Low Cost Monitor 1/2012

Low Cost Monitor 1/2012 - An Analysis performed by DLR - 454 Routes LCC Routes 2012 The current Low Cost Carrier Market in Germany Spring 2012 The current Low Cost Carrier Market in Germany 2011/2012 The Low Cost Carrier (LCC) market has been an inherent part of the German air transport market for several years. Published by DLR twice a year, the Low Cost Monitor informs on LCC’s essential features and current developments in this market segment, particularly with reference to the number and relative importance of low-cost carriers, their supply including air fares, and the passenger demand for low-cost transport services. The offers reflected by the current Monitor are based on one reference week of the winter flight schedule 2012. The passenger figures refer to the whole year of 2011. Airlines The airlines involved in the Low Cost business design their offers quite differently. Due to this inhomogeneity only a few distinctive criteria can be defined for the Low Cost market segment, such as low fares, general availability and direct sale via the internet. Thus, in some cases, a certain scope of discretion arises when allocating an airline to a LCC segment. Furthermore, amalgamations of business models are seen in several airlines that further complicate the accurate assignment to the Low-Cost Market. In this Monitor issue, the authors currently identify 20 airlines (among all airlines operating on German airports) providing completely or partly LCC services. These are in detail (see also table 1): Aer Lingus (EI) (www.aerlingus.com), Fleet: 36 Aircraft (A320: 33, A321: 3) Air Arabia Maroc (3O) (www.airarabia.com), Fleet: 3 Aircraft (A320:3) Air Baltic (BT) (www.airbaltic.com), Fleet: 33 Aircraft (B737: 14, A320: 1, F50/70: 9, D8: 9) Air Berlin (AB) (www.airberlin.com), Fleet: 128 Aircraft (A319/20/21: 62, B737: 66) Blue Air (JOR) (www.blueair-web.com), Fleet: 9 Aircraft (B737: 9) Corendon (CAI) (www.corendon.com), Fleet: 6 Aircraft (B737: 6) Easyjet (U2) (www.easyjet.com), Fleet: 184 Aircraft (A319: 151, A320: 33) flybe (BE) (www.flybe.com), Fleet: 67 Aircraft (D8: 49, E: 18) Germanwings (4U) (www.germanwings.com), Fleet: 32 Aircraft (A319: 32) Iceland Express (5W) (www.icelandexpress.com), Fleet: 5 Aircraft (B737: 4, A320: 1) Intersky (3L) (www.intersky.biz), Fleet: 3 Aircraft (D8: 3) Jet 2 (LS) (www.jet2.com), Fleet: 36 Aircraft (B737-300: 27, B757-200: 9) Niki (HG) (www.flyniki.com), Fleet: 20 Aircraft (A320: 9, A321: 4, E: 7) Norwegian (DY) (www.norwegian.no), Fleet: 63 Aircraft (B737: 63) Ryanair (FR) (www.ryanair.com), Fleet: 293 Aircraft (B737: 293) Transavia (HV) (www.transavia.com), Fleet: 23 Aircraft (B737: 23) Vueling (VY) (www.vueling.com], Fleet: 46 Aircraft (A320: 46) Windjet (IV) (www.windjet.it), Fleet: 12 Aircraft (A319: 5, A320: 7) Wizz (W6) (www.wizzair.com), Fleet: 35 Aircraft (A320: 35) Wizz Ukraine (WU) (www.wizzair.com), Fleet: 2 Aircraft (A320:2) (A: Airbus, B: Boeing, C: Canadair, D: Dash, E: Embraer, F: Fokker, MD: B/McDonnell, S: Saab) Flights offered by Condor or LTU are not considered in this analysis, although these airlines also offer a number low-cost flights. But an unambiguous assignment to the Low-Cost sector is considered to be difficult because only selected flights can be booked directly and with low fares. This contradicts the real Low-Cost Carrier conception according to which all flights (or at least the bulk of the seat quota) should be available for booking online at a low price that is generally available and referring mainly to the actual advance booking period, respectively to the day of travel as well as to the booking situation. In a broad sense, Lufthansa flights of the „Better-Fly“-segment have to be taken into consideration as well, but here exists also only a strictly limited seat quota. An unambiguous assignment is not possible. The airline Air Berlin, who is running several business models, is one of the grey area. For this former charter airline, who has intervened early in the Low-Cost Market by launching the segment „Cityshuttle“, the identification of Low Cost routes has become much more complicated due to the mergers with DBA, Gexx and LTU as well as the cooperation with Walter airline (LGW). Thus, only the presently existing Low Cost routes served by these airlines as well as the corresponding ones are being considered, but not the flight routes to typical holiday destinations like North Africa or other intercontinental connections. Some time ago, Air Berlin has newly added the city links, previously operated by TUIfly, some of which, however, have already been ceased again in the meantime. In total, when compared to last spring, the number of Low-Cost Carriers operating in the German market has remained constant. 