air scoop march 2007
TRANSCRIPT
-
8/14/2019 Air Scoop March 2007
1/13
EDITORIAL
Environment, environment, environment! It seems these days
that environment has become the main issue concerning Eu-
ropean low-cost carriers. Sam Sellers, from Air Bulletin, pre-
sents us the second part of his exclusive article on environmental
public relations strategy for LCCs (p. 11). Two trends are clearly
becoming apparent (p. 9): On one hand, some LCCs, such as easy-
Jet(p. 9), have realized the clear and present danger on the planet
and have prepared a strategy to reduce their carbon emissions; and
on the other, some LCCs led by Ryanairrefuse to accept their roleand accuse government and institutions to add more taxes and to
regulate the market. This attitude goes against associations such as
Plane Stupidwhich has declared they will continue to target direct
actions against LCCs (p. 10).
Air Scoopstarts this month a deep investigation on LCCs subsidies
in Europe (p. 8). Further articles in our coming issues will follow
this global introduction. Just before the recent announcement of
bankruptcy ofFlyMe(Read Air Scoop April 2007), Air Scoophad
an exclusive interview of Finn Thaulow, CEO of the Swedish car-
rier (p. 2). From the same region, we made a focus on Blue1, thesecond largest airline in Finland (p. 4). Whereas Nordic skies are still
mostly held by local carriers, it is not the case of the Austrian LCC
market, largely dominated by foreign companies (p. 7). IdeaWorks
Companygave us once more a clear analysis of frequent flying pro-
grams. This month Jay Sorensenexplains why frequent flyer exe-
cutives are concerned about reward availability (p. 5). One of our
correspondents covered the FITUR 2007 in Madrid (p. 12). We had
the opportunity to ask few questions to representatives from Ger-
manwings, Meridianaand Blue Air(p. 13).
At last but not least, Air Scoopis proud to announce it will be me-
dia partner of the main LCCs European events:
- 2nd Air Transport Conference for CSEE (4th of May 2007) Bra-
tislava (EastEuroLink)
- Low Cost Air Transport Summit (13th and 14th of June 2007)
London (MarketForce)
- World Low Cost Airlines Congress (17th to 19th of September
2007 London (Terrapinn)
Air Scoopwill of course cover all these events starting next month
with French Connect (25th to 27th of April 2007) in Nantes - La
Baule Atlantia.
Highlights in this IssueBlue1: Low Prices - High Standards p. 4
Frequent Flyer Executives... p. 5
The Austrian LCC Market p. 7
LCCs Subsidies: The Birth p. 8
LCCs and Environment: Green Wars p. 9
Air Scoop - March 2007 www.air-scoop.com
The Low Cost Carriers Analysis NewsletterAIR SCOOP ANNOUNCEMENTS
Air Scoop and TripVision:
A Partnership for Polls
Air Scoop is proud to announce a par-
tnership with TripVision, the UKs only
travel specific tracking survey collecting
attitudes and behaviors of the travel con-
sumer.
The UK travel industry can now benefit
from a major new research program that,for the first time, aims to give meaningful
insight into all aspects of traveller behaviour
patterns - including future intentions.
TripVisionis a mixture of quantitative and
qualitative research combined with data
analysis to give a complete picture of the
size of the market, the traveller patterns
and how different categories of travellers
approach their individual trips.
Therefore, with TripVision, Air Scoop
will be able to provide more trends frompassengers and other sources.
http://www.trip-vision.com
Air Scoop - In the Air
Plovdiv
Airport
openning?
-
8/14/2019 Air Scoop March 2007
2/13
BIRDS EYE VIEW
Air Scoop - March 2007 www.air-scoop.com
Exclusive Interview of Finn Thaulow
(CEO of FlyMe)Finn Thaulow
CEO of FlyMe
Could you please present FlyMe to
our readers? What are your specifi-cities compared to other European
LCCs? What do you do better than
your competitors?
FlyMe Swedenwas founded in 2003
and started its commercial flights in
April 2004. The business model was
to operate a limited number of do-
mestic flights plus charter flights. The
utilization was very low, approx 4
hours per aircraft /day. FlyMe Swe-den is owned 100% by FlyMe Eu-
rope ABwhich is traded on the First
North at the Stockholm Exchange.
New owners and a new Board of
Directors took over in August 2005
and it was decided to turn FlyMe
Sweden into a true LCC airline by
investing in the FlyMebrand. Num-
ber of frequencies were increased on
the domestic routes and 12 new Eu-
ropean destinations were introduced
from Gothenburg from the Summer
2006 traffic program. FlyMepresent-
ly operates a fleet of 5 leased aircraft
(4 Boeing 737-300 and 1 Boeing 737-
500). From the Summer 2007 traffic
program the fleet will be increased to
7 aicraft (6 737-300 and 1 dampleased
MD87). The domestic operation has
been increased in terms of frequen-
cies and FlyMe has achieved a market
share of 34% on the route between
Gotehnburg and Stockholm/Ar-landa and 38% between Malm and
Stockholm/Arlanda. European des-
tinations have been introduced from
Stockholm in November (Alicante
and Nice) and more will be added
from Summer 2007 when also Malm
will have flights to European destina-
tions. Stockholm-Lule will be added
on the domestic route net. FlyMe
expects to carry around 1.5 million
passengers in 2007 and the growthin turnover will in principle double
from 2006. FlyMeis financed throu-
gh equity and has therefore posted
losses in the build-up phase. With the
current trend and size of the airline,
the financial results will improve andprofits are expected from the second
quarter of 2007.
How do you analyze the compe-
tition in Sweden, especially with
Ryanair with its base in Stockholm?
Which LCC is for you the main
competitor?
The LCC airlines are taking more and
more market share but also growingthe market by being able to offer at-
tractive fares and thus enable more
people to fly. The important thing is
to keep very tight cost control as ul-
timately the one with the lowest unit
cost will be the winner
Why did you choose Gothenburg as
your main base? What are the ad-
vantages to be there?
