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Highlights in this IssueVueling: Interview of Carlos Munoz p.2
Air Berlin: Chaotic Stock Exchange Introduction p.3
Debriefing of the Air Transport Conference p.7
WindJet: Looking Past the Horizon p.8
Factors of LCCs Business Model Evolution p.9
Air Scoop - June 2006 www.air-scoop.com
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EDITORIAL
A Month Full of Challenges
May 2006 has been a quite challenging month for European
LCCs. As the summer season is coming, low cost carriers
had a hard time with unions. easyJethad to face a possible
industrial action from the Transport & General Works Union that
would have disrupted the summer season. The airline will know this
week if its cabin crew and ground handling do or not accept a lowerpay offer than its pilots. Aer Lingushad to cope with SIPTU, which
represents most Aer Lingusstaff, during the 70th birthday of the car-
rier. Aer Lingusunions protest against the privatisation of the airline
arguing the recent disappointing privatisation of Air Berlin. Ryanair
always had an aggressive policy towards unions. For instance, Warwick
Brady, a Ryanairs top official, recently declared we recommend fast
women, slow horses or even greyhound racing, at least youll have a few
minutes of fun, which is more than youll have with BALPA(British
Airline Pilots Association). Ryanairhas also begun a legal action to
find out who is behind some hostile messages on REPA(Ryanair Eu-
ropean Pilots Association) website.
LCCs also had to confront with regulatory authorities, especially in
Italy. Thanks to a PSO decree (Public Service Obligation), ENAC(the
Italian National Civil Aviation Authority), has refused to allow LCCs
to fly to some routes to Sardinia. So, Ryanairis not allowed to operate
flights from Rome to Alghero, nor easyJetfrom Milan to Olbia.
And at least but not last, Michael OLearytook up a challenge from
LOT, the Polish national airline. After the spokesman for LOT de-
clared that Ryanair would drop their trousers for extra publicity,
Ryanairs CEO took up his words by saying he would walked naked
through the streets of Warsaw if
LOT removed the fuel surchargeit charges customers by the end of
May. We are now in June, LOT
didnt remove its fuel surcharge,
so Polish citizens wont have the
opportunity to see an Irish man
naked this time. When will be the
next challenge Mr OLeary? Bremen: easyjet newbase or just more flights?
Ryanair in Banja
Luka?
Ryanair: Hub in
Wroclaw
Aer Arann to introduce
another Dublin flight
soon
Ryanair could set
up a base in Nice
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BIRDS EYE VIEW
Air Scoop - June 2006 www.air-scoop.com2
ANALYST PORTHOLE
Carlos Munoz
Mr Carlos Munoz (CEO of Vueling) had the kindness to
answer our questions.
Air Scoop: Vueling is presenting itself as the new gene-
ration airline , what do you do better than your competi-tors? What are your specificities compared to other Euro-
pean LCCs?
Carlos Munoz: What sets Vueling apart from our compe-
titors is our innovative new airline concept: the aim to be
different from all other airlines and offer High Quality at
the Best Price
As a new generation airline, we want to guarantee all of our
passengers a new way of flying and implement our own phi-
losophy of high quality at the best price. This new formula is
changing the face of the airline market and we believe this isa key part of our continuing success. Our formula seems to
attract more and more European passengers who know they
can fly in comfort and safety with a professional and friendly
company whilst paying the best price.
Vuelings success can also be attributed to the following,
namely; the fact that our passengers are all flying on brand
new aircrafts (all our fleet is based on the same aeroplane
model Airbus A320), we always fly to main airports, Charles
de Gaulle in Paris, Fiumicino in Rome, Malpensa in Milano,
we guarantee no overbooking on all our flights and custo-
mers can choose their seat on line, we have total flexibility
with our tickets (one can change the dates of travel, the pas-
senger or destination), we have a check in system online, we
guarantee high punctuality and finally we know that almost
all passengers value on board entertainment. These attribu-
tes help to create the face ofVuelingand make us different
from the rest.
