The Battle of the Low Cost Airlines

The airline market is currently being re-shaped by the expansion of existing low-cost airlines. It has been estimated that they will expand their European market share from 5% to 25% by 2010, establishing themselves on a long-term basis. Realistically, however only 2-3 low-cost carriers will survive as major players on the intra European market. Only Ryanair and easyJet operate in Europe as low-cost airlines, and they have fallen into steep competition with one another.

Ryanair
is the low cost pioneer in Europe, pursuing this business model in its pure form. Founded in 1985, Ryanair is headquartered in Dublin. Its top destinations are Ireland, UK, Germany and Italy.

easyJet
, the UK’s second largest airline, was founded in 1995 and is headquartered in London. Its top destinations are Southern Europe and the UK. easyJet were expected to become the market leader after the planned takeover of Go and DBA. This however did not go quite according to plan. In March, easyJet announced the decision to terminate its option to acquire Deutsche BA (`dba`) from British Airways so as ‘not to compromise the easyJet business model’.

Ryanair recently launched a controversial and aggressive advertising campaign, criticising easyJet’s punctuality and low fares, which has since developed into a cat fight between the two airlines, to the amusement of impartial onlookers, as they trade below the belt in what can only be described as a slugging match.

A Ryanair spokesperson told Internet Travel News: “Low cost is a culture which few, if any, airlines are capable of emulating. Even easyJet, with fares averaging 70% more than Ryanair, have drifted into the medium-fares category and posted interim losses of EUR66m.”

ADVERTISEMENT

In defence, easyJet revealed that they are continuing to monitor the market, scrutinising the cost base of the business in an effort to keep expenses down. An easyJet spokesperson told Internet Travel News: “It is clear Ryanair are having difficulty giving away their seats at present, and are using this publicity stunt to try to encourage them to get into a fight, which we are not interested in”. The spokesperson continued: “We compete with Ryanair on one route only -  Stansted to Rome. We offer a different product as we fly to main city airports, whereas RYA fly to airports in the middle of nowhere, and the consumer realises that there are significant hidden costs for onward transportation when flying with RYA”.


Ryanair carried 1.4million passengers in April 2003. A spokesman described this as: “A 12 month rolling average. This puts us at 16.1m passengers in April 2003. Our current income guidance to the market is EUR230 (February 04,2003).”


By comparison, easyJet reported revenues of £373 million, up 92% on last year, however after tax generating a loss of £46.3 million. Passenger numbers increased 33% on last year, however to maintain the high load factors they have reduced yields by 10.7%. This they attribute to the economic downturn, the effects of the war and the fact that easyJet was late this year.

Currently flying 125 routes and 84 destinations, Ryanair has just launched 25 new routes across Europe (April 30, May 1). Meanwhile easyJet have just announced four new routes from their Paris base and will continue to look for the best deals and where there is demand. They are also due to take delivery of 10 boeing aircraft and 120 airbus over the next 4 years.

In a further direct and more personal attack at easyJet, Ryanair’s Head of Communications, Paul Fitzsimmons commented: “easyJet are misleading the public. They can`t match Ryanair’s low fares, punctuality, European route network, customer service or profitability and they can’t match Ryanair’s popularity on the internet either. How many more lies will easyJet’s Head of Information, Comical Ali and his motley crew try to spin?” He added: “It`s time easyJet stopped deceiving the public and changed their slogan and re-brand their fleet - they are the “web’s second favourite airline”.

After much disparagement, easyJet have finally struck back at Ryanair with a press release entitled ‘more evidence of Ryanair’s inability to tell truth (or add up)’, in which they too get personal, accusing Ryanair of cutting costs by depriving staff of ‘basic office equipment’ such as calculators.

When asked their predictions for the future of the aviation industry, a Ryanair spokesperson told Internet Travel News: “Ryanair will continue to be the number one low fares airline in Europe. easyJet will stumble as it tries to reposition itself as British Airways. British Airways has already stumbled but will trip up again as it tries to
reposition itself as easyJet. Saatchi and Saatchi Advertising will offer to
save them money by creating a joint ad for them since passengers will be
unable to tell the difference.”


There is now a huge demand for low cost travel and one thing that is predictable is that the only low-cost airline survivors will be those with a pure low cost base. Whilst this ‘competitive spirit’ between easyJet and Ryanair may have spiralled somewhat out of control, competition is usually healthy and the main beneficiaries will be the cost-conscious, internet-savvy consumers. Customers, after all, should be the winners and for now, consumers can enjoy flights around Europe for as little as £1. I say bring on the battle of the low cost airlines!

——-