Recently in Low Cost Carriers Category

Its been another year of growth and expansion for low-cost carriers. 2011 saw double-digit revenue growth almost across the board. Southwest Airlines completed its acquisition of AirTran to underline its position as the biggest budget carrier by a distance, while organic growth remains strong among other low-cost carriers. And while high fuel prices took the edge of low-cost carrier profits, the sector largely remained profitable for the year.

I've witnessed an interesting juxtaposition today between the UK's two leading airlines. One is working hard to shake off its old image as it moves up market while the other is proudly showing off its heritage with a revival of brandings from bygone eras.

This morning I was at the World Low Cost Airlines Congress where EasyJet CEO Carolyn McCall underlined EasyJet's ambition to be "Europe's preferred short-haul airline" (above). She talked about her push to grow revenue from business passengers and unveiled a new service guarantee which will provide free flights to compensate premimum passengers for delays (below). There was even the admission that an orange FFP could materialise "if it could be done in an EasyJet way".

For that read "cost-effective" or "thrifty" - but there's no denying the airline is shifting towards the middle ground as it matures through its teenage years. That said, Carolyn is adamant she's not abandoning the airline's low-cost roots where anything that adds to operational complexity is taboo.

Then this afternoon I was in the glamorous surroundings of BAFTA at its headquarters on Piccadilly. Here, British Airways CEO Keith Williams unveiled the launch of the airline's biggest marketing campaign for a decade, which it says "backs the £5 billion being spent on customer products and services over the next five years".

While not a rebranding per se, the high profile marketing campaign centres upon a re-enforcement of BA's heritage as a full-service, global and pioneering flag carrier, so it's no surprise that there is a return of the old coat of arms. This dates back to the early days of BA but was brought to the fore in the halcyon days of Lord King in the so-called "Landor scheme" era that began in the mid-1980s. And with the crest comes a revival of the slogan: "To Fly. To Serve."

The centrepiece of the campaign is a retro-style television advert, "Aviators", which incorporates elements from nine decades of history of the airline and its predecessors. The 90 second production includes iconic aircraft such as the Douglas DC-3, de Havilland Dragon Rapide (below), Vickers VC10 (bottom) and of course Concorde, as well as a DH51 pretending to be an AT&T DH9A from 1919. Heritage brands the like of BEA and BOAC are much in evidence, as is BA's now very fashionable original red-tail "Negus & Negus" scheme of the 1970s.

The new TV ad is a wonderful piece of cinematography - albeit with the odd historical anachronism (see if you can spot any!). BA tells me it was filmed at Heathrow, Duxford, Brooklands and the Shuttleworth Collection at Old Warden. Some of it was created using real metal and some by CGI.

The TV ad will run alongside a print campaign, and will debut at 11:00 on 21 September on Facebook and then on Channel 4 later that day. The coat of arms logo will be applied to the fuselages of all BA's aircraft but sadly the airline says that there are currently no plans for a repeat of retro style paint jobs like the one used last year to mark the end of Boeing 757 operations.

So while BA's mood goes all reflective, EasyJet is looking to its next evolution. Well let's face it, there's little chance at this juncture of the orange brigade reviving images of their original icon - Mr Haji-Ioannou - for a bit of nostalgic advertising!

 Click here to watch the new Aviators ad in full.

 

If Singapore Airlines isn't naming some new airline company 'Scoot' then a lot of effort is going into throwing nosey hacks off the scent.

Not only is there apparently a Scoot-related website domain registration linked to SIA, but a trawl through the Intellectual Property Office of Singapore's trademark database turns up the following entry, listed on 20 June, under 'transport':

The application has been put forward on behalf of a company named 'New Aviation' but which gives an address which matches the location of Singapore Airlines' headquarters at Changi International Airport.

Even for a man who has made a habit of being an industry trend-setter, today's coming together between Tony Fernandes' AirAsia and Malaysia Airlines marks something of another first for this industry. The proposed co-operation between AirAsia, its long-haul unit AirAsia X and Malaysia Airlines, including minority cross-shareholdings, could bring network carrier and low-cost rivals together in a way seldom seen in this industry before.

Exactly how the partnership unfolds between Malaysia's biggest airlines remains to be seen. It will initially focus on initial synergies between the two with limited impact on each party's operations, but envisages deeper co-operation once an anti-trust review is completed by the companies. Certainly the aim appears to be to enable Malaysia Airlines to focus on its network business, and the AirAsia units to grow in the low-cost sector - a move evident in the intention to reposition MAS' low-cost unit Firefly as a full-service regional operation.

Co-operation between network and low-cost carriers within Asia has become increasingly prominent - note for example ANA's move to work with AirAsia on its Japanese low-cost operation and Thai Airways turning to Tiger Airways to develop a low-fares presence. 