A recent survey of more than 8,600 frequent flyers carried
out by a European consumer organisation in France, Belgium,
Holland, Italy, and Portugal ranked Vuelingas the best Spa-
nish airline. Out of the 110 airlines analysed, Vuelingranked
in 23rd position. People taking the survey stated that the keysfactors which helped them rate the airlines were: reliability,
punctuality, customer service, and the relationship between
quality and price.
Interview of Carlos Munoz
(CEO of Vueling)
Are you looking more for Business or Leisure passen-
gers? Both?
Our Business to Leisure passenger ratio is what we wouldexpect. Approximately 40% of our customers choose to
travel with Vuelingwhen travelling on business. Without
a doubt they value the fact that we fly to principal air-
ports, our no overbooking policy and the punctuality of
our flights gives us our personality and obviously makes
us different. Equally we have a high proportion of our
passengers who choose Vuelingas their choice airline for
leisure breaks. Our prices and high quality and service
ensure that all trips whether leisure or business work for
everyone as the price factor is no longer an obstacle.
Why Barcelona as a choice for your base? What are the
advantages?
We saw an opening in the market and we took it. Barce-
lona was crying out for the type of airline we were plan-
ning. In fact there was no low cost company established
in El Prat and as this airport is strategically very impor-
tant for the rest of Spain and the south Mediterranean,
we seized the opportunity to establish Vueling. Our lea-
ding position has always been in Barcelona although we
are equally aware of the important role Madrid is now
playing. We have already established a base in the capital,
and with the new terminal T4 in Barajas we promotedour operations from Madrid.
How do you analyse the competition with Ryanair, ea-
syJet and Air Berlin? Especially with easyJet since the
settlement of their hub in Madrid? Which one is for you
the main competitor?
To compare Vueling with other low cost companies
is difficult, our aims and what makes us a success are
very different to those other airlines, we believe there is
enough room in the skies and we fly in our own space
and they theres. The entry of companies in the marketstimulates the lawsuit. Theres no doubt that the airline
industry has seen an unprecedented transformation in
the past 10 years with the low cost phenomenon but this
a welcoming situation for all passengers and we believe
the skies can hold us all. The new situation has enticed
almost everyone to get on a plane and travel safe in the
knowledge that they will not incur huge costs, which
used to be the case. The difference between all the actual
low cost companies lies in the way they choose to fly and
the quality of service on offer. Customers nowadays have
plenty of options, they just have to decide which one isthe best for them. In Vuelingwe think our philosophy
is logical and simple and we try to keep on achieving our
promises... and it seems to be working.
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BIRDS EYE VIEW
Perspectives of LCCs in 5 main European Markets
TNS Infratesthas recently released a representative con-
sumer survey conducted in the five key European mar-
kets: UK, Italy, Germany, France and Spain. After moni-toring the German LCC market over the last 3 years, the
Low Cost Carrier Monitor 2006has now included these
four main markets.
One of the main results of the survey has been a clas-
sification of these five markets with regard to low cost
carriers.
UK is the most advanced market for low cost flights
(41% of consumers claimed to have already flown with
an airline offering low cost flights). Italy takes the second
place with 20%. Its market potential for low cost is in anextremely dynamic phase with many promising growth
opportunities. Finally, Germany is in third position with
only 13% of people who admitted to having flown with
a LCC.
Unlike British and Italian passengers who are especially
interested in low-price tariffs, Germans are not ready to
accept a lower standard of comfort and service. Similar
user rates to those in Germany have been recorded in
France and Spain. Perception of low costs carriers is quite
different depending on the country. While British and
Italian passengers are loyal customers thanks to low-pri-
ces, Germans are looking for personal consideration and
good service, and Spanish have expressed the strongest
doubts about low cost carriers safety.
TNS Infratest- Low Cost Carrier Monitor 2006,
http://www.tns-infratest.com
Iberia has announced the creation of a LCC based in
Barcelona, what do you think about it?
The competition is always welcome, with Iberias low cost
aims we are slightly sceptical, we really do not know how
they are going to manage if they try and model themselves
on LCC. We reserve all judgements and are happy to sit
back and watch the developments. It will be interesting
to see how they implement this, which aircrafts are they
going to use, which airports and which destinations do
they intend to fly, etc.
Are you worried about the shortage of pilots and crew
hitting LCC market?
