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Aviation History
2002
2002 - 1111.PDF
ULL LIST OF READER SERVICES ADVERTISER CONTACTS - 42 EDITORIAL +44 (20) 8652 3842 Quadrant House, The Quadrant, Sutton, Surrey SM2 5AS, UK Fax +44 (20) 8652 3840 email llightMernationambi.co.uk Editor Murdo Morrison +44 (20) 8652 4395 murdo.morrison9rbi.co.uk Editor's PA Debra Warburton +44 (20) 8652 3835 debra.warburton9rbi.co.uk News Editor Emma Kelly +44 (20) 8652 3096 emma.kellY9rbi.co.uk Commercial Aviation Editor Max Kingsley-Jones +44 (20) 8652 3825 max.kingsley.jones9rbi.co.uk Defence Aviation Editor Stewart Penney •44 (20) 8652 3834 stewart.penney9rbi.co.uk Operations/Safety Editor David Learmount +44 (20) 8652 3845 david.learmount9rbi.co.uk Business Editor Alexander Campbell +44 (20) 8652 3990 alexander.campbell9rbi.co.uk Business & General Aviation Editor Kate Sarsfield +44 (20) 8652 3885 (maternity leave) Business & General Aviation Reporter Justin Wastnage +44 (20) 8652 i6bZjustin.wastnage9rbi.co.uk Spaceflight Correspondent Tim Furniss •44 (1237) 471960 tim9spaceport.co.uk EUROPE/MIDDLE EAST European Editor Christina Mackenzie +33 (1) 64 23 68 89 christina.mackenzie9rbi.co.uk Israel Correspondent Arie Egozi +972 (3) 9413132 Middle East Correspondent Gerald Butt •357 2 771967 gbutt9spidemet.com.cy AMERICAS Washington DC Office Fax +1 (703) 836 8344 Americas Editor Graham Warwick +1 (703) 836 3448 graham, warwick9rbi.co.uk East Coast Editor Paul Lewis +1 (703) 836 3084 jpaul.lewis9rbi.co.uk West Coast Editor Guy Norris •1(949)2528971 Fax+1 (949) 252 8972 guy.norris9rbi.co.uk Brazil Correspondent Jackson Flores Jr +55 212439-6062 Fax 00 55 212349-6090 fubar9uol.com.br Canada Correspondent Brian Dunn +1 (514) 937-1855 Fax (514) 937-3352 brian9derniermot.com ASIA/PACIFIC Singapore Office Fax +65 338 6171 Regional Managing Editor Nicholas lonides +656434 3311 Fax+65 338 6171 nicholas.ionides9rbi.co.uk Deputy Asia Editor Andrew Doyle •65 6434 3309 andrew.doyte9rbi.co.uk Regional Reporter David Fullbrook •65 6434 3314 david.fullbrook9rbi.co.uk Australia Civil Aviation Correspondent Paul Phelan •61 (7) 4053 2791 Fax+61 (7)40533003 pdphelan9optusnet.com.au Australia Military Aviation Correspondent Peter La Franchi +61 (0) 419 246 620 Fax +61 (2) 62312795 nulka9ozemail.com.au EDITORIAL PRODUCTION Group Production Editor Graeme Osborn +44 (20) 8652 3828 Group Art Editor James Mason +44 (20) 8652 4994 Chief Sub-Editor Chris Thornton +44 (20) 8652 3850 Deputy Production Editor Jackie Thompson +44 (20) 8652 4997 Photographer Mark Wagner +44 (20) 8944 5225 TECHNICAL ARTISTS Senior Technical Artist Giuseppe Picarella +44 (20) 8652 8054 joe.picarella9rbi.co.uk Editorial Artist Tim Brown +44 (20) 8652 8043 tim.brown9rbi.co.uk WWW.FLIGHTINTERNATIONAL.COM WEBMASTER Sheena Buchanan +44 (20) 8652 4432 SUBSCRIPTIONS +44 (1444) 445454 rbi.subscriptions@rbi.co.uk THE FLIGHT COLLECTION kim.hearn@rbi.co.uk Flight International is a registered trademark ot Reed Business Information Ltd. ©2000 Reed Business Information Ltd /X^F'I *'r Transport Intelligence (ATI), Flight International's sister L\ J J online service at www.rati.com, contains the full text of Flight •a^n International and Airline Business since 1996. Full text of the magazines can also be found online with Lexis-Nexis, Dialogue. FT Profile, IAC and Reuters. Editor Kieran Daly +44 (20) 8652 3837 Reed Business Information COMMENT No-frill flag flying Europe's flag carriers need realistic solutions in their battles against the low-cost, no-frills airlines because doing nothing is not an option British Airways' decision to cut fares on its domestic flights is the latest in a series of responses by established European carriers to the growing threat of the upstart low-cost airlines. The move is too little, but not, perhaps, too late. The low-cost carriers have grown over the past decade from insignificance to irrelevance to concern to threat. Although they still carry fewer than one in 10 intra-European passen gers, their rapid growth and healthy profits contrast with the stagnant traffic and worrying losses of the flag carriers. The responses of