Gothenburg has historically been an
underserved area. The national car-
rier, SAS, offered very few non-stop
services to and from Gothenburg
trying to channel as much traffic a
possible via its main hub in Copen-
hagen. Consequently, there was an
untapped potential in Gothenburg
and its catchment area; stretching
also far into Norway.
The European Low cost carriers
market has reached a certain ma-
turity which leads to its consolida-
tion. During this transition, what
are, for you, the greatest threats to
the European Low cost carriers?
Fuel rising? Overcapacity? Evo-
lution of airports? Regulation?...
Overcapacity and lack of airport
slots pose the biggest challenge.
Again, it is important to monitor thecost base continuously and also the
traffic program in terms of frequen-
cies and destinations. A high degree
of flexibility is needed to respond to
changes in the market and competi-
tive actions
What are your expansion projects
for the coming year(s)?
FlyMewill continue to grow and gra-dually increase its network between
Stockholm and Euope as well as Mal-
m and Europe. Furthermore, flights
on intra-Scandianvian sectors will also
be introduced. FlyMe Europehas an-
nounced the purchase of 51% of Ri-
ver Don, which owns 51% of Global
Supply Systems. The transaction is
conditioned by necessary approval by
the British Civil Aviation Authorities
as well as an endorsement from theGeneral Assembly ofFlyMe Europe.
Global Supply System is a profitable
747-400 cargo operator today and has
the potential to partly develop the
existing cargo business but could also
serve as a platform for the introduc-
tion of long haul LCC in due time.
A project is looking into this exciting
possibility right now. A proposal or
recommendation will be made to a
General Assembly by the 28th of Fe-
bruary 2007.
Many LCCs look after extra-reve-
nues to offset the low price of their
tickets. What are the projects of Fly-
Me in terms of Extra-revenues?
Ancillary revenue is very important.
FlyMe is presently strengthening this
part and will put in a lot of efforts
in 2007 to substantially increase re-
venues from non-airline products.The website is being up-dated and
ancillary services presented more at-
tractively and efficiently. It is a most
prioritized area
-
8/14/2019 Air Scoop March 2007
3/13
BIRDS EYE VIEW
Air Scoop - March 2007 www.air-scoop.com
Do you believe that consolidation
of the market will lead to 2-3 main
LCCs in Europe, or do you think
there will always be many LCCs on
niche markets?
There will certainly be consolida-
tion in the market with maybe 3-5
main LCCs. FlyMeaims to be part
of this group. Additionally, there will
always be a number of smaller LCCs
but probably shrinking
Are you worried about the shortage of
pilots and crew hitting LCC market?
The overall airline market is growingby an estimated 5% annually the co-
ming years according to IATA. The
LCCs continue to grow faster and to
represent a higher share of the to-
tal number of passengers traveling
reaching around 20% of the total
in 2007. This high development ratewill definitely put pressure on get-
ting sufficient number of pilots also
considering that other parts of the
world have an increased demand and
corresponding shortage as well. The-
refore, it is important to be regarded
as a good and attractive employer
and first and foremost to have an
excellent relationship and working
climate
What are the options for FlyMe to
transform its business model in
order to make more costs savings?
Cost savings is a matter of continuous
improvements and the right menta-lity throughout the entire organiza-
tion. Additionally, it is the flexibility
to respond to changes in the market
and being able to make adjustments
in a reasonably short time.
Read Air Scoop February 2007 for a
complete analysis on FlyMe.
Six European consumers protection organizations from different
countries (Belgium, France, Italy, Portugal, Spain and The Nether-
lands) have evaluated more than 36 000 flights from legacy airli-
nes, charter airlines and low cost carriers.
The 9 000 passengers questioned gave detailed information on
their travel experiences on board flights from July 2004 until Sep-
tember 2005. With a rank at the 14th spot, GermanWingsis the-
refore the German airline with the highest evaluation marks. This
result is particularly due to the punctuality of its flights, the good
relation between price and performance, the cleanness on board
and the efficiency of the ground staff.
GermanWings: Best German Airlines
UP & DOWN
According to a French judicial source, French prosecutors have
opened a preliminary inquiry into allegations that Ryanairsad-
vertisements were misleading after receiving more than 40 formal
complaints. Indeed, Ryanairhighly publicized the launch of new
routes from Marseille to Morocco scheduled to begin in Novem-
ber 2006. But the flights have been cancelled indefinitely as the
necessary licenses had just not materialized on time.
The company denies any responsability for this fiasco. A spokes-
man of the airline accuses the French government of delibarately
trying to damage Ryanair.
Passengers of these cancelled flights accuse Ryanairof selling tic-kets before getting the green light for the routes, and sue the carrier
for misleading advertising. Although Ryanairhas paid back the
cost of the tickets, the carrier failed to reimburse related expenses,
such as deposits for hotels and hire cars.
Ryanair Cancelled Flights and
French Investigations
-
8/14/2019 Air Scoop March 2007
4/13
BIRDS EYE VIEW
Air Scoop - March 2007 www.air-scoop.com
The 4th French Connecttakes place on 25-27th April 2007 in La Baule. This unique event offers you the op-
portunity to network with some of the most influential people in European Low Cost aviation.
French airports, the legislators and Europes low cost operators all in one place with first-class conference faci-
lities, superb hotels and dining and a relaxed, entertaining business environment : book your place today!
For further information, please check www.frenchconnect.net
The Nordic sky has always been a tough place for airlines
where the survival of the fittest law can be applied vi-
vidly. What survives survives and goes on holding posi-
tions. Blue1entered the market after two previous brands
had failed (Air Bonitaand Flying Finn) and managed to
evolve into the second largest airline in Finland.
