W
wyliepoon
Guest
Link to article
Low-cost airlines flying high
Chris Sorensen
Financial Post
Saturday, December 02, 2006
Flyglobespan, the Scottish low-cost airline, will have a unique marketing pitch for Canadians this spring when it begins flying between the United Kingdom and Hamilton, Ont. The Edinburgh-based airline is saying, in effect: Let us deliver you to our competitors.
In addition to distributing its own glossy route maps, the four-year-old airline will tout access to the vast European networks of two of its biggest discount rivals -- Ryanair and easyJet -- from London's Stansted airport, now a Mecca for thrifty European air travellers. It will be the first daily flight by a low-cost airline from Canada to Stansted.
From there, Flyglobespan says, Canadians will have access to more than 150 European destinations and airfares that are advertised as low as a measly $2, plus fees and taxes.
"We've chosen Stansted principally because it's such a huge hub for low-cost carriers," says Bill Robson, the business development director for Flyglobespan, a division of holiday package-seller Globespan Group Plc, which has sold seats between the U.K. and Canada on other airlines for years.
"There's an immense number of flights that go from there to every part of Europe for the cheapest fares you can find."
(What does a $2 airline ticket buy you? To find out, the Financial Post recently sent a reporter on a one-week discount airline trip from England to Latvia, Germany, Hungary and back to England again, spending about $300 all told on airfare. The results are in this week's Financial Post Business magazine, which offers an inside look at the industry, its promise of "free" flights, and what it means for North American travellers.)
Flyglobespan, which will operate a fleet of 21 aircraft next year, will also fly between Calgary and Vancouver and other U.K. airports. Mr. Robson said the airline is betting Canadians will follow the lead of Europeans and stitch together a series of cheap, one-way tickets to create their own European holidays for a fraction of the cost. Including all taxes and fees, the airline's introductory fares to the U.K. will start at $259 one-way.
That has some observers wondering whether Canadians are witnessing the emergence of an informal transatlantic low-cost network -- a sort of do-it-yourself system of airline connections -- that could one day rival those offered by traditional airlines such as Air Canada and British Airways.
But first airlines such as Flyglobespan must convince travellers to abandon some of the creature comforts they've become accustomed to during overseas flights. And they will have to do it while fighting off challenges from the big full-service carriers, which aren't likely to relinquish their highest-margin international routes without a fight.
Canadians arriving at Stansted for the first time can expect to feel a bit frazzled. Every 15 to 30 minutes swarms of travellers carrying suitcases, backpacks and gym bags stream up the escalators from the terminal's basement, where express trains run into the heart of central London. On the departures level, there are line-ups everywhere: to check-in, to clear security, to change money, to buy a sandwich. There are groups of bleary-eyed teenagers sleeping on the floor, outraged husbands arguing with ticket agents and mothers shopping with their daughters in dozens of retail outlets.
But what Stansted lacks in ambiance it more than makes up for in opportunity. Consider that Ryanair, Europe's biggest and brashest discount airline, serves more than 90 destinations from the airport and frequently advertises flights for less than a trip on the London Underground. While Ryanair's average fares are about $60 one-way, plus fees and taxes, that's still much lower than the average short-haul fare offered by, say, British Airways, which analysts estimate to be $170.
Moreover, Ryanair is just one of dozens of low-cost airlines that use Stansted to connect the European Union together above the clouds. Other big players include easyJet, Air Berlin and SkyEurope. In total, travellers have access to more than 160 destinations in Europe from Stansted.
There's already some evidence that Canadians are taking advantage of what Stansted offers by flying to the airport on carriers such as Ottawa's Zoom Airlines and Air Transat, whose parent recently bought one of its U.K. competitors, doubling its vacation business to Britain.
"The Canadian market is quite important to us," said Nick Barton, Stansted's director of business development and planning. "And I think Canada is interested in Stansted because we can be a doorstep into Europe. You can fly transatlantic on one of the scheduled carriers and then spring off anywhere to Europe via Stansted. It's really very easy to do."