the Big Three have been varied. Air France has chosen to ignore the insurgents, dismiss ing them as being "not in the same business". Lufthansa, faced with Ryanair's encroachment on its home territory, has been fighting a suc cession of legal battles to silence the low-cost carrier's siren appeals to the German con sumer. And BA has now decided that it can Inertia, myopia and delusional overconfidence precede disaster compete head-on with the arriviste airlines by cutting costs and fares on its domestic short- haul routes. Of these, only BA's response has any strategic respectability. The flag carriers can not deal with the low-cost advance by pretending it does not exist, nor by fighting rearguard actions in defence of untenable positions. But BA's approach is not the only answer to the growth of low-cost travel. The UK carrier has already tried another approach - running its own low-cost operation, first by attempting to take over EasyJet, then by setting up Go. No airline in Europe has tried the third possible strategy -simply to leave the field to the new arrivals and concentrate on more profitable long-haul services. BA deserves credit for recognising that a problem exists. Its attempt to compete in the UK domestic market by cutting fares is a griev ous mistake, however. The low-cost carriers can offer the prices they do, which are still far lower in many cases even than BA's revised fares, because they are highly specialised on a single sort of opera tion, and have been designed or redesigned with a sole objective in mind: cheap short-haul point-to-point services. BA's Future Size and Shape study called for restructuring and 13,000 job cuts, but this will not be enough. It is fundamentally more expensive to run a net work, to maintain a fleet of 11 aircraft types, to operate into every major airport, to keep a pension roll of retired employees and an expensive headquarters division. Put simply, it is very unlikely that BA can compete. Pulling out from the short-haul market is tempting, but, perhaps unfortunately, pride and bureaucratic inertia, not to mention political influence from national governments, will stop any national flag carrier taking this path. The history of exclusively long-haul carriers such as Laker and Pan Am is not inspiring. The prospects of a low-cost subsidiary of a mainstream airline are still uncertain. Although KLM's Buzz is making moderate progress, BA chief executive Rod Eddington decided in 2000 that he could not run BA and Go under the same roof. The sale of Go met opposition from some of his own executives and was criti cised by industry observers. They were right and Eddington was wrong. While it was owned by BA, Go ran its own operation - and so was able to start from a clean sheet when hived off. Unless BA can reproduce this independence in its short-haul operations, enabling them to cut costs and restructure far more thoroughly, this latest strategy will prove a costly failure. As before in history, the existence of the English Channel tempts leaders on one side to regard events on the other side with a sort of serene detachment. But, as the UK today, so France, Germany and the rest of Europe tomorrow. Airline deregulation means that the challenges to Air France and Lufthansa by newcomers from London Luton and Stansted airports are mere tokens of the threat they will soon face from home-grown insurgents. The slower pace of liberalisation has given conti nental Europe a little time in which to prepare itself. It should not squander this respite in vain attempts to preserve the status quo or in Olympian denials that a problem exists. There is no reason why cheap subsidiaries of the flag carriers should not compete suc cessfully against independent low-cost airlines - no reason, that is, but the inertia, myopia and delusional overconfidence which precede any disaster and which are now both harbin gers and root causes of great and unnecessary suffering for the European flag carriers. SEE AIR TRANSPORT P7 AND FEATURE P29-39 www.fliqhtinternational.com FLIGHT INTERNATIONAL 9-15 APRIL 2002 3
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