We are not overly concerned about this matter there will
always be professional graduated pilots who want to work
for a new generation airline. Vuelingcontinues to increase
its staff every month with more and more pilots and cabincrew with each new aircraft. This Wednesday 30th of May
we will accept our 12th A320 and by the end of 2006 we
expect to have 16 aeroplanes in our fleet.
Do you have expansion projects in a near future? (IPO?
New planes? Partnerships?...) Vuelingcurrently covers 6
countries; do you plan to open more routes to/from these
countries, or to open new routes to other countries?
Vuelinghas been growing and developing since it was es-
tablished in July 2004. We began flying Barcelona-Ibiza
and now we operate in 7 European countries (Lisbon-
Portugal, Paris-France, Amsterdam-The Nederland, Brus-sels-Belgium, Milan, Venice and Rome-Italy and Santiago
de Compostela, Bilbao, Madrid, Sevilla, Mlaga, Granada,
Valencia, Barcelona, Mallorca and during the summer
Menorca and Ibiza). We are dedicated to fly to more and
more cities whilst continuing to increase the frequencies
with our well established routes. New destinations, more
schedules and our constant improvement in all aspects of
our company are our constant goals.
Ryanair, easyJet and Air Berlin have routes to Morocco.
Vueling is close from this market, do you plan to open
routes there before its too late? What is your point of
view about this market?
As I said before Vuelingis an airline focused on the south
Mediterranean, and our business plan is based on a specific
model which considers a determinate type of routes and
destinations based on our customers preferences. We are
still very young and Morocco at this stage is to far from
our plans right know. That does not mean we may ne-
ver fly there in the future however increasing our actualroutes and improving our services in the countries we fly
remain our aims.
Thank you very much Mr Munozfor your time and your
answers.
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BIRDS EYE VIEW
Air Berlin Faces Chaotic Stock Exchange
Introduction
Air Berlins introduction on the German Stock Exchange
was chaotic: first scheduled for May 5th, it finally tookplace almost one week later, on May 11th. The reason for
this delay: many potential investors, especially from Great
Britain and the United States, considered the first projected
issue price of the share, estimated by Air Berlinbetween 15
and 17,5 Euro, too high, particularly because of significant
risks on air transport due to high kerosene prices.
Lufthansas challenger on the German market therefore
decided to reduce the price of the share to 11,5 to 14,5 Euro,
and to postpone the introduction. The share was finally
launched on the market at the price of 12 Euro. After the
first quotation day, it had fallen to 11,40 Euro, and to 10,70one week later the Lufthansashare, however, followed
a comparable trend during that period. Furthermore, a few
days after the introduction, Joachim Hunold, Air Berlins
CEO, announced the companys kerosene taxes would be
raised by 5 Euro.
The reducing of the shares issue price may penalize Air
Berlins ambitious development policy. Joachim Hunold
wants to keep the companys number three position among
low-cost airliners in Europe (behind Ryanairand easyJet),
by opening new routes, especially to Eastern Europe and
Scandinavia, and by developing business customers. Air
Berlin also ordered 60 new Airbus jets. Two weeks be-
fore the introduction, Hunold told his company needed
290 million Euro to carry all these development projectsthrough.
Yet, whereas it expected almost 300 million Euro from the
Stock Exchange introduction, Air Berlinhas only col-
lected a net amount of about 195 million Euro to finance
its development. Will this be enough? Hunold thinks so:
he announced he would not change his plans, and his com-
pany has enough liquid assets to fund them. But he may
not have enough money left for major strategic operations,
such as external growth or aggressive pricing policy.
Air Berlinalso announced the composition of its board of
directors. The chairman is Johannes Zurnieden (Bonner
Phoenix Reisen GmbH), non-executive directors are Ec-
khard Cordes(Haniel & Cie GmbH), Hans-Joachim Kr-
ber (Metro AG), Nicholas Teller (Commerzbank AG),
Claus Wlfers(ex-Hapag Lloyd AG). Executive directors
are Joachim Hunold(CEO), Ulf Httmeyer(CFO), Karl
Friedrich Lotz(COO) and Elke Schtt(CCO).
