Low Cost Monitor 2/2008
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Low Cost Monitor 2/2008 - A Joint Analysis of DLR and ADV - 617 Routes The current Low Cost Carrier Market in Germany Autumn 2008 The current Low Cost Carrier Market in Germany (2008) Since several years the low cost carrier (LCC) market is an essential part of the German air transport market. The Low Cost Monitor, jointly issued by ADV and DLR, twice a year informs on LCC’s essential features and current developments in this market segment, particularly as to the number and relative importance of low cost carriers, their offers including the air fare, and the passenger demand. The offers reflected by the current Monitor are based on one reference week of the summer flight schedule 2008. The passenger traffic indicated relates to the half year total of 2008. Airlines 4 The airlines involved in the Low Cost business, design their flight services quite differently. Due to this inhomogeneity, only a few clear distinctive criteria can be defined, for example low fares and direct sale via the Internet. Thus, in some cases a certain scope of discretion arises when allocating an airline to the LCC-segment. Furthermore, for several airlines amalgamations of business models are seen, which additionally complicate the accurate allocation of airlines to the Low Cost Market. The authors of this Monitor currently classify 23 airlines operating on German airports as low cost carriers. These are in detail (see also Table 1): Aer Lingus (EI) (www.aerlingus.com), Fleet: 33 Aircraft (A320: 27/A321: 6) Air Baltic (BT) (www.airbaltic.com), Fleet: 25 Aircraft (B737: 16, F50: 8, ATR42: 1) Air Berlin (AB) (www.airberlin.com), Fleet: 109 Aircraft (F100: 8, A319/20/21: 43, B737: 58) Blue Air (0B) (www.blueair-web.com) Fleet: 7 Aircraft (B737: 7) Centralwings (C0) (www.centralwings.com), Fleet: 10 Aircraft (B737: 10) Clickair (XG) (www.clickair.com) Fleet: 25 Aircraft (A320: 25) Corendon (CAI) (www.corendom-airlines.com) Fleet: 4 Aircraft (B737-300: 2, B737-400: 2) Easyjet (U2) (www.easyjet.com), Fleet: 145 Aircraft (A319: 106 A320: 9, B737: 30) Easyjet Switzerland (BH) (www.easyjet.com), Fleet: 12 Aircraft (A319: 12) Flybe (BE) (www.flybe.com), Fleet: 74 Aircraft (ATR72:2, BAE146: 1, D8: 41, E: 30) Fly Nordic (LF) (www.flynordic.com), Fleet: 7 Aircraft, (MD80: 7) Germanwings (4U) (www.germanwings.com), Fleet: 29 Aircraft (A319: 29) Intersky (3L) (www.intersky.biz), Fleet:4 Aircraft (D8: 4) Iceland Express (FHE)(www.icelandexpress.com), Fleet: 3 Aircraft (MD90: 3) Jet 2 (LS) (www.jet2.com), Fleet: 30 Aircraft (B737-300: 21, B757-200: 9) Meridiana (IG) (www.meridiana.com), Fleet: 22 Aircraft (A319: 4, MD82/83: 20) Niki (HG) (www.flyniki.com), Fleet: 6 Aircraft (A319: 2, A320: 6 A321: 1) Norwegian (DY) (www.norwegian.no), Fleet: 32 Aircraft (B737: 32) Ryanair (FR) (www.ryanair.com), Fleet: 166 Aircraft (B737: 166) Sterling (NB) (www.sterling.dk), Fleet: 27 Aircraft (B737-500/700/800: 26, MD83: 1) Transavia (HV) (www.transavia.com), Fleet: 34 Aircraft (B737: 34) TUIfly (X3) (www.tuifly.com), Fleet: 46 Aircraft (B737: 46) Wizz (W6) (www.wizzair.com), Fleet: 16 Aircraft (A320: 16) (A: Airbus, B: Boeing, C: Canadair, D: Dash, E: Embraer, F: Fokker, MD: Boeing-McDonnell) In total, the number of Low Cost Carriers operating in the German market is stagnating compared to last year. Blue Air and Brussel Airlines as well as Blue 1 and Air Italy, which still were serving Germany in the beginning of the year, stopped serving the German market in summer 2008. Furthermore, the product “City Flying”, offered by Condor from Munich does not exist any more. However, this airline is offering various other “Flying”-products such as long and short haul flights etc., which complicate the allocation to the Low Cost sector, since only selected flights can be booked directly and with low fares. However, this contradicts the actual Low Cost Carrier concept of booking the majority of flights online and of pricing according to the booking period, respectively the day of travel. Hence, Condor Flights are not considered anymore, neither flights operated by LTU, who are also offering only special prices for selected flights. In a broad sense, also Lufthansa flights of the „Better-Fly“-segment have to be considered, but also here no distinct allocation can be made. The airlines Air Berlin and TUIfly, who are running several business models, can be allocated to a gray zone. For Air Berlin, a former charter airline, who is an early actor in the Low Carrier 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 present Low Cost routes served by these airlines, as well as corresponding routes are considered. More expensive feeder flights performed by small scale 2 airplanes operated by LGW under