2 Most airlines have kept their fleet size relatively constant. Only Ryanair show a strong increase of 30 airplanes as opposed to the last spring. Thus, Ryanair has a fleet of 293 aircraft, type Boeing 737-800, equipped with about 190 seats each. Carrier Ranking (s. Tab. 1): Based on the number of flights (departures) in one week in January 2012, the Low-Cost segment of Air Berlin is by far the largest one in Germany. However, the air traffic figure is by 12% lower than in the preceding year. This trend is, among other reasons, based on Air Berlin’s comprehensive programme of capacity reduction, including also their withdrawal from several regional airports. Whereas during the past years until 2008 high yearly growth rates have been achieved in the Low Cost sector, a reversal already indicated in summer 2008, when the growth rates dropped distinctly. This decline continued until summer 2009. After a further consolidation phase, positive growth rates were seen again for most airlines since the beginning of the year 2010 - a trend that continued also in summer 2010. Since early 2011, however, there is a new decrease in the number of take-offs offered. In July 2011, these values were lower by11% compared to the year of 2010, an effect caused partly by the implementation of the air traffic tax in Germany as of 1st January 2011. This trend continued also in the beginning of 2012, according to which the number of take-offs in the Low Cost sector dropped again by 14%, compared to 2011. According to the ranking, Germanwings (715 flights) and Ryanair (383 flights) follow. For Ryanair, the trend observed regarding reduction in flights offered in Germany is continuing, after Ryanair carried out a policy of expansion in Germany until then. This way, Ryanair could continuously increase the number of flights on a high level even throughout the entire economic crisis, whereas almost all other major Low Cost Carriers have reduced their supply during this period. All intra-German domestic flights served by Ryanair have been ceased in March 2011. Also here, one of the major reasons was, according to Ryanair, the implementation of the German air traffic tax. For Easyjet, a return to a higher growth in supply is seen after a period of rigid reductions since 2010. This is due to the considerable expansion of the service in Berlin and by extensions in Cologne-Bonn, Duesseldorf, Hamburg and Munich, as well as the addition of new flights from Dresden. Although the number of Easyjet’s routes increased slightly in early 2012, but there were also simultaneously frequency reductions by more than 10%. Also for the rest of 2012, Easyjet announced further reductions, particularly at Dortmund airport. The Austrian airline Intersky and the Hungarian airline Wizz follow on places 5 and 6. Whereas Intersky reduced their frequencies by nearly 20%, there was an increase of more than 20% for Wizz. Flights performed by all other Low Cost Carriers distinctly amount to less than 70 flights per week. LCC Market Shares (s. Fig. 1): The six major of 20 Low Cost Carriers currently cover roundly 92% of the German market. Just Air Berlin covers around 47% of all flights. On the market share ranking list, it is followed by Germanwings (20%) and Ryanair (11%.). Easyjet have been able to increase their share to 9% owing to the declines of shares of Air Berlin and Ryanair. Transport Services Routes (s. Tables 1 and 2 as well as Fig. 2): In total, the analysed Low Cost airlines served 454 different domestic and cross-border routes in one week in January 2011. These are roundly 50 routes less than in winter 2011, which equals to a decline rate of more than 10%. Thus, after route closures in 2009 and a rise in 2010 since summer 2011 again a decline in the route development that still continues in 2012. While during the last winter period the pre-crisis level was exceeded by strong growth, this winter it is only up to the level of the crisis year of 2009. Also the number of flights is declining sharply compared to the preceding year (-14%), that according to various airlines is also due to the new air traffic tax. While since the emergence of the Low Cost market roundly 9 years ago, in the first 6 years, almost 100 routes have been added each year, a crisis of the world economy and of air transport was already looming in summer 2008, when only about 50 routes have been additionally covered by LCC’s. In spring 2009, for the first time, there was a decline compared to the reference period. But already in summer 2009 a positive growth of routes was seen again that continued in spring 2010 and arrived at a new peak in summer 2010 (with more than 700 routes) or in winter/spring 2011 (with more than 500 routes) respectively.

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