Cheap flight airlines are real high fliers of the market

Published on Wednesday 10 April 2002 01:00

THE September 11 terrorist attacks sent the airline industry into disarray, costing approximately 150,000 jobs worldwide and wiping Belgium and Switzerland’s national carriers from the aviation map.

Confidence in air travel was badly damaged in the immediate aftermath, hammering in particular the fortunes of British Airways, which relied heavily on transatlantic travel.

But business people and tourists still had to travel and despite the knock to confidence, low-cost carriers such as easyJet, Go and Ryanair have continued to record a rising trend in passenger numbers.

Scotland is enjoying its fair share in the rise, with Edinburgh Airport, Scotland’s fastest-growing airport, the only UK airport to host the three leading discount carriers.

More than 6.1 million passengers used the airport in the last year compared with 2.4 million in 1990.

According to BAA - which owns seven UK airports, including Edinburgh, Glasgow and Aberdeen - Edinburgh is also the UK airport with the highest number of low-cost services, with about 70 flights in and out of the Capital each day.

The airlines themselves and the industry in general are in no doubt about the growth potential of the low-cost sector and take the general view that it will be the main aspect of European short-haul travel within the next few years.

However, the airlines claim the biggest hurdle to future growth in Scotland is the landing charges that BAA levies.

EasyJet, which flies from Edinburgh to Amsterdam, Gatwick, Belfast and Luton, has hinted that more routes from Scotland are virtually a non-starter because of the current charges.

And Go, the former BA subsidiary, last month pulled its route from Glasgow and Edinburgh to Dublin to compete with bmibaby on routes from East Midlands airport.

Late last year, the SNP’s tourism spokesman Kenny MacAskill accused BAA of failing to do enough to boost low-cost travel from the city to foreign destinations, claiming Edinburgh was up to four times more expensive to fly into than other UK cities and European airports. He said sources had told him it was costing 1600 to land a 737 jet at Edinburgh, compared to 1300 at Gatwick and 700 at Belfast.

But Richard Jeffrey, the managing director at Edinburgh Airport, sees the landing charge issue as nothing more than a "negotiating tactic" by certain airlines.

The September 11 attacks took place amid a downturn in the global economy, adding to the pressure on companies to rein in costs.

The low-cost airlines, which many industry analysts believe to be run by shrewd entrepreneurs, reacted by slashing fares to the bone to keep people flying.

But not only did they keep people flying, they may have inadvertently secured the long-term services of cost-conscious businesses, suggesting that in a few years from now, the vast bulk of short-haul business travel will be conducted through this channel.

Go’s chief executive Barbara Cassani is in no doubt about the future prospects for budget carriers, saying "the low-cost genie is well and truly out of the bottle".

Ryanair recently announced it was buying 100 extra planes and easyJet said it was buying 75. Go has said that once it floats, it will look to buy about 80 extra aircraft. It all demonstrates the belief that the industry is on a growth curve.

Ryanair recently introduced the first budget flight from Scotland to Scandinavia, by flying to Oslo from Prestwick.

Kathryn Munro, Scottish sales manager for Ryanair - whose main Scottish hub is Prestwick and which claims to carry one in four of all air passengers travelling from Scotland to London - says that within the next five years, low-cost air travel will form the bulk of short-haul flights in and from Britain.

"The main budget carriers have all made a commitment to expansion as we all believe that there’s much more growth to come over the next few years," she said.

She said there was "no reason" why Scotland should not share in that growth, particularly with business travellers looking to cut costs.

"Ryanair would be looking to develop up to ten new routes from Scotland within the next five to eight years," she said.

As budget players became the "dominant force" in the industry, "the overall cost to business travellers will come down", she says. In many instances, she added, budget operators may be the only carriers to offer direct routes to many destinations in Europe.

Ryanair says that about 50 per cent of its passengers are business travellers and that as higher capacity aircraft filter into its fleet, that percentage is expected to edge up.

Ms Munro says that Ryanair is confident that over the next few years, it will boost its UK market share, from the current 24 per cent, past BA’s 35 per cent, thus becoming the UK’s leading domestic carrier.

But the main barrier to further growth in Scotland, Ms Munro says, is BAA’s "extraordinarily high landing charges".

"Unless BAA start to realise that the major growth in air traffic over the next five years will come from low-cost traffic they are not going to see any further increase in passenger numbers," she says.

"The low-cost carriers will go wherever the opportunities and business is. We’re in talks with them [BAA] and the tourism people at the moment looking to see how we go forward from here.

"But what BAA need to ask is whether they’d rather have another half a million more people using Scottish airports by lowering landing charges, or lose out altogether."

It’s a view that Moira Findlay, easyJet’s marketing manager for Scotland, agrees with.

"We’re looking to introduce a new city to the network each year and I would hope that we would be able to link that network into Scotland, as there’s a lot of capacity coming into the market in the next few years."

Ms Findlay says easyJet has put more capacity into its Paris and Gatwick hubs, suggesting that the company will continue to gear its capacity towards both demand and the best economic overheads.

With up to 60 per cent of its passengers from Scotland travelling on business and the firm’s aims to increase capacity, Ms Findlay says she hopes BAA will address the issue of landing charges.

Richard Jeffrey says: "Nearly 40 per cent of our passengers travel on low-cost airlines."

"The low-cost sector has seen very strong growth as more companies have scrutinised their travel budgets. I expect more growth in the sector, but also more growth in the traditional carrier market."

He makes a strong defence against the criticism BAA has attracted from the budget carriers. "I see the criticism as a negotiating tactic by certain low-cost carriers. About 60 per cent of my business is still with traditional carriers and I have to keep my eye on the future, as far ahead as 15 to 30 years, to carry out the exciting plans for this airport.

"No-one will thank me if I jeopardise that by using an unsustainable pricing model with certain market sectors.

"It’s a difficult balancing act, but the fact that we’re enjoying such strong growth suggests we’re doing something right."

However, Mr Jeffrey says the door for more low-cost services from Edinburgh remains firmly open.

"We’ve had discussions and are continuing to have discussions with all our airlines, particularly low-cost ones, as to their plans. We’re looking for long-term relationships with the airlines so we can build the future of Edinburgh Airport together."

The evidence clearly highlights the confidence in the no-frills airline market.

Last week BA, the self-styled "world’s favourite airline", revamped its prices on domestic flights, making more cheap seats available, and dumping many booking restrictions.

The move came in the wake of the firm’s "Future Size and Shape" strategy announced last month.