In fact, the airport's own research shows more and more passengers are using Stansted as a travel hub, despite the fact few airlines flying there offer connecting flights.
"We have about four million passengers flying into Stansted on flights they've chosen over the Internet, staying a couple of hours in the terminal, and then self-transferring out on another plane. It's quite a surprising characteristic of Stansted and quite a strong one."
Some predict it won't be long before low-cost airlines begin co-operating on a large scale in a bid to grow market share and gain access to high-revenue international traffic. Canada's WestJet Airlines Ltd., for example, is seeking to partner with foreign airlines. Ryanair, meanwhile, has expressed an interest in long-haul flying through its bid for Ireland's flag carrier, Aer Lingus.
"Most low-cost carriers started in the short-haul markets because it was easier," says Marc-David Seidel, a business professor at the University of British Columbia's Sauder School of Business. "But now they are expanding into long-haul markets where there's a lot more room. The next logical step is figuring out some sort of connecting arrangement ... There's no reason to expect them not to form a low-cost network alliance."
Of course, this type of do-it-yourself travelling won't be for everyone. There are no refunds for missed planes, no plush terminals or airport lounges to pass the time waiting for flights, and the airports themselves tend to be far away from the cities they claim to serve. For example, Frankfurt (Hahn) airport is 90 minutes from Frankfurt by bus.
Hence, John Gibson, the vice-president of marketing for John C. Munroe Hamilton International Airport, predicts that Flyglobespan's transatlantic service will appeal primarily to those seeking to visit friends and relatives in the U.K. and younger travellers "that want a bit of adventure travelling in Europe."
Although Flyglobespan also offers a cheap business-class cabin, Mr. Gibson says it will mainly be used by companies that have strict travel budgets. "It's not going to appeal to everybody," he concedes. "It's not like flying to Cologne and having Lufthansa take care of you all the way."
One challenge Flyglobespan will face is the apparent unwillingness of Canadian travellers to use secondary airports, which are absolutely critical for airlines trying to keep costs -- and fares -- at a minimum. That's particularly the case with Hamilton's airport, which, despite much cheaper fees, has struggled to lure passengers away from Toronto's Pearson International Airport, among the most expensive airports in the world for airlines to land their planes.
"I've watched WestJet come and then move out of Hamilton," says Hugh Boyle, the CEO of Zoom Airlines. "The same thing happened with Jetsgo. I wish, and hope, Flyglobespan is successful, but I do know that Canadians don't really seem to like flying from Hamilton. I don't know if it's the drive or something else."
Airport officials say they are addressing the issue by improving amenities such as food concessions, retail shops and duty-free stores. Mr. Gibson said there are also plans to have a shuttle service connecting the airport to regional transit networks by the time Flyglobespan begins its first flights.
At the same time, Flyglobespan's Mr. Robson says the airline will benefit from its parent company's years of experience selling seats to Canada, including flights operated by Air Transat and its partner companies to Toronto.
Flyglobespan will also need to keep an eye on established airlines such as British Airways and Air Canada, both of which have undergone restructurings to compete with lower-cost operators. Both will be eying any new threat on an important route and can be counted on to respond with lower air fares and improved service if they sense their market shares slipping.
Air Canada, for example, last summer operated 13 daily flights to London's Heathrow airport, five to Frankfurt, one each to Munich and Rome, and four daily to Paris, according to a prospectus filed with regulators.
Still, at the end of the day, it seems inevitable that flying to Europe, and internationally in general, will ultimately become cheaper for Canadians, providing they are willing to put up with a few inconveniences.
Zoom's Mr. Boyle, who is in the process of setting up a U.K.-based version of his airline, argues that, with the exception of ticket prices, there's now scant difference when flying from Toronto to London on a low-cost airline, or in economy class on a big full-service carrier -- particularly as more so-called "legacy airlines" follow the lead of Air Canada and jettison extra frills from the back of the plane .
He compares Zoom to Air Canada: "Our seat pitch is the same as their economy seat pitch. They fly Boeing 767-300s, we fly Boeing 767-300s. The meals are the same, worse or better, but who really cares about that. It's all about value."