Since he picked up in February 60%
of Germanys fourth biggest holiday
airline LTU, the businessman Hans-
Rudolf Whrl, already controlling
the low-cost carrier DBA, considershe has enough means to achieve his
ambition: Create the first worldwide
low-cost airline, and a significant Ger-
man challenger to Lufthansa.
Whrltook control ofDBA, formerly
affiliated to British Airways, in 2003.
His plan is now to combine DBAs
mainly internal German routes and
LTUs international network (USA,
Egypt, Caribbean, Sri Lanka...). Both
companies already cooperate via their
online booking system. However, no
merger is planned.
Whrl is first aiming to strongly im-
prove LTUs tricky financial situation.
In 2006, he wants to reduce the com-
panys costs by 45 million Euro, by
creating synergies with DBA, attrac-
ting new customers and reducing the
wages. By the end of April, Whrlalso
transferred 24% of the LTUshares toLTUs CEO Jrgen Marbach, in order
to enhance top managements invol-
vement in the companys results.
This coming closer of two German
most important airliners was a sur-
prise for the German air transport
sector. Last year, DBAhad picked up
Germania Expresss routes, and even
begun an online-partnership with
Air Berlin, which is still running. But
Whrls strategy makes sense given
the growing competition on the Ger-
man market. Even the traditional
airline Lufthansa now competes on
the low-cost market with his 99 Euro
Europe-round-trips.
Other less ambitious partnerships
are going on: Germanwings and
Condor, for instance, exchange ad
banners on their respective websites.
There were even rumours about col-laboration between Air Berlin, DBA,
HapagFly and HLX, finally denied.
All companies may not survive the
competition - Whrl warned LTUs
employees the airline could go ban-
krupt if its financial situation did not
improve.
If his risky strategy fails, Whrl may
choose an alternative plan for DBA,
for example a partnership with Air
Berlinor easyJet. Whatever happens,
he announced he would definitively
step out from air transport business
by the end of 2007, when he is 60
years old.
DBA-LTU Partnership Shows Hardening Competition on the German Market
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FROM THE GROUND
www.air-scoop.com
Inaugural Air Transport Conference ForCentral and Southeast Europe
Air Scoopwas proud to be Media partner of the Inaugu-
ral Air Transport Conference For Central and Southeast
Europeorganised by EastEuro Link Air Transport.
Under the auspices of Ministry of Transport, Posts and
Telecommunications of the Slovak Republic, this confe-
rence has been held in Bratislava, Slovak Republic, the
26th of May.
Two important speakers came to outline the LCC marketin CSEE and the perspectives of their company within.
Jim Callaghan is the Head of Regulatory Affairs with
Ryanair Limited.
Mr Callaghaninsisted on the success of low fair airlines
in Europe, based on his Ryanair experience. Ryanairs
success is due to five points: a maximisation of efficiency
(a 25 min turnaround, using both exits), a single aircraft
type fleet, the use of regional and secondary airports, a P2P
network model (no waiting for connecting passengers)and cost reduction (Internet sales, no free meals). In
two words: increase efficiency and reduce costs!
Concerning CSEE, the transition to LCCs was very sud-
den. Mr Callaghanregrets the important protectionism
from the eastern governments. Overregulation, over taxa-
tion, state aids to national flag carriers and elimination
of competition between airports are for him among the
greatest threats to liberalisation.
Chris Mandlis the CEO ofSkyEurope Airlines.
During his speech, Mr Mandl described his company
and its integration to CSEE market. SkyEuropehas five
bases: Bratislava-Vienna, Budapest, Prague, Krakow and
Warsaw. According to Mandl, the growth potential in
the CSEE area is huge because of the lack of speed and
inter-region transport. The building of a high speed trains
network or highways will take some time.
But the CSEE market is still not mature enough to focus
exclusively on leisure travellers, so SkyEuropehas deci-
ded to fly to convenient airport for business passengers.
For instance, this strategy explains the choice of Orly in
Paris (SkyEuropeis now the second LCC in Paris, behind
easyJet), and not Roissy-Charles-de-Gaulle because the
carrier doesnt need connecting traffic, nor Beauvais be-
cause of the distance from the city centre is too far for
business travellers.
