airports that are less congested and less
expensive to operate out of, such as Fort Lauderdale instead of Miami,
Baltimore instead of Washington, DC or Long Beach instead of Los Angeles.
Southwest is particularly famous for this, flying into Providence, RI and
Manchester, NH rather than Boston, Islip, NY instead of New York City, or
Samford, FL rather than Orlando.

Another major factor is the fare structure. The major airlines were,
and are still, relying on business travellers to be less cost concious in
their flight selections. For example, it costs nearly twice as much on the
walk-up fares to fly from Denver to Atlanta on Delta and United than on
Frontier or AirTran, which all have non-stop flights on this route.
However, in this economic climate, corporations are closely watching travel
expenses. Many are requiring their travellers to forego the perks of the
major airlines for the lower expenses of the discount carriers. Leisure
travellers were always price sensitive, and offering lower costs to them was
always a major goal, which the low cost airlines are able to do over the
long haul

Custumer service is also a major factor that all airlines are starting
to pay attention to. In January of 1998, Northwest left many passengers
stranded on the runways at Detroit for several hours with no information or
services during a snowstorm. The summer of 2000 was very bad as airlines
would not disclose delays when they knew one was imminent. There was also
the labor slowdown at United which resulted in several flights being
cancelled, and in one case, a flight into Denver was abandoned in Colorado
Springs when the flight crew left the aircraft because they couldn't fly
into Denver due to bad weather, and were going to exceede the FAA limits on
time in the cockpit. Congress threatened tighter regulations, but they
promised they would get better so no legislation was passed. As of today,
there is no indication that they are following through with their promises.
The major carriers are also discontinuing services. You can almost never
find a flight less than three hours long with food service more than a can
of soda (if that anymore) and a bag of peanuts. Discount carriers almost
never offered food service anyway, and this was not expected of them so no
one was dissapointed to not get a tasteless omlette or a sandwich on a roll
that was once a baseball. Discount carriers are starting to provide some
services, though. JetBlue and Frontier both offer seatback TVs, and
Southwest is considering adding them to their planes, too. Some airlines
are offering food service, too. Frontier offers food service on their
longer flights such as a breakfast burrito or chicken wrap on their flights
to Florida.

All is not lost for the major carriers, though. They still have the
airport clubs for their business travellers where they can make phone calls
and relax between flights. Frontier, JetBlue and Southwest do not have a
first class section, although ATA, AirTran and Spirit do. Most discount
carriers do not have a frequent flyer program, and the ones that do have a
fairly rudimentry rewards system. Many have limited route networks. All
flights on Frontier airlines go through Denver. Most flights on AirTran go
through Atlanta, and Spirit's entire timetable fits on one 8 1/2" by 11"
sheet of paper. Also, if the discount carriers fly internationally, the US
based carriers fly only to Mexico and the Caribbean basin, and the European
discount carriers rarely operate outside the European Union. This is mainly
due to the fact that international flights are limited by the respective
governments. Discount carriers also have much fewer resources available to
them. The major airlines can offer a much wider selection of flights, and
more destinations. Discount carriers rarely offer more than five flights a
day between any two cities, while the major carriers operate dozens of
flights between their main cities. As I previously mentioned, food service
is inconsistent on the discount carriers, which can be a factor on
trans-continental flights.

For the discount carriers to survive, they must have the resources to
withstand attacks by the dinosaurs of the airline industry. They must also
be able to deliver a consistantly good service at low fares. If they can do
this, they will survive. If they can do this, they will survive.

Tom Smith

"Thomas Smith" -NO-SPAM wrote in message ...
[snip]
Also, they fly into airports that are less congested and less
expensive to operate out of, such as Fort Lauderdale instead of Miami,
Baltimore instead of Washington, DC or Long Beach instead of Los Angeles.
Southwest is particularly famous for this, flying into Providence, RI and
Manchester, NH rather than Boston, Islip, NY instead of New York City, or
Samford, FL rather than Orlando.

It's Sanford, and WN doesn't fly outta there. Neither does Blue,
ATA, AirTran, etc. You are right that WN and other avoid some of
the largest airports in the nation, but they do occasionally have
to serve them in order to get into markets. They avoid it like
the plague however. But MCO ain't one of them.

[snip]
All is not lost for the major carriers, though. They still have the
airport clubs for their business travellers where they can make phone calls
and relax between flights. Frontier, JetBlue and Southwest do not have a
first class section, although ATA, AirTran and Spirit do. Most discount
carriers do not have a frequent flyer program, and the ones that do have a
fairly rudimentry rewards system. Many have limited route networks. All
flights on Frontier airlines go through Denver. Most flights on AirTran go
through Atlanta, and Spirit's entire timetable fits on one 8 1/2" by 11"
sheet of paper. Also, if the discount carriers fly internationally, the US
based carriers fly only to Mexico and the Caribbean basin, and the European
discount carriers rarely operate outside the European Union. This is mainly
due to the fact that international flights are limited by the respective
governments. Discount carriers also have much fewer resources available to
them. The major airlines can offer a much wider selection of flights, and
more destinations. Discount carriers rarely offer more than five flights a
day between any two cities, while the major carriers operate dozens of
flights between their main cities. As I previously mentioned, food service
is inconsistent on the discount carriers, which can be a factor on
trans-continental flights.