Under its name Blue1was launched in 2004 after tender
call for the re-branding, which was won by SAS. The
carrier started operating flights to those destinations that
had previously been served by Flying Finnbut more suc-cessfully. Though Blue1 is positioned as an individually
branded airline appealing in its colour scheme (white and
blue) to Finnish identity it is strongly backed up by SAS
group. Apparently it was that good fellowship with SAS
that helped Blue1to become the first regional airline to
join Star Alliancein 2004. At the moment Blue1is code
shared with SASbut it can also fulfill the task in getting
regional passengers feed into other airlines within the al-
liance. On the other hand, Blue1passengers can enjoy the
full range ofStar Alliancefacilities: EuroBonus program-
me, through check-in and lounges.
1 in the name stands for the fastest developing airline
in Finland and probably the first national airline to chal-
lenge Finnair. With its new 11 international destinations
opened in 2006 Blue1has to some extend undermined
Finnairs position. This also intensified overall competi-
tion in Scandinavia and led to response from other airlines
such as Sterling. Danish LCC made an attempt to create
its sixth base in Helsinki serving 11 destinations. But the
story was short and the project was terminated almost 4
months after, leavingBlue1one of the largest operators
between Finland and Scandinavia.
Blue1succeeded in finding its own way in business tra-
vel niche-market. It has elaborated a certain strategy ad-
dressed to short business travel segment. Not only fares
were reduced but several facilities added that made Eco-
nomy Flex a business-like class with the features requi-
red: fast check-in, front seats and special meal offers. The
company has recently introduced brand-new tariff sche-
me with three types of fares: WebSaver with the lowest
prices possible without any re-fund permitted; BestBuy
with higher prices but with the possibilities of rebooking;
and FullFlex with flexible conditions of rebooking and fullrefund. Such a variety of choices means that the airline is
oriented both towards usual low-cost passengers and to
people with higher demands. This has a good impact on
the carriers image bringing it closer to a full service airline
than to a no-frill one.
But still there are some fields where Blue1cant beat Fin-
nair in the nearest future: Russia, for example. Though
the LCC has initiated consultative sessions with Russian
aviation authorities regarding flight permission to start
operation regular flights to Moscow; it is unlikely thatFinnairwill concede its monopoly in the region.
According to Blue1web-site, the main goal is to become
the best regional airline for the North European business
and leisure traveller. And there are just two steps left to
achieve this. In September 2006 Blue1was voted the third
best regional carrier in Europe by the European Regions
Airline Association. No wonder the award would foster
further development and expansion. But as long as it is
Finnish the airline doesnt disclose its plans preferring to
develop quietly without unnecessary excitement in order
to show then great results at once.
Blue1: Low prices - High standards
AIRWAY MARKERS
EVENTS
-
8/14/2019 Air Scoop March 2007
5/13Air Scoop - March 2007
DOWN TO EARTH
www.air-scoop.com
Representatives from more than 70 frequent flier pro-
grams recently gathered in Vancouver Canada for thethird annual FFP Conference. Low cost carriers sending
representatives included Air Berlin, Frontier Airlines,
JetBlue Airways, Southwest Airlines, Spirit Airlines,
and Virgin Blue. The event is the worlds largest gathe-
ring of frequent flier program executives and provides a
unique opportunity to measure the pulse of the loyalty
marketing industry.
IdeaWorks, in cooperation with conference organizers
Airline Information and Global Flight, distributed a
survey during February 2007 to more than 100 registe-red attendees. The survey results demonstrated an al-
most painful level of awareness of consumer resentment
over reward availability issues. Management at low cost
carriers might find the results of interest as they react to
competitors that offer frequent flier programs, or as they
consider the development of programs of their own.
67% of program executives recognized that consumers are
frustrated by the lack of basic reward availability for the
entire airline industry. This awareness seems to be having
an affect on policy, as nearly 60% of survey respondentsanticipate some level of increased reward availability for
2007. But the dynamics of frequent flier programs have
clearly changed over the years. What began as a method
to increase loyalty has now become a source of attrac-
tive revenues. 42% of program executives indicate top
management now rates the ancillary revenues generated
by frequent flier programs as the benefit of greatest im-
portance.
Booking reward tickets is a top-of-mind issue for frequent
fliers. It seems every frequent flier has a tale of woe on
the topic reward availability. Consumers might be sur-
prised to learn program executives are very aware of the
problem. The survey measured perception of the reward
availability issue by comparing it to other areas of com-
plaint, and by seeking feedback for the airline industry as
a whole. By every measure, reward availability appears to
be problem number one in the airline industry.
One of the survey questions addressed the issue directly
by asking program executives about the perceptions held
by the members of their frequent flier program. Program
executives expressed concern over issues such as extrafees and upgrades. But, the greatest source of member
frustration is the trouble associated with booking reward
seats.
The issue of reward availability was also measured in a
broader sense by asking about consumer perceptions for
the entire airline industry. Here again, program executi-ves acknowledged the scope of the problem; 57% agreed
its a major problem and members are very upset. Only
6% of program executives indicated reward availability
is not a problem and that members are happy with the
ability to secure reward seats.
Perhaps the surprise result of the survey was the impor-
tance placed by top management on the ancillary reve-
nues produced by frequent flier programs. Loyalty was
the primary objective when frequent flier programs were
introduced 26 years ago. Over time, and largely concur-
rent with the advent of co-branded credit cards, the pri-
mary mission of these programs has become the genera-
tion of cash flow for the parent airline. Meanwhile, the
Stormy Weather: Frequent Flier Executives Are
Concerned About Reward Availability and Other
Consumer Issues
www.IdeaWorksCompany.com
by Jay Sorensen
(President ofIdeaWorks)
IDEAWORKS AISLE
-
8/14/2019 Air Scoop March 2007
6/13
BIRDS EYE VIEW
Air Scoop - March 2007 www.air-scoop.com
Everybody knows the packaged holiday tour business has
been ripe for consolidation for some time. There were no
surprises when First Choice put their mainstream business
up on the block. Soon the suitors were circling like 30-so-
methings at a speed dating party. Thomas Cookwas hot,
My Travel was ready to rumble and even Kuoniand Vir-
ginwere strutting their stuff.