This immaturity of the CSEE market has an impact ontickets sales. Because of the lack of Internet and credit
card penetration, SkyEuropedecided to offer innovativealternatives: a centre call in Bratislava, and a cash depo-
sit in the bank partners. Therefore banks have become
points of sales for the carrier.
CurrentlyOriginal
Future?
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FROM THE GROUND
www.air-scoop.com
QUOTES OF THE MONTH
Our difference:
leather seats and real Italian espresso,Chris Mandl, CEO ofSkyEurope
All the people that tried to copy the Southwest model, they failed. Thepeople that succeeded were the ones that introduced little differentiation
factors. ()We are the first short haul airline in the world that sales a
real Italian espresso on board
Sky Full of Possibilities, Bratislava, May 26th, 2006.
Financial situation and financing strategy:
To finance an aggressive strategy, it was important to ac-
cess the capital market; therefore SkyEuropeis the first
airline in Central Europe to be listed on a stock exchange
(Vienna and Warsaw).
With this financial asset, SkyEuropewants to achieve cri-
tical mass, so the airline decided to order 32 new aircrafts
by 2010 (16 firm orders: 12 financed by operating leases
with GECAS, and 4 bought directly from Boeing backed
by the Bank of Scotlandand put on balance sheet). The
choice for new aircrafts is a cost issue: lower fuel burn,
lower maintenance costs and downtime, and higher air-
craft utilization and reliability.
New fleet network planning:
Thanks to the large aircraft order, the carrier will be more
predictable in the aircrafts allocation and will make early
deals with airports as they know when the aircrafts will
be delivered. SkyEuropehas three strategic priorities: in-
crease frequencies on existing routes, join the dots within
the existingSkyEuropenetwork (reducing of marketing
investments), and open new destinations to satisfy the
local needs of the respective bases. The choice of new
destinations is based on destinations which are under-ser-
viced, which are in the optimal range of two hours flighttime (because of the rhythm of two or three rotations a
day), and which may be served from more SkyEurope
bases. SkyEurope management focuses on profitability
and not just passenger volumes.
Two strategic initiatives:
Go East consists of developing East-East connections
in addition to the East-West flights and entering markets
of future European Union countries (Croatia, Romania,
Bulgaria), and maybe to Ukraine and Russia in the fu-
ture.
Winter Offensive has been launched trying to
offset the seasonality and to offer fights to at-
tractive winter ski resorts (Innsbruck, Salzburg,
Poprad/Zakopane).
6
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BIRDS EYE VIEW
Air Scoop - June 2006 www.air-scoop.com
WindJet Airlines:
Looking Past the Horizon
This summer, more individuals
than ever are scheduled to take ad-
vantage of the wide range of ticket-
prices and travel locations offered
by low-cost carriers. Certainly one
of the bright spots heading into
the peak tourist months can be felt
from Cantanias WindJet Airlines.
Within the low-cost carrier indus-
try, WindJethas turned more than
a few heads, and for all the right
reasons. Consider the following:
- In 2005, WindJet moved more
than two million passengers
- The total number of flights from
2004 to 2005 increased by 274%.
Jumping from 3200 to 12,057.
- Enjoyed an increase in profits
from 23.3 million Euro in 2003 to
approximately 139 million Euro in
2005.
In short, WindJetis the only airlinein Italia that is growing.
But numbers like that dont come
by accident. According to Windjets
Commercial Director Mr. Massimo
Polimeni, it all comes down to pro-
viding a product that the public
wants. These days it seems like eve-
ry airline will promise its customers
the moon.
WindJets success is a bit more con-crete. In the physical sense, a larger
fleet of airplanes translates into a
more flexible operation and more
flights that can be offered. What
the Italian public notices either di-
rectly or indirectly is the attention
addressed to customer concerns by
the airlines Customer Management
Team and the quick turn-around
to questions by the WindJet Call-
Center staff. Adds Polimeni, ...We
try to be pragmatic about adopting
the true industrial model that go-
verns low-cost carriers. There are
a lot of companies out there doing
business and most will call them-
selves low-cost but in effect, they
are only trying to copy the pricing
model of the true low-cost air-
lines. [That isnt the way to run abusiness] and sooner or later these
other companies are going to have
problems. As a result they will lose
everytime.