Similarly a dual approach operating model is not new. Indeed the positioning of Malaysia Airlines and AirAsia as partners in some ways mirrors the combination at Qantas with its Jetstar short and long-haul operations (a further twist is provided here as Malaysia Airlines is a new partner of Qantas having recently opted to join it in Oneworld, while AirAsia struck a loose partnership with JetStar last year).

But there are few examples poacher and game-keeper coming together. In Belgium, Brussels Airlines was born out of a merger between SN Brussels and low-fares carrier Virgin Express - though the latter had already moved towards the business middle ground by then - while Brazilian low-cost giant GOL's acquisition of national icon Varig out of administration was pretty much in name only.

One interesting comparison is with Ireland. Malaysia Airline has, like Aer Lingus, had to grow up with one of the region's dominant low-cost operators on its doorstep. Both have had to do so with larger than life leaders, Fernandes at AirAsia and Micheal O'Leary at Ryanair, driving their rivals forward. And, once the planned share swap is completed, Malaysia Airlines will like Aer Lingus find itself minority-owned by its low-cost rival.

The similarities though end there. Aer Lingus, the Irish government, Irish unions and European regulators continue to resist a future life as part of Ryanair. But with Tony Fernandes joining the Malaysia Airlines board as non-executive, non-independent director, and part of the team overseeing management of the company, the low-cost innovator is set to be embraced by the establishment.

For more on AirAsia and Tony Fernandes, read the Airline Business cover interview with him from May 2009 here.

EasyJet boss Carolyn McCall is being applauded for negotiating a new pay and scheduling deal with her long-disgruntled pilots, which was agreed last week on the recommendation of BALPA.

The agreement, which will see pilots receiving a 4% salary increase and a 5% rise in sector pay "goes some way to resolving some of EasyJet pilots' long-term concerns about rostering and scheduling", says the union.

BALPA says the relationship between EasyJet's pilots and management had "not been a good one over recent years". But it credits McCall, who is only a year into the job, with a "brave" decision to take on the difficulties and discuss a "game-changing" partnership.

Last month, McCall held a meeting with her Gatwick flightcrews and a webcast to the rest of the UK pilots to "explain the vision" and why it was in both sides' interests to work together.
 
Speaking to Airline Business shortly after that Gatwick meeting, McCall said that the vision she had would mean "more efficiency and productivity for us, which means a more efficient therefore lower cost base, and allows us to pass on lower fares to passengers - it's a virtuous circle".

She added that the pay deal was "not really about pay at all. It's all about life-style, and rostering and the future. We want a constructive relationship with our pilots. We want them to be on side."

Describing the deal as a "not inexpensive settlement", RBS Transport analyst Andrew Lobbenberg quipped in a note today: "The good cop bad cop partnership of McCall and ops Director Warwick Brady looks to have worked well."

He adds: "This episode looks to have earned the CEO some kudos and should have bought the company a good dose of goodwill from the cockpit crew that should help secure the operation through whatever ATC strikes, storms, volcanoes, bean sprout pandemics or other challenges the world throws at the business this summer."

So they just need to tackle the peak-time bag-drop bottlenecks and it should be smiles all round in Orangeland!

This weekend there will again be the puzzling sight for non-Formula 1 fans of four cars circulating in a Grand Prix carrying the name Lotus.

Thanks to AirAsia boss Tony Fernandes' success in the High Court, his F1 team has been cleared to keep using the name "Team Lotus" after a challenge from Lotus Cars, which is a sponsor of the Renault F1 team (and Lotus parent Proton is a part owner of the team).
Fernandes bought the rights to the name "Team Lotus" from David Hunt - brother of world champion James - but Lotus Cars has tried to prevent him using it in F1 as they have their own Grand Prix aspirations (through sponsorship of an front-running existing team) as part of a major relaunch and attempt to return to high-end road car production.

But why tie up with another team when there was already a perfectly good one running under the name Lotus and one which the car division had initially sanctioned? The fact is that the Fernandes outfit, starting in 2010 with a cleansheet, is simply not going to be competitive quickly enough in the eyes of Lotus Cars. It's all very well having the kudos of a name in F1, but not much of a brand-strengthening exercise if the cars are rattling around at the back of the grid being lapped by road-car rivals like Ferrari. 

But Fernandes means business, and if he can repeat the success that his AirAsia empire has achieved in the low-cost airline sector, then the F1 big guns - and Lotus Cars - need to look out.

I'm sure Lotus founder Colin Chapman would be delighted to see his racing team's name being employed by an entrepreneur with the same go-ahead spirit he showed back in the 1960s when his green and yellow Lotus F1 cars were dominating Grand Prix racing with the legendary Jim Clark at the wheel (pictured above). As Chapman used to say: "if you're not winning, you're not trying hard enough."

Irish budget carrier Ryanair unveiled increased profits for 2010 yesterday - and chief executive Michael O'Leary had some very interesting things to say about the year ahead, which includes the carrier cutting capacity over the winter months for the first time in its history in a bid to hang on to first half gains amid higher fuel costs. READ AN ARTICLE ON IT HERE.