For the discount carriers to survive, they must have the resources to
withstand attacks by the dinosaurs of the airline industry. They must also
be able to deliver a consistantly good service at low fares. If they can do
this, they will survive. If they can do this, they will survive.


The mantra in almost any business is "grow or die". The discount
carriers currently grow by adding flights and/or routes between
specific city pairs. At some point, they will have to start their
own version of "hub and spoke" and they'll begin to experience many of
the same problems that the majors do. They'll have to deal with
"feeder routes" and the associated baggage handling problems. And
at some point, their gonna wanna go international.

It is in the international market where the majors are suffering
right now. There are too many carriers and government restrictions
still abound. Throw in the current security slow downs/hassles
and international has a hard time fitting into the discounts business
model of rapid turn arounds. It'll take 10 years I'd bet, but in
the end, we may some day redefine "majors" based upon their ability
to fly internationally.

In message , me
writes
Throw in the current security slow downs/hassles and international has
a hard time fitting into the discounts business model of rapid turn
arounds.

There's a rather more fundamental problem. Most intercontinental flights
have to fit into a tight pattern. For example, (apart from Concorde,
RIP) if you fly from the USA to Europe, then you leave the USA in the
late afternoon, arrive in Europe at dawn. Turn the plane around and
leave mid-morning, getting home to the USA in mid afternoon. You can
only do one return trip a day, and there's no economy involved in a
faster turnround at *either* end.
--
Roland Perry

On Tue, 4 Nov 2003 17:26:49 +0000, Roland Perry
wrote:

You can
only do one return trip a day, and there's no economy involved in a
faster turnround at *either* end.

That assumes that the aircraft is only operating on that one route, but
that is not the case much of the time. It might fly say LAX -LHR-LAX but
it doesn't sit at LAX to fly that evenings flight back to Heathrow. It
will be used to fly another route. An aircraft arriving at LAX shortly
before the LHR departure may well fly that route.

In fact watching UAs use of aircraft I have found that an aircraft from
LAX-LHR may well go out to ORD and that over a 7 day period there is a
different aircraft each day operating a particular flight number. Can't
do more than seven days as the machine in my office will not let me.

--
Lansbury

In message , Lansbury
writes
That assumes that the aircraft is only operating on that one route, but
that is not the case much of the time. It might fly say LAX -LHR-LAX but
it doesn't sit at LAX to fly that evenings flight back to Heathrow.

It doesn't need to sit there very long. Ten hour flights with two hours
turnround at each end.

FWIW, I've rarely seen aircraft arrive transatlantic in London, and then
*not* fly back straight away. Even BA planes based in the UK. (Virgin is
a counter-example). Similarly, virtually all Europe-based aircraft will
simply turn around in the USA.

In any event, aren't most transatlantic planes a different
configuration, or do they really fly planes with four classes and
reclining sleeper seats between LAX and ORD?

--
Roland Perry

On Wed, 5 Nov 2003 12:54:24 +0000, Roland Perry
wrote:


FWIW, I've rarely seen aircraft arrive transatlantic in London, and then
*not* fly back straight away. Even BA planes based in the UK.

But fly out again where, not necessarily from where it came.

In any event, aren't most transatlantic planes a different
configuration, or do they really fly planes with four classes and
reclining sleeper seats between LAX and ORD?

Why does it have to go on a domestic flight it could, as made up
examples only, go LAX-LHR-ORD-FRA-JFK-CDG-IAD-AMS-LAX.

An aircraft based at LHR could do LHR-JFK-LHR-JNB-LHR-SEA-LHR-SYD-LHR.

So there is some scope to cut down turn around times but of course
nowhere near to the times the like of easyjet or ryanair do. All other
things being equal of course.
--
Lansbury

Lansbury wrote:
That assumes that the aircraft is only operating on that one route, but
that is not the case much of the time. It might fly say LAX -LHR-LAX but
it doesn't sit at LAX to fly that evenings flight back to Heathrow.

This varies a lot. For a small airline with only a couple 747s, then the route
that needs a 747 may find itself using the same plane. On the other hand, if a
route requires more than 24 hours for the return flight (including
maintenance/turn around), then you'll have at least 3 planes involved, with
each of these planes having enough spare time between the long hauls to do
some shorter hops.

Or for transatlantics from east coast of USA airlines, a flight might go
eastbound at 19:00 and return from europe the next morning at 12:00. That
leaves 7 hours where the plane can do a short return flight to another city
and be back at JFK in time for its 19:00 departure.

At the other end (outside airline's home country) though, the airlines have a
tendency to have the flight return as soon as possible, with some exceptions
where a plane arrives very late at night and would wait until morning to leave
(I think Asia has (or had) many such examples)