Low Cost Monitor 2/2012 - An Analysis performed by DLR - 648 Routes LCC Routes The current Low Cost Carrier Market in Germany Autumn 2012 Current Low Cost Carrier Market in Germany in 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 summer flight schedule 2012. The passenger figures refer to the first half year of 2012. 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: 37 Aircraft (A320: 32, A321: 3, A319: 2) Air Arabia Maroc (3O) (www.airarabia.com), Fleet: 4 Aircraft (A320: 4) Air Baltic (BT) (www.airbaltic.com), Fleet: 30 Aircraft (B737: 15, F50: 7, D8: 8) Air Berlin (AB) (www.airberlin.com), Fleet: 98 Aircraft (A319/20/21: 40, B737: 58) Air One (AP) (www.flyairone.com), Fleet: 8 Aircraft (A320: 8) Blue Air (JOR) (www.blueair-web.com), Fleet: 9 Aircraft (B737: 9) Easyjet (U2) (www.easyjet.com), Fleet: 193 Aircraft (A319: 145, A320: 48) flybe (BE) (www.flybe.com), Fleet: 65 Aircraft (D8: 44, E: 21) Germanwings (4U) (www.germanwings.com), Fleet: 32 Aircraft (A319: 32) Iceland Express (5W) (www.icelandexpress.com), Fleet: 2 Aircraft (A320: 2) Intersky (3L) (www.intersky.biz), Fleet: 3 Aircraft (D8: 3) Jet 2 (LS) (www.jet2.com), Fleet: 46 Aircraft (B737-300: 32, B757-200: 13, A319: 1) Meridiana (IG) (www.meridiana.it), Fleet: 23 Aircraft (A319: 3, A320: 11, MD80: 8, ATR: 1) Niki (HG) (www.flyniki.com), Fleet: 23 Aircraft (A320/321: 16, E: 7) Norwegian (DY) (www.norwegian.no), Fleet: 64 Aircraft (B737: 64) Ryanair (FR) (www.ryanair.com), Fleet: 294 Aircraft (B737: 294) Transavia (HV) (www.transavia.com), Fleet: 36 Aircraft (B737: 36) Vueling (VY) (www.vueling.com], Fleet: 59 Aircraft (A320: 59) Wizz (W6) (www.wizzair.com), Fleet: 37 Aircraft (A320: 37) 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 summer, 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 Easyjet show an increase, worth being mentioned, of 9 airplanes as opposed to the last spring. Thus, Easyjet owns a fleet of 193 aircraft type Airbus A319 and A320. Opposed to this, Air Berlin reduced the number aircraft in service from 128 to 98 in the classes B737 and A319/320/321. With 294 aircrafts type Boeing 737- 800 with almost 190 seats each, the Ryanair fleet has remained almost constant. Carrier Ranking (s. Tab. 1): Based on the number of flights (departures) in one week in July 2012, is Air Berlin with their Low Cost segment, having almost 2,300 departures, by far the largest Low Cost Carrier in Germany. However, the air traffic figure is by around 2% 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 by 11% 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. But in July 2012, this crisis seems to be over because the number of starts increased by 1.5 % over the previous year. According to the ranking, Germanwings (968 flights) and Ryanair (672 flights) follow. For Ryanair, the trend observed regarding reduction in flights offered in Germany has not continued since early 2011. After the company was able to increase the number of flights at a high level throughout the economic crisis 2008/2009 – while almost all other Low Cost Carriers have reduced their supply during this period – all domestic flights served by Ryanair have been discontinued in March 2011. Also on the other routes, Ryanair reduced its offer in Germany in 2011 by almost 30 %. A major cause was, according to Ryanair, the introduction of the German air traffic tax. This summer, however, Ryanair has expanded again its supply of flights by around 12 %. For Easyjet, in 2011 a return to growth in supply can be seen after a period of rigid reductions in 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 by 4 % in summer 2012, there was an increase of only 1 % in frequency deals. Also for the winter flight schedule of 2012, Easyjet announced further reductions, particularly at the Dortmund airport, but also increases at Berlin. The British airline Flybe and the Austrian airline Intersky and the Hungarian airline Wizz follow on places 5 and 6. Whereas Flybe reduced their frequencies only by around 2 %, there was an increase of almost 14 % for Intersky. On the other hand, for flights performed by Wizz (ranking 7th) there was an increased by 12 %. Flights performed by all other Low Cost Carriers distinctly amount to less than 80 flights per week, LCC Market Shares (s. Fig. 1): The seven major of 20 Low Cost Carriers currently cover roundly 94 % 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 (14 %,). Easyjet have been able to maintain its share of 8 %. Transport Services Routes (s. Tables 1 and 2 as well as Fig. 2): In total, the analysed Low Cost airlines served 648 different domestic and cross-border routes in one week in July 2012. These are roundly 10 routes more than in summer 2011, which equals to an increase of 2 %. Thus, after route closures in 2009, a rise in 2010 and a decline in 2011, again there is a slight growth in the route development. However, the number of 648 routes is well below the maximum value from the year 2010 with 675 routes. The number of flights has also risen slightly (+ 1.5 %) if compared to the preceding year. While since the emergence of the Low Cost market roundly 10 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.