Air Berlin flight numbers, as well as flights to typical holiday destinations like North Africa are excluded. The merger of the charter airline Hapag Lloyd with the Low Cost Carrier HLX causes similar problems with regard to TUIfly. So far, it was easy to identify Low Cost flights by the difference in service provided during the flights. Low Cost Carriers do not provide catering free of charge. This is a distinct criterion for Low Cost Carriers. Mostly, this is still valid for the current situation, however, recently also on flights to Italy and Sardinia catering is provided free of charge while keeping the ticket prices low. Thus, also these flights (TUIfly) are continued to be considered in the Low Cost Monitor. They include all routes of the Low Cost range, which are not bound to typical tourist destinations and the respective serving flights show mainly single seat booking. Newcomers in the German market are Fly Nordic, Meridiana and Centralwings, who so far have only been active in other European countries. However, Fly Nordic - a Finnish Low Cost Carrier - was taken over by Norwegian in Spring 2008 and is supposed to be integrated in the Norwegian network. Due to system alignments, also Corendon flights can be indicated now. For most airlines the fleet sizes have remained relatively constant. Solely Ryanair show – as announced – a flight growth from 155 (summer 2007) to 166 (summer 2008) aircraft. This is, among other reasons, due to the extensions of German bases. Thus, at the airport Niederrhein 2 airplanes were additionally stationed in spring 2008. Compared to last summer, also Easyjet have increased their fleet by 20 airplanes to 145 and currently Air Berlin are operating more than 100 airplanes. 4 Carrier Ranking (s. Table 1): Measured by the number of flights offered (departures) during one week in July 2008, Air Berlin turn out to be the major Low Cost Carrier (almost 2,200 movements in the Air Berlin Low Cost segment); compared to summer of the preceding year, when almost 2,000 departures were performed, this is a growth of 10%. Whereas this year in January growth still amounted to about 35% compared to the preceding year, there is compared to July 2007 in July 2008 only an increase by about 9%. According to the ranking, Germanwings are number two (929 departures) followed by TUIfly (657 departures). Their flight services have been only extended slightly. A particularly strong growth (roundly 20%) is seen for Ryanair (613 departures), which is caused, despite of a reduced service in Hahn, mainly by the operation of additional aircraft, and thus the extension of services at the airports of Bremen and Niederrhein. Hence, Ryanair are still guided by their expansion strategy. However, there are announcements of operation pauses for several aircraft, due to the high oil price. Easyjet are reducing their flights already. The number of flights has decreased by 2% to 371 flights per week. In contrast with one additional aircraft, Intersky have increased their flights by almost 30% to 160 flights and thus rank as number 5 in the German Low Cost Carrier ranking, ahead of the British airline Flybe, who had to distinctly reduce their flights to roundly 100, compared to last year, when they were still considerably expanding. The number of flights performed by the remaining Low Cost Carriers is considerably lower than this value. 4 LCC Market Shares (s. Figure 1): The seven major Low Cost Carriers currently share almost 94% of the German market. Roundly 41% of all flights can be allocated to Air Berlin. According to market share ranking, they are followed by Germanwings (17%), TUIfly and Ryanair (12% each). In total, no considerable changes can be seen, compared to the preceding year. Flight Services 4 Flight Routes (s. Tables 1 and 2 as well as Figure 2): In total, the Low Cost Carriers considered, are serving 617 different domestic and cross-border routes. This means an increase of almost 50 routes, compared to summer 2007, and equals a growth of nearly 9%. Thus, routes expansion was reduced, compared to the preceding years, when more than 100 new routes were added yearly. Ryanair have achieved a considerable network extension by additionally implementing 34 routes. This means a growth of more than 40%, compared to the preceding year. The airports of Bremen and Niederrhein are particularly involved, since network extensions have been realized primarily on these airports. For the first time also domestic flight routes are served. To the routes Hahn-Berlin and Hahn-Luebeck the connection Niederrhein-Berlin will be added in October. In total, Air Berlin and TUIfly have added only a few destinations, such as Brindisi and Bourgas. Air Berlin have added several additional routes to Italy and Eastern Europe.