So it was quite a surprise when Thomas Cookcaught My
Travels eye across the crowded dance floor and announced
they were an item! Was this unexpected outcome an op-
portunistic grab it now that could be a synergy trap as
some industry experts have observed....or a carefully thou-
ght through plan?
TripVisionran the numbers on the deal from a unique
standpoint - that of consumer ownership. As well as trac-
king the absolute numbers of consumers who have used a
particular travel agent, TripVisionis also able to identify
those consumers who have NOT used a particular agent.
TripVisionis the only data source to be able to do this.
This is a crucial factor as it determines whether the merge
will produce incremental business, or if consumers from
either party end up cannibalising each others sales.
The customer ownership results are available to subscri-
bers (its free to subscribe) of our web site www.trip-vision.
com - to the right hand side of this item entitled Thomas
Cook & My Travel Presentation. The analysis shows it was
a good move for both companies. Read on and reflect - re-
sults for the entire industry are also included on our chart
and clearly, there are still plenty of merger and acquisition
opportunities out there.
...so make sure you pick the right partner by considering
the consumer ownership perspective as well as the finan-
cials !!!!
Was Thomas Cooks and My Travels merger
the right outcome?
ANALYST PORTHOLE
pure loyalty benefit has been reduced to a lower level of
importance.
42% of survey respondents suggest their top management
says show me the money when placing a value on theirfrequent flier program. Only 15% of those surveyed opted
for loyalty as the primary benefit recognized by an airlines
top management.
Readers are encouraged to note the importance placed
upon the revenue generating power of frequent flier pro-
grams. What was launched as an initiative to further the
loyalty of key customers, has become a significant con-
tributor of profits from the sale of miles to partners suchas co-branded credit cards. But as the issue of reward
availability demonstrates, airline management should not
forget the key purpose of these programs - - to drive
loyalty, provide recognition and enhance customer ser-
vice. After all, these programs are designed to serve an
airlines best customers. If airlines fail to maintain the
value of these programs for their customers, they will be
useless as revenue sources.
Readers are invited to browse the complete 9-page report
online at the IdeaWorks web site: www.IdeaWorks-Company.com
Get more information:
http://www.trip-vision.com/TravelNews/index.cfm?ccs=61&cs=193
-
8/14/2019 Air Scoop March 2007
7/13
BIRDS EYE VIEW
Air Scoop - March 2007 www.air-scoop.com
At the beginning of 2007, the LCC
headlines in Austria were dominated
by... a Slovakian company, SkyEuro-pe. For two reasons: first, two Aus-
trian businessmen, Ronny Pecikand
his partner Georg Stump, took over
16,5% of the Bratislava-based com-
pany, quoted on the Vienna Stock
Exchange. Thus, they challenged the
other big SkyEurope investor, the
American hedgefond York (23% of
the shares).
Secondly, at the end of March,SkyEuropewill land at the Vienna
Airport for the first time ever. In
2007, the LCC will open 16 new
destinations from Vienna to Hol-
land, Greece, Spain, Belgium, Italy,
France, Romania, Bulgaria, Cyprus
and Croatia, and also an internal
route to Innsbrck. This year, the
Slovakian LCC expects more than
700 000 passengers in Vienna. Two
of its planes will be based in Austrias
main airport, and ten in two years.
This is an important evolution in
SkyEuropes strategy : with two hubs
both in Bratislava and in Vienna,
the LCC now really reinforces its
leading position in Central Europe.
Previously, SkyEurope was only
connecting Vienna with a shuttle
bus from the Bratislava airport, one
hour away from the Austrian capital
city, but located in another country.The same strategy than Ryanair, not
operating a single flight to Vienna,
but connecting four British cities and
Milano to Bratislava.
In Vienna, SkyEuropewill have to
compete with the local low-cost lea-
der: the German-Austrian alliance
Air Berlin - Niki.
Austria has only two small LCCs.
The first one, InterSky, is based at
the German Friedrichshafen airport,a few miles away from the western
Austrian border. It operates three
small aircrafts to 13 destinations. The
second one is Niki, the company of
the former formula-one champion
Niki Lauda, created in november
2003. It owns six aircrafts, and car-
ries more than one million passen-
gers per year.
Niki could not exist without itsGerman big brother , Air Berlin.
The German leader and third biggest
LCC in Europe owns 24% of Niki,
which is, in fact, its affiliated com-
pany in Austria. Nikioperates fli-
ghts from Vienna to Air Berlins hubs
(Palma de Mallorca, Nrnberg...),
from where the German LCC brings
the passengers further to other des-
tinations. It also benefits from Air
Berlins logistic support (marketing,
Internet, call-center...).
In Vienna, 2,2 of 16,9 million passen-
gers yearly choose low-cost flights
- among whom 1,8 million fly with
Air Berlin - Niki. SkyEurope will
have to fight hard. Fortunately, the
low-cost activity is dynamic in this
airport: in 2006, it grew by 13,2%.
Austria, with 8 million inhabitants
and high living standards, is an attrac-
tive market for LCCs. Their market
share is growing behind national lea-der Austrian Airlines. In addition to
Vienna, five other Austrian airports
are connected to low-cost flights. In
their case too, foreign companies are
predominant.
In Salzburg, an important LCC plat-
form (12 companies, among which
Air Berlin Niki, Flybe, RyanAir,
TUIfly, SkyEurope, Norwegian, Aer
Lingus, Transavia... ), new routesto Manchester and several German
cities will open in 2007. In Graz
(Niki, Condor, InterSky, RyanAir,
TUIfly ), news routes to Palma de
Mallorca and Berlin are planned. In
Innsbrck, Transaviarecently ope-
ned a route to Rotterdam and TUI-
flyto Kln. Linz (RyanAir, TUIfly,
Air Berlin - Niki) will be connected
with Kln in March. RyanAir and
TUIfly also serve the smallest low-cost airport in Austria, Klagenfurt.
