{"id":35917,"date":"2014-04-29T15:32:13","date_gmt":"2014-04-29T14:32:13","guid":{"rendered":"https:\/\/www.voyages-d-affaires.com\/low-cost-aerien-un-business-modele-20140429.html"},"modified":"2016-02-10T10:17:35","modified_gmt":"2016-02-10T09:17:35","slug":"low-cost-air-travel-a-business-model","status":"publish","type":"post","link":"https:\/\/www.voyages-d-affaires.com\/en\/low-cost-air-travel-a-business-model","title":{"rendered":"Low-cost air travel: a business model"},"content":{"rendered":"

Who could have imagined, even ten years ago, that European short-haul air transport would one day be dominated by low-cost aviation? And that Europe's major airlines, like Air France, Iberia and Luft-Hansa, would also embrace this model? Probably not. And yet, in less than two decades, low-cost airlines have completely reconfigured air transport worldwide. At the end of 2013, 26 % of all seats offered worldwide were on a low-cost carrier. In a study published by the World Bank, air transport specialists Charles E. Schlumberger and Nora Weisskopf even consider that low cost is one of the engines of global economic growth, particularly for developing countries.<\/p>\n

And for once, Europe is far from lagging behind! Quite the contrary, in fact. On this continent, low-cost carriers increased their seat capacity by an annual average of 14 % between 2004 and 2013, compared with just 1 % for traditional airlines, according to studies by OAG, a leader in the observation of air transport schedules and capacity. In fact, low-cost carriers now account for 38 % of all seats offered in Europe. Some experts even go so far as to predict that by 2015, this figure should reach or even exceed 50 % of market share on short-haul routes.<\/p>\n

Europe ahead of the game<\/h2>\n

Europe is on the way to supplanting the United States, where the model was born in the early 1970s with Southwest Airlines. While the American low-cost model remains primarily a domestic affair, the European low-cost model is expanding internationally, towards North Africa - Morocco in particular - and the Middle East - Israel and Turkey in particular.<\/p>\n

We can definitely speak of a \"before\" and an \"after\" for low-cost airlines. The revolution triggered by the arrival of low-cost carriers has affected the entire industry service chain, from booking to pricing, from network density to on-board service. No aspect of air travel today escapes the influence of the low-cost dynamic. Starting with passenger traffic. In a Europe wracked by economic crisis, the growth of low-cost airlines is flirting with insolence. \u00a0<\/p>\n

Ryanair and others<\/h2>\n

\"AsAlthough Ryanair is often criticised for its cookie-cutter strategy and its sales and marketing methods, Michael O' Leary's company is also one of the most powerful in Europe. In 2013, Ryanair carried 81.4 million passengers on its aircraft, an increase of 2.3 % compared with 2012. This makes it the leading carrier on the continent. The Irish airline recorded an average load factor of 83 % over the same period. A figure to be compared with that of Air France-KLM. The Franco-Dutch duo carried 78.44 million passengers last year, with a load factor of 83.7 %. But Ryanair has widened the gap if only Air France-KLM's European traffic is taken into account. In 2013, this totalled 53.9 million passengers, with a load factor of 76.1 %.<\/p>\n

Europe's second-largest low-cost carrier, easyJet, has no reason to be ashamed of its results either, with 61.3 million passengers (+3.6 % on 2012) and a record load factor of 89.3 %! Behind them, Norwegian (19 million passengers), Vueling (16 million) and Wizz Air (13 million) are the other European low-cost carriers whose traffic exceeds ten million passengers a year.<\/p>\n

\"WithEconomic conditions such as the explosion in aircraft operating costs have worked in favour of low-cost air transport. With paraffin up 143 % in ten years and the average ticket price falling as a result of competition, this equation is weighing on the profitability of short-haul routes, which are financially unprofitable for traditional airlines. So, in the 1990s, British Airways abandoned services to Europe from the British provinces. This left the way clear for carriers such as Flybe, the leader in the British regions with a 52.5 % market share. Similarly, it's hardly surprising that easyJet is now the leading operator at airports such as Basel-Mulhouse, Geneva and Newcastle, and the runner-up at Bordeaux. Or that Ryanair accounts for 90 % of traffic at Beauvais, 75 % at London Stansted and 20 % at Marseille Provence.<\/p>\n