Low-cost airlines flying high
Chris Sorensen
Financial Post
Saturday, December 02, 2006
Flyglobespan, the Scottish low-cost airline, will have a unique marketing pitch for Canadians this spring when it begins flying between the United Kingdom and Hamilton, Ont. The Edinburgh-based airline is saying, in effect: Let us deliver you to our competitors.
In addition to distributing its own glossy route maps, the four-year-old airline will tout access to the vast European networks of two of its biggest discount rivals -- Ryanair and easyJet -- from London's Stansted airport, now a Mecca for thrifty European air travellers. It will be the first daily flight by a low-cost airline from Canada to Stansted.
From there, Flyglobespan says, Canadians will have access to more than 150 European destinations and airfares that are advertised as low as a measly $2, plus fees and taxes.
"We've chosen Stansted principally because it's such a huge hub for low-cost carriers," says Bill Robson, the business development director for Flyglobespan, a division of holiday package-seller Globespan Group Plc, which has sold seats between the U.K. and Canada on other airlines for years.
"There's an immense number of flights that go from there to every part of Europe for the cheapest fares you can find."
(What does a $2 airline ticket buy you? To find out, the Financial Post recently sent a reporter on a one-week discount airline trip from England to Latvia, Germany, Hungary and back to England again, spending about $300 all told on airfare. The results are in this week's Financial Post Business magazine, which offers an inside look at the industry, its promise of "free" flights, and what it means for North American travellers.)
Flyglobespan, which will operate a fleet of 21 aircraft next year, will also fly between Calgary and Vancouver and other U.K. airports. Mr. Robson said the airline is betting Canadians will follow the lead of Europeans and stitch together a series of cheap, one-way tickets to create their own European holidays for a fraction of the cost. Including all taxes and fees, the airline's introductory fares to the U.K. will start at $259 one-way.
That has some observers wondering whether Canadians are witnessing the emergence of an informal transatlantic low-cost network -- a sort of do-it-yourself system of airline connections -- that could one day rival those offered by traditional airlines such as Air Canada and British Airways.
But first airlines such as Flyglobespan must convince travellers to abandon some of the creature comforts they've become accustomed to during overseas flights. And they will have to do it while fighting off challenges from the big full-service carriers, which aren't likely to relinquish their highest-margin international routes without a fight.
Canadians arriving at Stansted for the first time can expect to feel a bit frazzled. Every 15 to 30 minutes swarms of travellers carrying suitcases, backpacks and gym bags stream up the escalators from the terminal's basement, where express trains run into the heart of central London. On the departures level, there are line-ups everywhere: to check-in, to clear security, to change money, to buy a sandwich. There are groups of bleary-eyed teenagers sleeping on the floor, outraged husbands arguing with ticket agents and mothers shopping with their daughters in dozens of retail outlets.
But what Stansted lacks in ambiance it more than makes up for in opportunity. Consider that Ryanair, Europe's biggest and brashest discount airline, serves more than 90 destinations from the airport and frequently advertises flights for less than a trip on the London Underground. While Ryanair's average fares are about $60 one-way, plus fees and taxes, that's still much lower than the average short-haul fare offered by, say, British Airways, which analysts estimate to be $170.
Moreover, Ryanair is just one of dozens of low-cost airlines that use Stansted to connect the European Union together above the clouds. Other big players include easyJet, Air Berlin and SkyEurope. In total, travellers have access to more than 160 destinations in Europe from Stansted.
There's already some evidence that Canadians are taking advantage of what Stansted offers by flying to the airport on carriers such as Ottawa's Zoom Airlines and Air Transat, whose parent recently bought one of its U.K. competitors, doubling its vacation business to Britain.
"The Canadian market is quite important to us," said Nick Barton, Stansted's director of business development and planning. "And I think Canada is interested in Stansted because we can be a doorstep into Europe. You can fly transatlantic on one of the scheduled carriers and then spring off anywhere to Europe via Stansted. It's really very easy to do."