Among the important European
LCCs, only easyJetis absent in the
country. Its route to Bratislava was
suppressed in 2006.
Most of the LCCs in Austria fly to
Germany, Great Britain and Southern
Europe. Charter activity is signifi-
cant, from Austria to the southern
seas in summer, and from abroad
to the Austrian snow in winter. But
Austria is also the door to Central
and Eastern Europe. And this mar-
ket has just begun to emerge. From
Salzburg, Niki already flies to Bu-
dapest, and SkyEurope to Warsaw.
And from Vienna, SkyEurope will
launch in March flights to Bucharest
and Sofia, and Nikito Moscow. The
beginning of a battle to the East
? Maybe... But Niki Lauda, the par-
tner ofAir Berlin, is also a friend ofRonny Pecik, the new Skyeuropein-
vestor. And he announced he could,
one day, cooperate with SkyEurope.
The Austrian LCC Market Is Dominated By Foreign Companies
-
8/14/2019 Air Scoop March 2007
8/13
BIRDS EYE VIEW
Air Scoop - March 2007 www.air-scoop.com
The Birth of LCC Subsidies
Subsidies for airports and low-cost carriers (LCCs) have
long been a center of debate. With Ryanairgreeted the
New Year facing European Commissions queries overthe carriers airports deal with Derry in the mist of scrutiny
and suggested illegal state aid, LCCs and airports subsidies
once again strike European media.
State aid in aviation sector is not a new breed. It has long
existed in European Union when all airlines are privately
owned, of partial or complete state ownership. As a result,
complete or partial state ownership has frequently invol-
ved state capital injections into airlines having financial
difficulties. State aid has been justified on various grounds
ranging from economic and military to legal and psycholo-gical. In the present European aviation scene in which fair
competition is emphasized, many aviation development
funds are taken in more subtle and implicit forms.
When Ryanairand easyJetstarted low-fare operations in
Europe in the 1990s, they offered modest flights connec-
ting small and secondary airfields. However, this started to
change when European governments launched route de-
velopment funds to support cultivation of direct regional
flights connecting local airports with major transport hubs
and even exotic international destinations, with the aim tobolster business travel and tourism and ultimately maxi-
mize commercial interests for the airports, carriers and the
cities concerned.
Various route development funds are set up as indirect
initiatives to promote, secure and enhance existing and
new direct air services between regional airports and more
popular destinations. As a strategic move to consolidate
city and even country image, direct air connection is con-
sidered to help create more popular business and tourism
gateway. As early as November 2002, Route Development
Fund (RDF) was set up in November 2002 by the Scot-
tish Executive. The RDF is operated on a partnership basis
with Highlands & Islands Enterprise, VisitScotlandand
Scottish Enterprise, which administers the fund on the
Executives behalf, allocating funding to airports and new
external direct routes proved to be economically beneficial
to Scotland. It has helped lure more than 40 new services
than mere European routes that were on the wish list in
2003, including lucrative links from Glasgow to Dubai and
Boston and Edinburgh to New York and Atlanta.
Northern Ireland followed suit shortly after by launchingan air route development fund in 2003. Similar to the
Scottish flagship funds operational structure, the northern
Irish initiative is operated by a company called Air Route
Development (NI) Ltd. This company was created by the
Department of Enterprise, Trade and Investment and In-
vest Northern Ireland, providing investment support toairports that offer discounts on aeronautical charges to
airlines introducing new routes, as well as match funding
which allows the airports to double the amount of dis-
count offered. By June 2005, it has subsidized nine new
routes include one direct flight linking Belfast and New
York.
From carriers perspective, launching new air routes con-
necting major destinations and airfields is no easy task.
Airports are natural assets to countries and at the same
time, monopolies. Apart from fuel and operational cost,airport charges levied by the airfields is what each carrier
strives to reduce through individual negotiation. After
slimming down operational cost through e-ticketing, re-
duced complimentary services and back-office operations,
low-cost carrier is burdened by steepened airport charges.
This creates another contradiction to route development
funds which offer financial aid for respective airports
and carriers to develop direct routes. If the airports are,
in a way sources of carriers financial expenditure, to what
extent they can be justified to receive government incen-
tives to discount carriers on landing and other adminis-trative charges in order to encourage them to fly to these
airports?
Notably, European Commissionstrives to put an end to
such subsidies and retain a competitive air market. The
new EU rules will outlaw start-up subsidies for long-haul
routes launched after the end of May and all flights to air-
ports with 10 million or more passengers a year. The Com-
mission hopes to put many lucrative links that are made
possible by route development funds to date back on the
ground. However, since many of the regional airports such
as Edinburgh and Belfast still have missing links to many
Europes biggest economic and transport hubs, the execu-
tives would still offer scaled down financial backings to
routes that would have started by June. As a matter of
fact, the new rules do let the Scottish executive to use
RDF to support routes from Edinburgh duplicating those
that already existed from Glasgow.
Find more articles about LCCs Subsidies in our next
newsletter: Air Scoop April 2007.
LCCs SUBSIDIES
-
8/14/2019 Air Scoop March 2007
9/13Air Scoop - March 2007
DOWN TO EARTH
www.air-scoop.com
Tense debates over certain issues have always accompa-
nied the EU Commission LCCs relationships. The la-
test ecological initiative set out by the Commission hasbrought forward discords that exist within the European
Low Fares Airline Association (ELFAA). The two lea-
ders, Ryanair and easyJet, appeared to have different
approaches to the problem of CO2 emissions and envi-
ronmental protection. However, the idea to include LCCs
in the emission trading scheme met rather cool reaction
from ELFAA, the organization that was created in order
to protect LCCs interests and defend their rights against,
amongst others, the EU policies.
