12 December 2022, etc.venues Monument, London
Business Travel Show Europe, presented by The BTN
21 November, London Hilton Metropole
Low cost carriers (LCCs) will take a bigger share of the aviation market, Herb Kelleher, founder of Southwest Airlines, said.
Mr Kelleher said he had "no such foreboding" that the low cost market was doomed in the current economic climate. He was speaking at the World Low Cost Airlines Congress in London this week.He said there were two "strategic initiatives" which LCCs could take to ensure their survival. One was the introduction of a small 110-150 seater jet which he said was "mindboggling" for the market. The second was the reform of air traffic control which would create a more efficient and cost saving environment for airlines. But he said LCCs also needed staying power and warned: "Don't overextend yourself in the pursuit of short-term glittering gains." Mr Kelleher rejected the suggestion that legacy carriers could take on the LCCs as they were "suffering" in the current climate.Ten attempts by legacy carriers to launch LCC in the US had all failed. They were now imposing extra costs on their customers, like baggage charges, to offset the high cost of oil. LCCS were still the "bargain" of the airline industry. While he expected consolidation in both the US and Europe where he predicted BA, Lufthansa and Air France KLM would dominate, he said both Ryanair and easyJet were “in great shape.” But Mr Kelleher said LCCs must be prepared to adapt to survive or take over markets abandoned by legacy carriers. This might mean slightly upgrading services to include food on longer flights. "What we are seeing is the denouement of de-regulation in the United States," he said. "There will be fewer carriers and more capacity restraint." Tony Fernandes, ceo of Air Asia, told the delegates that there would "always" be a market for LCCs. But he stressed that they had to be innovative to keep their market. During the SARS scare several years ago, most airlines had stopped advertising but Air Asia had tripled its budget. "If you keep the fares low enough, people will risk their lives," he said.
Also from the World Low Cost Airlines Congress……
Low cost carriers must adapt to market
Low cost carriers (LCC) must serve the market they are in, said Stephan Nagel, senior vice president strategy for Air Berlin.He said the hybrid model suited his airline as it was aiming for the business and the premium leisure markets. Mr Nagel told the Congress that a hybrid model did risk higher costs. "You don't have to be a Ryanair or a legacy carrier. You have to choose your model – that is really essential. "For our model you need to use the GDS. It brings costs but it also brings the high yield market. Like easyJet, we want to attract the corporate customer. "We do have some frills, some complexity. We give our customers seating, a loyalty programme. We have built up a 30% share of the market so there is a market for this hybrid model," he said. Mr Nagel was speaking in a debate on the evolving model of LCCs. Earlier Brett Godfrey, ceo of Australian LCC Virgin Blue, said that price was the main thing on which to compete. "The reality is that more and more, we are competing against each other. Ryanair and easyJet is the classic example. "Price is the main lever. We have always had the view that there is a market which will pay for a network and higher frequency. You don't have to mimic the legacy carriers. "We make more profit on flying 16 times a day between Melbourne and Sydney than we did five or six times a day," he said. Alex Cruz, ceo and one of the founders of Clickair, said that his carrier had evolved over the years. "Our cost base was going to be the lowest. But two years on we have changed very slowly. "We have not changed from a low cost airline but we have upgraded our product. We have been copying Virgin Blue. "We have seat reservations, we have lounges. Is this a hybrid model? "We are not going to stop evolving or disregard our customers and I think we are still managing to keep our costs down."
Consolidation will bring LCCs opportunities
Consolidation among European legacy airlines will bring new market opportunities for LCCs, Mike Rutter said.The chief commercial officer for Flybe, the largest regional carrier in Europe, said he saw consolidation not as a threat but as a "land of opportunity."He told the Congress that it made LCCs realise that legacy carriers cannot serve the regional market."I see consolidation as an opportunity," he said.Daniel Skjeldam, chief commercial officer for Norwegian Air Shuttle, said there were rumours that rival Scandinavian carrier SAS might be taken over. If that happened, it might provide his carrier with more scope. "There will be quite a lot of opportunity for us as our rivals have twice the costs that we do. "I believe there will be route opportunities and chances to feed hubs," he said. Earlier Mr Rutter outlined five key points which he said has led to the profits which Flybe announced earlier this month. They are the need to be leaders in a market, about having a wide customer base, a carefully defined network, a controlled cost base and having a compact with the customers. He said his airline had looked for a strong business traveller base but these were not just corporate customers but also people from the SME market. Thomas Winkelmann, ceo of Germanwings, said the customer did not care if he was flying with a legacy carrier, an LCC or on a charter. "He wants to travel safely and pay the least possible fare for his trip," he said. Travellers wanted quality and while free seating might work in some countries in Germany it was "baloney" and "the quality of the product went down and you did not get the high yield customer." Mr Winkelmann said there was not at the moment enough competition between LCCs or between airports and air traffic control had to be reformed.