WindJet has experienced pheno-
menal success with its most popu-
lar flights departing to such diverse
locations as Barcelona, Madrid, St.
Petersburg, Paris, Oslo and Bucha-
rest. Departure points are scatteredfrom Palermo and Catania in the
South and from Forl and Venice
in the North. But access to an even
larger hub in the north is the key
to even more expansion in the co-
ming years. Comments Polimeni,
When it comes to increasing our
presence, we cant really anticipate
anything until we open a base of
operations in Northern Italy. We
did in fact have a plan in motion
for just such a thing for this sum-
mer, but ultimately we decided to
re-schedule this initiative until the
winter months
WindJethas concentrated on sche-
duled activities and limiting its
commitment to charter flights and,
most importantly, it has made huge
investments in its fleet, increasing
the number of 180-seater Airbus
320 planes from 8 to 11. Further-more, a significant partnership
agreement with Lufthanza Technic
(the largest international supplier of
MRO (Maintenance, Repair and
Overhaul) aeronautical services)
assigns them technical support for
WindJets entire fleet of 11 Airbus
A320s.
Furthermore, the contract inclu-
des the supply of components tothe carriers bases in Catania and
Palermo, while also supplying its
complete range of ARC (Airframe
Related Components) services.
The low-cost carrier industry is a
competitive one. Other airlines in
Italy include Volare and Eurofly
and both have successfully managed
to grab a respectable portion of themarket share. Ryanair looms even
larger across Europe. But WindJet
stands on the brink of making huge
gains across the board as it conti-
nues to position itself as a reliable
carrier to and from Sicily as well
as other location throughout Eu-
rope. Adds Polimeni, ...Volareand
Euroflyarent actual lowcost airli-
nes. And we dont know ifAlitalia
which recently aquired Volare will transform that airline into a
true lowcost carrier. With respect
to easyJetand Ryanair, its impos-
sible to consider ourselves as their
competitors at this point because
those airlines function on another
level all together.
What that means, remarks Poli-
meni, is that WindJetcan only look
to grow by operating within its
means and allotted space. Wi-
thin 5 years we hope to experience
significant growth within our fleet
and also the number of flights and
locations we offer. Accomplishing
that will place us within the top 3
low-cost carriers in Italy with re-
gards to the number of passengers
and flights. Above all, the only way
to ensure our continued growth is
to keep moving forward, continue
to re-invest our profits as we offerunsurpassed customer service
As the halfway point for 2006 looms
into view, WindJetcontinues to be
a force to be reckoned with, and is
on track for achieving its goals of
servicing over 2.5 million passengers
-- an increase of more than 20%
over the last year.
** For more information onWindJet Airlines log on to
www.volawindjet.it
7
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BIRDS EYE VIEW
Barclaycard Business Travel Survey 2006
The Barclaycard Business Travel Survey is this year celebrating its
10th anniversary. It is one of the most comprehensive business travel re-
ports in the UK and is used by many to track trends within this dynamic
and changing industry. This year, in addition to summarising the current
state of business travel, the Barclaycard Business Travel Surveylooks
ahead to the trends business travellers might experience in 2015.
The Barclaycard Business Travel Survey predicts that by 2015 half
of all business travellers will consider improved services an important
reason to choose an airline. Furthermore, the number of business travel-
lers using business class services is likely to rise from 25% in 2005/2006
to approximately 33% in 2015.
Low-cost air travel is not expected to increase further, with the le-
vel of business travellers who have used these services staying at the
2004/2005 level of 74% through to 2015.
Nearly a third (30%) of all flights taken for business are with a low-cost
provider. This year, for the first time, a low-cost airline (easyJet) has
become the second favourite airline for business travel overall. easyJet
is also seen as the number one choice within the low-cost airline cate-
gory.
Trust in the brand and the rou-
te offered have replaced relia-
bility and comfort as the main
reasons why people choose a
particular airline. This is in part
due to the airline industry, and
particularly the low-cost sector,
becoming much more brand
driven and the growing trend
for travelling longer distances.