Positioning itself as a green and environmental friendly air-
line Ryanairis absolutely against any additional taxation
regarding ecological issues. The LCC is convinced that
factories and road transport are much more to be blamed
than aviation. Being the largest LCC in Europe with the
fleet of more than 120 aircraft Ryanairis not interested in
any additional costs. The company accuses the Commis-
sion of speculating; and states that the offered measure
will do nothing but decrease the overall economic growth.
Environmental agencies in the UK, in turn, chastised Rya-
nairfor its position, calling it irresponsible.
easyJet, on contrary, admits airlines negative influence onthe environment and is ready to improve it at any stake.
The company sees minimising this influence as a crucial
part of the strategy. The British LCC is rather supportive
of the scheme and does not see any threat in it. Unlike
Ryanair, easyJetbelieves that this measure is worth ta-
king to cut down greenhouse gas emissions.
The scheme itself has two-step implementation with intra
EU flights being added in 2011 and flights operated out/
into the EU in 2012. This basically means that LCCs are
the first to feel the burden of new taxation. ELFAAin-
sists on long-distance flights entering the scheme together
with the domestic EU flights. ELFAAsees such division asdiscriminatory and afraid that the delay in out-EU flights
entering can end up with no entering at all.
To defend member airlines and to accommodate both
Ryanairand easyJetinterests ELFAAhas published the
Frontier Report stressing that the whole idea of scheme
implementation is just a waste of time. The report highli-
ghted that airlines are not the biggest polluters and should
not be treated as such. The main goal of the report, which
was to disclose all the myths that surround airlines nega-
tive impact on the environment, was much in accordance
with Ryanairs position. But considering that the present
Chairman of the Environment Working Group at the EL-
FAAis also a representative of easyJet it is plausible that
some kind of compromise is to be found.
Positions of other members ofELFAAare not that clear
as of the two mentioned. Sterling, for example, is aimed
at reducing C2O emissions and introducing new environ-
mental friendly fleet by its own efforts. The approach is
really close to Ryanairs: we dont pollute, so there is no
need to pay.
Although Ryanairs and easyJets attitudes towards buying
so called pollution credits are fundamentally different,
ELFAAitself (meaning all the member airlines) took a so-
mewhat middle of the road position acknowledging the
importance of environmental protection but being stron-
gly against any additional taxation. However, this could
be a matter of further bargaining with fuel taxation, for
example, being an objective.
LCCs Green Wars LCCs ENVIRONMENTAL ISSUES
Among all European LCCs, easyJetappears as the most
open to discussion on Environment and ready to make
some proposals to reduce its carbon emissions. Here under
are the latest positions of the carrier:
easyJettoday publishes its Corporate and Social Respon-
sibility Report which outlines its strong environmental
credentials and includes three promises to help balance
aviations huge social and economic contribution with its
impact on climate change.
Andy Harrison, easyJet Chief Executive, declared: Its
hard to see how anybody who has read the recent IPCC
report and the Stern Review can deny that global warming
is a clear and present danger and that this generation has a
responsibility to take action now. Most within the aviation
industry recognise that aviation pollutes and that we must
improve the environmental efficiency of todays operations
and work on tomorrows technologies.
It is time for a proper debate of the sort that has been lar-
gely missing of late. Given that aviation CO2 only accounts
for 1.6% of global greenhouse gas emissions, grounding
every aircraft in the world would have a miniscule impact
on climate change yet a vast impact on our economies. So,
airlines have a responsibility to do what they can and go-
vernments have a responsibility to ensure that their policies
incentivise the right behaviour.
easyJet: Friend of the Environment...
-
8/14/2019 Air Scoop March 2007
10/13Air Scoop - March 2007
DOWN TO EARTH
www.air-scoop.com0
Plane Stupid: Yes. We will continue to target direct actions against LCCs
Probably if somebody conducted a survey today about
the most often heard word in the news and read in the
newspaper the answers would be firstly Environment andsecondly Climate changes. Be honest with yourself, does it
not seems to you as if the words had been discovered few
weeks ago. Everybody is speaking about environmental is-
sues, their changes and consequences for the future - for
our future. Supposedly everybody cares about the future,
and therefore also about the environment, but what can
be done? Who is responsible and what is the solution?
Air Scoopasked the association Plane Stupidwhy are Low
Cost Carriers, in their opinion, not environmental friends
and if they plan any action against LCCs in the future?
Leo Murray, Press Officer ofPlane Stupid, answered as
follow:
Low cost carriers are driving the massive growth in air
travel we have seen and expect to continue to see over the
next decades if our governments do not adopt a policy of
demand restraint. Air travel is the most environmentally
damaging form of transport, both because of the very high
levels of CO2 it deposits in the upper atmosphere - exact-
ly where it is not wanted - but also because of the seldom
mentioned other greenhouse gas emissions, such as NOX
and contrails, which make the warming effect of aircraftemissions at least twice that of the CO2 alone. All of this
adds up to make aviation the fastest growing contributor
to climate change, especially here in the UK and the EU.
Low cost carriers are only able to offer their services so
cheaply because of the enormous tax subsidies they re-
ceive through 0% tax rating on aviation fuel and no VATon tickets, aircraft or aircraft spares and repairs. All of the
LCCs in the UK lobby aggressively to maintain their uni-
quely tax-free status; see Ryanairs APD stunt earlier this
year, or indeed easyJets deliberately misleading sustaina-
bility statement last week.
Plane Stupidtargets LCCs specifically because most of the
destinations they serve are near enough to be easily accessi-
ble by more sustainable forms of transport such as rail; 45%
of all flights in the EU are to destinations of 500km away
or less; Paris is the top destination from Heathrow airport- there are 60 flights every day to Paris from Heathrow.
The reality of transforming our economies to avoid dange-
rous climate change means we cannot allow aviation as a
whole to grow much beyond its present size, and we may
very likely even need to reduce it. This means if we are
still going to travel to places like Australia, South America,
China and Japan - places that are basically innaccessible
by other forms of transport - then we are going to have to
stop flying between nearby European cities altogether, and
find some other means of getting around instead.