Given this success, the dividing line between a true low-cost carrier and a traditional airline has become increasingly thin. All the more so since some incumbent carriers have created low-cost subsidiaries or acquired low-cost airlines to better counter Ryanair or easyJet. The genres are blending and the low-cost spirit is slowly but surely making inroads among the regular airlines, which no longer hesitate to mix basic services with \"dry\" flights, sprinkled with supplements for any additional service, such as checked baggage or an in-flight meal.<\/p>\n

Mixing genres<\/h2>\n

One of the first to blur the lines was Belgian carrier Brussels Airlines, which for a dozen years now has been offering a low-cost service on its lowest fares and a traditional airline service on its highest fares on its European routes. It's an example that can be repeated over and over again. Launched in summer 2013, the new strategy of SAS Scandinavian Airlines applies this principle through its new SAS Go service classes - inspired by low cost - and SAS Plus - a more traditional service. \"We wanted to make it even easier for our customers to get around\".<\/em>said Rickard Gustafson, Chairman of the SAS Group, last summer, \"SAS Go and SAS Plus are part of a commitment to simplicity, which must go hand in hand with customer satisfaction.<\/em><\/p>\n


<\/em><\/p>\n

\"WithVueling is another example of the increasingly blurred boundaries between traditional and low-cost airlines. The Spanish carrier has lost its financial independence, first becoming a subsidiary of Iberia in 2009 and now of IAG, the holding company for British Airways-Iberia, which has controlled 90.5 % of the airline's capital since 2013. Vueling is the dominant carrier at Barcelona El Prat airport, from where it offers over a hundred destinations, as well as at numerous Spanish regional hubs. It is also one of the main carriers at Rome Fiumicino.<\/p>\n

In Germany, the rise of Germanwings, a subsidiary of Lufthansa, reflects the German airline group's desire to stem its losses on short-haul routes in Europe. Begun in 2013, the transfer of all Lufthansa point-to-point routes from Germany to Germanwings, with the exception of routes from the Frankfurt and Munich hubs, will continue this year. This change in strategy reduced operating costs by more than 20 % across Europe in 2013, compared to Lufthansa's losses of \u20ac250 million the previous year.<\/p>\n

Low-cost subsidiaries<\/h2>\n

\"AtTo achieve this, Germanwings oscillates here too between low costs and full service between its Basic fares, where all services are paid for, from baggage allowance to in-flight catering, its Smart fares, which include a hold baggage item - like a traditional economy class - and a limited in-flight service, and its Best seats, dedicated to business travellers. This superior service includes total ticket flexibility, access to Lufthansa lounges, a two-baggage allowance, a meal and an express queue for security checks.<\/p>\n

Air France is no exception to this trend. Last year, the airline came up with the HOP concept. This Air France subsidiary brings together the carrier's regional arm and, thanks to very low fares, intends to regain market share on Paris-region routes as well as on intra-provincial routes, where low-cost airlines are increasingly positioning themselves. \"We are quite satisfied with the acceptance of HOP by businessmen in the regions, who wanted a simple, transparent, punctual and therefore reliable product\".<\/em>says H\u00e9l\u00e8ne Abraham, Deputy Managing Director in charge of sales at HOP.\u00a0<\/p>\n

Back in business<\/h2>\n

\"Low-costTransavia has established itself as Air France-KLM's true low-cost structure, almost complementary to HOP. Positioned primarily on leisure destinations from Paris Orly, Lille, Lyon and Nantes, it mainly serves the Mediterranean basin. But its strategy is gradually evolving, with an increase in flights to major European cities and the development of its fleet, which is due to grow to 16 aircraft by the end of 2014, then 20 aircraft in 2015. The airline recently announced the opening of 15 new routes, including Athens, Barcelona, Budapest, Istanbul, Pisa, Prague and Rome from Paris, as well as Athens and Malta from Nantes. It is even considering code-sharing flights with Air France.<\/p>\n