In fact, the airport's own research shows more and more passengers are using Stansted as a travel hub, despite the fact few airlines flying there offer connecting flights.
"We have about four million passengers flying into Stansted on flights they've chosen over the Internet, staying a couple of hours in the terminal, and then self-transferring out on another plane. It's quite a surprising characteristic of Stansted and quite a strong one."
Some predict it won't be long before low-cost airlines begin co-operating on a large scale in a bid to grow market share and gain access to high-revenue international traffic. Canada's WestJet Airlines Ltd., for example, is seeking to partner with foreign airlines. Ryanair, meanwhile, has expressed an interest in long-haul flying through its bid for Ireland's flag carrier, Aer Lingus.
"Most low-cost carriers started in the short-haul markets because it was easier," says Marc-David Seidel, a business professor at the University of British Columbia's Sauder School of Business. "But now they are expanding into long-haul markets where there's a lot more room. The next logical step is figuring out some sort of connecting arrangement ... There's no reason to expect them not to form a low-cost network alliance."
Of course, this type of do-it-yourself travelling won't be for everyone. There are no refunds for missed planes, no plush terminals or airport lounges to pass the time waiting for flights, and the airports themselves tend to be far away from the cities they claim to serve. For example, Frankfurt (Hahn) airport is 90 minutes from Frankfurt by bus.
Hence, John Gibson, the vice-president of marketing for John C. Munroe Hamilton International Airport, predicts that Flyglobespan's transatlantic service will appeal primarily to those seeking to visit friends and relatives in the U.K. and younger travellers "that want a bit of adventure travelling in Europe."
Although Flyglobespan also offers a cheap business-class cabin, Mr. Gibson says it will mainly be used by companies that have strict travel budgets. "It's not going to appeal to everybody," he concedes. "It's not like flying to Cologne and having Lufthansa take care of you all the way."
One challenge Flyglobespan will face is the apparent unwillingness of Canadian travellers to use secondary airports, which are absolutely critical for airlines trying to keep costs -- and fares -- at a minimum. That's particularly the case with Hamilton's airport, which, despite much cheaper fees, has struggled to lure passengers away from Toronto's Pearson International Airport, among the most expensive airports in the world for airlines to land their planes.
"I've watched WestJet come and then move out of Hamilton," says Hugh Boyle, the CEO of Zoom Airlines. "The same thing happened with Jetsgo. I wish, and hope, Flyglobespan is successful, but I do know that Canadians don't really seem to like flying from Hamilton. I don't know if it's the drive or something else."
Airport officials say they are addressing the issue by improving amenities such as food concessions, retail shops and duty-free stores. Mr. Gibson said there are also plans to have a shuttle service connecting the airport to regional transit networks by the time Flyglobespan begins its first flights.
At the same time, Flyglobespan's Mr. Robson says the airline will benefit from its parent company's years of experience selling seats to Canada, including flights operated by Air Transat and its partner companies to Toronto.
Flyglobespan will also need to keep an eye on established airlines such as British Airways and Air Canada, both of which have undergone restructurings to compete with lower-cost operators. Both will be eying any new threat on an important route and can be counted on to respond with lower air fares and improved service if they sense their market shares slipping.
Air Canada, for example, last summer operated 13 daily flights to London's Heathrow airport, five to Frankfurt, one each to Munich and Rome, and four daily to Paris, according to a prospectus filed with regulators.
Still, at the end of the day, it seems inevitable that flying to Europe, and internationally in general, will ultimately become cheaper for Canadians, providing they are willing to put up with a few inconveniences.
Zoom's Mr. Boyle, who is in the process of setting up a U.K.-based version of his airline, argues that, with the exception of ticket prices, there's now scant difference when flying from Toronto to London on a low-cost airline, or in economy class on a big full-service carrier -- particularly as more so-called "legacy airlines" follow the lead of Air Canada and jettison extra frills from the back of the plane .
He compares Zoom to Air Canada: "Our seat pitch is the same as their economy seat pitch. They fly Boeing 767-300s, we fly Boeing 767-300s. The meals are the same, worse or better, but who really cares about that. It's all about value."