Yes. We will continue to target direct actions against LCCsuntil they accept and admit that their business is a major
cause of climate change, and is set to become the UKs n1
contributor before 2050 unless their crazy expansion plans
are scrapped.
It is for this reason that easyJethas today published its
Environmental Code, which contains three promises - that
easyJetwill be efficient in the air, efficient on the ground
and will help shape a greener future for the industry.
The same business model which gives us low fares (newaircraft, high occupancy rates, direct flights) also gives us
environmental efficiency in the skies - easyJetemits 27%
fewer greenhouse gasses per passenger kilometre than a tra-
ditional airline on an identical route. In addition we reco-
gnise that we can and we will expect more of our ground
suppliers at airports.
We also intend to play a leading role in improving the fu-
ture environmental performance of our industry - reforming
Europes famously-inefficient air traffic system, implemen-
ting a meaningful European emissions trading scheme, wor-king on the next generation of aircraft, giving customers the
most comprehensive range of environmental information
available for travel to a particular destination, and helping
them to offset the carbon emissions of their flight.
I believe that we are on the cusp of major advances in air-
craft and engine technologies which will lead to dramatic
reductions in emissions, which have not yet been factored
into the environmental forecasts about our industry.
In the meantime airlines have an obligation to maximisetheir environmental efficiency (particularly by operating the
cleanest available technology). For their part, Governments
must ensure their policies balance the vast economic and so-
cial benefits of flying with its impact on climate change, par-
ticularly by mandating minimum environmental standards
for aircraft to operate in Europe.
Governments should also recognise that some airlines are
already more efficient than others - something that the UKs
Air Passenger Duty dramatically fails to do. APD provides
no incentive for airlines to operate the cleanest aircraft; itcompletely omits airfreight and private jets; the proceeds
are not allocated to any scheme to improve the environ-
ment; and it is disproportionate - on a UK domestic return
flight, the 20 APD is now 25% of the average fare and about
10 times the cost of off-setting the carbon emitted on an
easyJetflight.
-
8/14/2019 Air Scoop March 2007
11/13
BIRDS EYE VIEW
Air Scoop - March 2007 www.air-scoop.com1
Moreover, LCCs need to clearly explain to customers their
position on two controversial programs that impact pas-
sengers and airlines.
The first is the EU Emission Trading Scheme. Many LCCs
seem to understand that emission trading is the best system
for reducing aircraft emissions, but LCCs might consider
pressing for changes to make the system fairer. These in-
clude:
Ensuring that long-haul flights on any airline to/from Eu-rope are covered so passengers who fly longer distances
on an airplane, regardless of the airline, will pay their fair
share.
Pressing for tough restrictions on the minimum number
of seats airlines can configure their aircraft with, which mi-
ght force legacy carriers to cut premium seat sections and
make their aircraft more efficient to operate.
Ensuring that the EU presses other nations, including the
United States and China to develop similar schemes to
control emissions. EU airlines should not be the only ones
making sacrifices for the planet.
LCCs also need to communicate to passengers what green
taxes LCCs find acceptable. Many customers justifiably be-
lieve that airlines are opposed to any taxes on air travel,
but some LCCs recognize that some environmental taxes
are necessary for passengers to pay, a fact many passengers
arent aware of. LCCs need to set clear criteria for new or
expanded air travel taxes that passengers can comprehend
and empathize with. Some possible criteria include:
Tax increases must be phased in over a period of at least
six months, so a fiasco similar to the current APD crisis
doesnt reoccur. Taxes must directly fund environmental programs such
as the formation of carbon sinks.
Tax increases are proportional to the airline, duration of
flight, and class of travel. Passengers who fly more envi-
ronmentally friendly carriers shouldnt pay the same rate
as those who fly on dirtier carriers, and like the APD, pas-
sengers who fly in premium classes should pay more than
passengers who dont.
LCCs also need to offer an alternative to environmental
taxes. Perhaps the easiest idea is to allow customers to do-
nate to a carbon offsetting charity to compensate for the
emissions of their trip right from the booking page. To
launch this feature, airlines should match customer dona-
tions up to a certain figure.
If LCCs create a dialogue with customers, they must ac-
knowledge the successes, but also the steps that still needto be taken by passengers and airlines to achieve further
reductions to the human impact on climate change. An
advertising campaign that discusses the environment and
not travel may be the best way for LCCs to start a dialogue
with customers. LCCs should consider voicing their envi-
ronmental message in various formats including:
An advertising campaign similar to HSBCs latest cam-
paign in the UK. This brilliant campaign contains a posi-
tive, down-to-earth message that customers can relate to.
The campaign de-emphasizes the negative image custo-
mers have of banking and instead focuses on what HSBC
has done to reduce its environmental footprint, what more
they still have to do, and most importantly, what custo-
mers can realistically do to help.
Information in in-flight magazines and other sources on
the aircraft with the same content as proposed in the ad-
vert campaign above.
A prominent, detailed, dedicated page to the environ-
ment on their Web sites.
European LCCs shouldnt hide the fact that they contri-
bute to climate change. Instead, creating an open and frank
dialogue will help customers understand the challengesairlines face, the steps most LCCs have already taken to
reduce their environmental impact, and the steps they
plan to take in the future. If LCCs dont present their own
solutions to slowing climate change, then the uninformed
public will side with governments, which will impose hi-
gher taxes and an EU Emissions Trading Scheme that will
unfairly punish LCCs.