In our May issue of Airline Business we published our latest annual low-cost airline survey - based on airline results over the last 12 months. Taking a snapshot of a global industry, with differing financial years, is always something of a moving target. The picture will vary slightly depending on when the music stops. Our survey comes out before those airlines with a March ending financial year had reported their results for 2010/11, and because the last year featured a strong traffic recovery and as Ryanair has introduced some longer, higher-yielding routes, its interesting to see how the Irish carrier compares with its latest results.

The answer is, while already number two low-cost carrier the world by passenger number, Ryanair also moves up from fourth biggest to second behind US low-cost giant Southwest Airlines by revenues based on the 2010/11 financial year figures. It also underscores its profitability - operating profits increased from $568 million in 2009/10 to $686 million - again behind only Southwest. 

Top 5 low-cost carriers after December 2010 financial year closed

Airline                          Revenue         Op result    Year ending

Southwest Airlines         $12.1bn          $988m        Dec 10

Air Berlin                       $4.9bn           -$12m         Dec 10

EasyJet                        $4.6bn            $271m        Sep 10

Ryanair                         $4.2bn            $568m        Mar 10

Gol                               $4.0bn            $387m        Dec 10

 

Top 5 low-cost carriers after March 2011 financial year closed

Airline                          Revenue         Op result    Year ending

Southwest Airlines         $12.1bn          $988m        Dec 10

Ryanair                         $5.1bn            $686m        Mar 11

Air Berlin                       $4.9bn           -$12m         Dec 10

EasyJet                        $4.6bn            $271m        Sep 10

Gol                               $4.0bn            $387m        Dec 10

It will be interesting to see how things stand when easyJet completes its financial year in September.

For much more on the leading low-cost carriers, the evolution of the sector, future challenges and to test your own low-cost carrier knowledge with our cryptic picture quiz, check out our interactive special, the essential guide to low-cost airlines here.

 

 

 

 

What makes a low-cost carrier a low-cost carrier? And how does it differ from a network airline? The two worlds, once chalk and cheese, have been orbiting ever closer over the years and the line between the two is more blurred than ever before.

This has been one of things we've been looking at as we've been throwing ourselves into the sector at Airline Business this month with our annual low-cost carrier financial and traffic survey and, for the first time this year, an interactive edition of magazine covering low-cost sector.

If you've missed it, you can check out The Essential Guide To Low-Cost Carriers - which features an interactive treatment of annual financial rankings, a groovy timeline where you quite literally open a window to find out more about the evolution of low-cost carriers, and a cryptic picture quiz to send you down low-cost carrier memory lane.

Of course you could argue a better reflection of the sector might have been The Essential Guide to No-Frills and Hybrid Carriers. Okay it doesn't quite have the same ring about it, but does reflect that one size no longer fits all when it comes to low-cost operators.

The sheer variety of their operations - including long-haul flights - means a Virgin Blue or Air Berlin for example is a very different animal from a Ryanair. And the move to lure more lucrative business travellers over to low-cost carriers has seen many move into network carrier territory, such as embracing distrubition through GDS systems for example. And the different models make comparing like-with-like more complicated. Ryanair, for example, based on revenues for its March 2010 financial year, is the fourth largest operator behind Southwest, Air Berlin and easyJet - which have higher yielding traffic. But by passenger count Ryanair is by some distance larger than both Air Berlin and easyJet, and behind only Southwest. 

So how to define a low-cost carrier? For me, while you can frame it with some tangible low-cost carrier ingredients - namely predominantly operating short-haul, point-to-point routes with a single fleet in a single class with a simple fare structure often to secondary airports - few low-cost carriers still tick all these boxes. Instead I think it is more about a low-cost carrier ethos and which side of the line the airline grew up on. And keeping this ethos will be key for low-cost carriers to retain their identity and cost advantage, as their models grow ever more sophisticated and their network counterparts bring their own costs down. 

For more on low-cost carriers, open our interactive edition of Airline Business here 

For more on the challenges facing low-cost carrier growth, read our recent analysis feature here

US low-cost giant Southwest Airlines, which turns 40 in June, has moved a step closer to completing its merger with fellow budget operator AirTran after the US Department of Justice cleared the planned merger. The deal is now set to complete on 2 May.

Southwest is already the largest low-cost carrier in the world, while AirTran was the eighth largest no-frills operator by revenue in 2010. The merged operation will create the biggest low-cost carrier in history with joint revenues of $14.7 billion based on 2010 performance.

We spoke to Southwest chief executive Gary Kelly about what the merger means for Southwest earlier this month, as part of  a special interactive edition of Airline Business looking at low-cost carriers. Here's a short extract from our video interview with Kelly.

"It is a growth opportunity, and growth opportunities have been very hard to come by over the last couple of years with higher gas prices. It creates a stronger network and brings 38 new destinations and AirTran is a great fit for us."

Watch the full interview in our interactive low-cost special edition of Airline Business here