Competition within Europe's low-cost sector is set to increase as fast-growing carriers start to come face-to-face with each other on some routes.
Europe's low-cost airlines have tended to avoid going head-to-head on city pairs so far, but a series of announcements during July suggests that this is becoming more difficult as carriers continue to add capacity.
Ryanair announced a major expansion at London Luton, the home airport for easyJet, which itself announced a series of route additions that take it into direct competition with some of the new entrants in eastern Europe. On top of all this, bmibaby announced a new base at Birmingham International, the home base of rival budget carrier MyTravelLite.
Both Ryanair and easyJet are taking delivery of massive aircraft orders placed in 2002 at a rate of around two aircraft a month, although they are taking the opportunity to replace 737 Classics as the new aircraft arrive. Ryanair's order is for 125 Boeing 737-800s, while easyJet ordered 120 Airbus A319s.
This all comes on the back of a stock market slide at easyJet and, to a lesser extent, Ryanair, after a series of profit warnings. These were prompted by signs that yields were being squeezed by a combination of new entrants in the low-cost sector and an aggressive response by mainline carriers to compete with often equally low fares.
Ryanair will base four 737s at Luton, an airport it previously only served from Dublin and Milan Bergamo. It will add nine routes, going head-to-head with easyJet on flights to Gerona and Reus (pitted against easyJet's Barcelona route) and Murcia (around 40km (25 miles) from Alicante, served by easyJet). Flights to Venice Treviso will compete with easyJet's London Stansted-Venice service.
John Mattimoe, airline analyst at Dublin-based Merrion Stockbrokers, comments: "Since the pricing environment deteriorated, Ryanair has clearly prioritised the strengthening of its strategic position in the market over short-term profitability." The Ryanair announcement came just a day after easyJet unveiled a major expansion at London Luton, adding three aircraft to the existing 13, with new destinations promised.
It is also taking on fledgling central/eastern European carriers SkyEurope and Wizz in Poland and Hungary, with flights to Warsaw, Krakow and Budapest, mainly from the UK. There will also be Krakow-Dortmund and Budapest-Geneva services. EasyJet opened a base at Dortmund in July. A total of three A319s will be based there by September.
However, easyJet has been forced to abandon for the time being a plan to set up a base at Hanover, capital of Lower Saxony, after Hapag-Lloyd Express threatened to pull out of the airport if the UK carrier came in. The German carrier complained that the airport could not support the entry of another low-cost airline. Air Berlin also flies out of Hanover. Hapag-Lloyd Express parent leisure conglomerate TUI is based in Hanover, giving it plenty of local political clout to fight off an easyJet entry.
Meanwhile, bmibaby is to open a base at Birmingham, where it will compete alongside MyTravelLite and Flybe. MyTravelLite has been hit by financial problems at tour group parent MyTravel, and is widely seen as one of the weaker low-cost carriers.
COLIN BAKER LONDON
Source: Airline Business