A Proposed Environmental Public Relations Strategy for LCCs (part 2)
www.airlinebulletin.com
Exclusive Analysis for Air Scoop
Sam Sellersprovides analysis and commentary on the airline industry at his website,www.airlinebulletin.com. He is the author ofTake Control of Booking a Cheap Airline
Ticket, an ebook for travelers in the United States who are interested in purchasing
cheap airline tickets. The ebook provides step-by-step instructions that readers can use
to purchase the cheapest airline tickets. It can be purchased for $10 at
http://www.takecontrolbooks.com/airline-ticket.html
(Read the first part Air Bulletins analysis on LCCs and Environment Issues on Air Scoop February 2007)
http://www.takecontrolbooks.com/airline-ticket.htmlhttp://www.takecontrolbooks.com/airline-ticket.html -
8/14/2019 Air Scoop March 2007
12/13Air Scoop - March 2007
DOWN TO EARTH
www.air-scoop.com2
FITUR 2007 is the first grand tourism event on the yearly calendar for the in-
ternational tourist industry. Over 5 intensive working days, from 31st January
to 4th February, a comprehensive range of tourism businesses and destina-
tions from around the world has been presented in Madrid, which became a
FITUR 2007
veritable focal-point for Spanish and international tourism opportunities.
FITUR reinvents itself year after year, providing an Integral Promotional Service which generates fluid trade links among
all participating actors of the tourist industry before, during and after the exhibition.
An Air Scoop correspondent was at the FITUR 2007 and had the opportunity to interview LCCs representatives there.
2 questions to...
Andreas Engel: PR Spokesman International Germanwings
What are the projects of Germanwings in Malta?
Germanwingsis now a litlle bit older than 4 years, flying
from 4 hubs in Germany to 60 destinations in Europe -
and from end of March from Cologne & Stuttgart also to
Malta, starting with 2 flights per week - starting from 19
EUR (incl. all taxes, up to 15 % of all tax). We think Malta
has an enormous growth potential, is a undiscovered Islandfor 7,1 Mi. GermanwingsCustomers we had 2006.
And there is a high demand also for well situated Germans
to fly individualy with nice Germanwings Airbus, leather
seats and without any advertising for gaming, gambling nor
car rentals to Malta
How does Germanwings manage the competition with
Ryanair?
Ryanairis low-cost market leader in Europe with over 16
years experience to fly from nowhere to nowhere. Ger-
manwings is mostly flying to Primary Aiports (Hamburg
not Luebeck like Ryanairor Barcelona not Reus or Stoc-
kholm-Arlanda and not Skavsta, Paris CDG not Beauvaisetc) So Ryanairdoes not disturb us, and competition is
good for Germanwings- we have the better product, we
are Lufthansa light, like a radio station in Malta men-
tioned recently. If you want to fly cheap with a very re-
liale airline, with brand new Airbus from, or to, a big city
like Cologne and Stuttgart, Germanwingsshould be your
choice!
2 questions to...
Loredana De Filippo, Exterior Relations from Meridiana
What are the projects of Meridiana in Malta?
We will start operation between Bologna and Malta on
next April with two weekly flights (on Thursdays and Sun-
days). Last year, Meridianacarried about 8.000 passengers
on this route from June to September, the load factor on
the 3 month base was 65%, in August we reached 77%. If
2007 operations will show a positive trend we could even
add a third flight per week. We aim to reinforce commer-
cial agreement with tour operators and travel agency that
helped us last year while starting operation in Malta in or-
der to keep this service even in winter season. If well havecooperation and good results, next step could be opening
other destination and connecting Malta with Florence, Tu-
rin or Verona.
How does Meridiana manage the competition with Rya-
nair?
Ryanair is not a real competitor for Meridiana, even if
this company is strongly operating in Malta. We feel more
aggressive the competition with other Italian carriers that
operates schedules and charter flight between Malta and
Italy.
Anyway Meridianahas a very strong position in the trade
Italian market, a website known and appreciated, fares and
services standards that can compete with these carriers.
-
8/14/2019 Air Scoop March 2007
13/13
BIRDS EYE VIEW
What is the impact for Blue Air of the entrance of Roma-
nia in the EU?The entrance of Romania in the EU brings Blue Aira lot of
new opportunities: new routes that now are available to us,
easier access to the EU for our passengers that ultimately
maximizes our check-in times as the customs procedures
go faster.
We will also have new competition and this will increase
the quality of the services provided to the client.
What will you do now that you could not do before?
Now we can have flights between the EU states (like Rome
Paris for instance).
Also, other low-cost companies have entered and will en-
ter into the Romanian market and this would be a great
possibility for all of us to educate the Romanians regarding
the low-cost concept; this has been a difficult task for Blue
Airbecause we are the first Romanian low-cost carrier.
With this new opening, how do you prepare competition
with Low Cost Carriers in Europe?
Even from the start we have offered accessible and safe
flights. We offer competitive services besides the low-cost
of our tickets and this is why last year we started our own
handling services in the Baneasa Airport (ground handling,
passenger handling, lost and found services, providing the
aircraft with specific equipment).
This year we intend to buy 2 new aircrafts and to open
Blue Airticketing agencies in the EU.
Blue Airalways focuses on the quality of the services it
provides and always finds highly competitive solutions to
keep its rates as low as possible.
3 questions to...
Mariana Ion, Development Manager from Blue Air
Air Scoopis a Registered Trademark ofGlobal Wings Publications.
Subscription to Air Scoop: 290 euros for 1 year (10 issues)
Copyright 2006 - Unauthorized distribution or reproduction is forbidden.
http://www.air-scoop.com ; http://airscoop.blogspot.com(free portal news)
2nd Air Transport Conference for CSEE
Air Scoopis proud to be media partner this year again of the 2nd Air Transport Conference for CSEE.
Following the success of our Inaugural event last year, this year we are continuing in dealing with the issues Air Transport
is facing in this region. This is a unique opportunity to meet face-to-face with Key Players in this sector and discuss what
additional strategies you can easily implement to empower your business development.
How to register?
tel: +381 (11) 20 26119
e-mail: [email protected]
www.easteurolink.co.uk
EVENTS
http://www.easteurolink.co.uk/http://www.easteurolink.co.uk/