In 2005/2006, when asked
which methods they had used
for checking into airlines in the
previous 12 months, traditional
check-in was still the most wi-dely used, although the majori-
ty prefer the newer technology-
based solutions.
It is predicted remote electro-
nic check-in procedures will be
preferred by almost all (90%)
business travellers in 2015.
The survey can be downloaded here:
http://www.companybarclaycard.co.uk/information_centre/tibs/tibs2005_06_survey.pdf
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BIRDS EYE VIEW
9
The original business model of Low Cost Carriers has been
based on few simple points: a single product (single class,
no-frills, no frequent flyer program), a secondary airports
policy, a point-to-point development strategy, and a low
operational cost (single fleet, direct sales distribution).The whole system is based on quantity which implies that
LCCs must constantly develop their load factor to reach this
critical mass. As price is THE main weapon against legacy
carriers, a war on price between LCCs could be dreadful.
So at first LCCs intended to avoid such direct confrontation.
The result: In 2005, LCCs had a fifth of the European mar-
ket, and in 2009, it should be a third. Ryanairand easyJet
still control 88% of the European LCC market.
This system is no longer the European market reality. In fact,
it is now impossible to talk about a single business model for
LCCs. Thats the main reason why Air Scoophas been crea-
ted: to analyse these differences and to study their evolution
to dominate the market and competitors.
LCCs will face both internal and external evolutions. While
airlines management can handle and drive first ones, they are
heavily dependent of the seconds.
We may focus on four main internal evolutions for LCCs:
Restructurationimplies getting new extra-revenues sources, opting for IPO strategy or not Consolidationof the mar-
ket could happen through partnerships, franchises, buyouts Externalisationof services like pilots, cabin crews, ground
handling will be one option to reduce heavy operational costs as airlines keep growing. Distributionwill evolve to cut
prices by all means (websites, supermarkets).
On the other hand, external factors, such as constant rise of fuel price, airports mutation (read the article on French Con-
nect), the global economy growth, and even the technology break-out, have a deep impact on these internal evolutions. Formanagements, evolution means corporate adaptation in order to survive. These adaptations will lead to a new generation
of LCCs, far from their genuine business model. Systems in mutation are always subjects to instability. This instability
occurs in a time of strong competition between LCCs for similar routes and airports.
Internal and External Factors of LCCs Business Model Evolution
The Low Cost Air Transport Summit
is a strategic conference dedicated tothe rapidly expanding low cost sector,
held in the historic London venue of
One Whitehall Place.
The summit is organised by the Insti-
tute of Economic Affairs (IAE) which
is considered as one of the worlds lea-
ding policy think-tanks.
The main topics of the summit will
be about Competition, Regulation,
Consolidation, Cost-efficiency and
Emerging Markets.
This event comes during a period
when the low cost industry is in high-
growth mode, and where the rewards
on offer attract massive competition as
well as the watchful eye of the regu-
lator. Furthermore, a restructuring le-gacy sector is eager to capitalise on the
growth which successful newcomers
have experienced, and these competi-
tive and regulatory pressures compel
low cost carriers to develop incisive
strategies if they are to succeed.
The summit will last two days with
four sessions each day.
Day 1: Facing the global challenges
of competition & regulation; Future
trends, future challenges; Defining
your strategy in a crowded marketpla-
ce; Exploring emerging markets - An
international panel.
Day 2: The Low cost model - Crea-
ting value, maximising efficiency;Fleet strategy - Planning for the fu-
ture; Exploring innovative business
models; New routes, new airports.
The Low Cost Air Transport Summit
will gather industry leaders, analysts of
the market, aviation associations...
Some european airlines represen-
ted during the summit: Ryanair, Air
Berlin, Sterling, Sky Europe, Ger-
manwings, FlyBe, MaxJet, FlyNor-
dic...
Air Scoop will cover the conference
and provide a detailed debriefing in
our next issue.
The Low Cost Air Transport Summit
12th and 13th June 2006
One Whitehall Place, London
8/14/2019 Air Scoop June 2006
10/11Air Scoop - June 2006
FROM THE GROUND
www.air-scoop.com0
The 2006 Worlds Low Cost Airlines Congress
Air Scoopis proud to be the Media partner of the 2006 Worlds Low Cost Airlines Congress.