But this porosity between concepts is also happening in the other direction. While scheduled airlines are in battle to win back passengers looking for low fares, low-cost carriers are redoubling their efforts to attract business passengers. Alex Cruz, CEO of Vueling, likes to describe his airline as a new generation. This hybrid model combines We offer \"the same quality of service and product as a traditional airline with a low-cost operating concept. Like others, we offer codeshare agreements, business class and frequent flyer programmes. But our model means that we are perceived as an airline offering affordable prices for excellent quality. That's our strength: having a low-cost operating base and the product that passengers want, <\/em>Alex Cruz recently told a British magazine. \u00a0<\/p>\n

Similarly, easyJet rethought its strategy a few years ago. The carrier with the orange and white logo offers what the business traveller is looking for: services from the main airports and numerous frequencies. On the Geneva-Brussels route, for example, easyJet offers two to three flights a day, while between Lyon and London Gatwick or Stansted, the airline schedules at least two services a day.<\/p>\n

Until now, however, there has been a lack of key elements for business customers, such as flexible booking and high-tech mobility tools. So last year, easyJet launched both a boarding pass accessible via smartphone and the Flexi offer. Flexi allows customers to change their booking up to one week before departure and three weeks after the flight date. The Flexi fare also allows you to take an earlier flight at no extra cost, subject to seat availability, or to take a 20 kg hold bag free of charge while enjoying priority boarding. This fare can also be booked through a business travel agency.<\/p>\n

Added to this new offer is the easyJet Plus subscription, which, for an annual fee, gives the right to reserve a seat in advance, benefit from an exclusive baggage drop-off counter and priority boarding. As a result, according to easyJet sources, more than 40 % of the airline's passengers are now businessmen.<\/p>\n

\"HalfServing airports that are generally far from city centres, such as Beauvais, 80km north of Paris, or Skavsta, 100km south-west of Stockholm, pure low-cost airlines such as Ryanair and Wizz Air are probably the least convenient for business passengers. The frequencies offered are another source of difficulties. Wizz Air, for example, does offer a flight between Paris Beauvais airport and Belgrade airport, but with only three flights a week... Ryanair, on the other hand, attracts business passengers where there are no or very few alternatives, such as on the Strasbourg-London Stansted route, the only direct route between the European and British capitals with three frequencies a week.<\/p>\n

Despite these inconveniences, 22 % of the Irish airline's passengers are business travellers. In November 2012, the Irish carrier introduced a six-row seat reservation option on each of its aircraft. This option allows passengers to embark and disembark with priority and to have a little more legroom in the rows at the level of the emergency exits. However, while its leisure traffic is showing signs of slowing down with the crisis, Ryanair is now looking to capture a larger share of business customers. To this end, last November the carrier announced the opening of two bases in Brussels Zaventem and Rome Fiumicino.<\/p>\n

Going the extra mile<\/h2>\n

Does this leave long-haul traffic as the sole preserve of the major airlines? For the moment, the low-cost model has found its limits in terms of flight duration. The longer the flight, the smaller the difference in operating costs. AirAsia X has experienced this. After launching routes from Kuala Lumpur to Paris and London, it withdrew after a year. Nevertheless, the low-cost carriers are still looking a little further afield. EasyJet serves Amman from London, while Vueling will link Dakar to Barcelona. Germanwings is landing in Istanbul and Tel Aviv from Germany, while Transavia is opening a route from Paris to the Israeli city. And Ryanair intends to offer flights between Europe and the United States for \u20ac10 within the next five years. \"large number of business and premium seats<\/em>\" according to Michael O'Leary. Is this just another bravado from the airline's chairman, or a concrete project? Whatever the case, the range of low-cost airlines continues to expand... \u00a0<\/p>\n

<\/p>\n