French Connect to
Anticipate
Airports Mutation
The third edition ofFrench Connect,
the Low Cost forum for French air-
ports, took place in Marseille, May
9th to 11th. This forum gathered
the community of low cost carriersmarket, from airlines and airports
managers to analysts, investors and
journalists. The choice of Marseille
for the forum has been strategic as
the airport faced passengers loss
since the opening of the TGV rail
route. The Mediterranean airport
bets on LCCs to gain back passen-
gers. The impact of this type of
conference has been quite impres-
sive on French LCC market, as 66
new low cost routes were created
in France during the year following
the latest edition in 2005.
During the last decade, regionalFrench airports mainly invested in
heavy facilities. Nowadays, their
strategic approach is different as
low cost carriers are included in
most airports business models. The
mutation is ongoing: From a tran-
sit place designed for departures
and arrivals, airports are evolving
to a market place. Analysts notice
that recent evolutions of secondary
airports are quite similar to LCCs
ones. The objective is to raise the
profitability by reducing constant
operational costs and by adding ex-
tra-revenues. Airports bet on stores
and lights facilities, like in Fran-kfurt-Hahnairport where stores are
now covering 3300 m2 (just 180 m2
in 2002).
8/14/2019 Air Scoop June 2006
11/11
FROM THE GROUND
Air Scoopis a Registered Trademark ofGlobal Wings Publications.
Subscription to Air Scoop: 290 euros for 1 year (12 issues)
Copyright 2006 - Unauthorized distribution or reproduction is forbidden.
http://www.air-scoop.com ; http://airscoop.blogspot.com(free portal news)
UPS AND DOWNS
EuroAirport:
Low Cost Carriers Unwanted
The Administrative Court of Strasburg has de-
manded the abolition of the incentive measures
stipulated in the new EuroAirport (Basel-Mul-
house-Freiburg) tariff regulations, after a claim
filed by Air France.
This justice decision is a bad news for easyJetthat chose EuroAirport
as a major base in the area. easyJetalready deserves 18 destinations
to many different countries, and designed the airport to be a Ryanair
Frankfurt-Hann like.
This case occurs three years after a similar justice decision invol-
vingRyanairin Strasburg-Entzheim Airport. The airline finally left
the French airport in fall 2003 for the nearby German Baden-Baden
Airport.
www.easyjet.com
1
BLOGS TREND
Ryanair had three important blog peaks in May.
The first peak is due to the investigation of the Irish
Aviation Authorityagainst Ryanairs airplanes that
landed at Stansted Airport when visibility was be-low minimums. The second peak occurred in the
middle of the month when Ryanairannounced the
settlement of its new base in Marseille. This move
is seen by many as a sign of further activities de-
velopment in South Europe (Morocco). Finally,
the most important peak of the month happened
because of the conjunction of two events. First
one, Ryanairhas gone to court to find out who is
behind messages on its pilots website and to know
the identity of those people who go under the codenames
ihateryanair And second one when Michael OLearyresponded to a challenge ofLOT. The Polish national air-
line said that Ryanairwould drop their trousers for extra
publicity. Right! Michael OLearydeclared he would walk
naked through Warsaw ifLOTremoves the fuel surcharge
on its tickets by the end of May.
easyJetweblog coverage is as usual lower than Ryanair.
Two peaks can be identified, but they both relate to the
same event: Flight attendants and ground staff have to vote
on industrial action in a row over the handling of a pay
offer. easyJetmanagement has faced a tense month as they
waited for a verdict from flight attendants and ground staffon the contested pay deal. As they know, this could lead
to a strike that would disrupt the airlines crucial summer
season
Air Berlinhas the lowest weblog coverage of the three Eu-
ropean LCC leaders. The unique main peak of the month
concerns its IPO. Air Berlin announced first they would
postpone its planned stock market flotation, and then they
would cut price of IPO. With this price cutting, Air Berlin
will lose out on 100m euros from the initial 290m euros.
Ryanair: Still the Largest Weblog Coverage