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Aviation History
2002
2002 - 1142.PDF
Cover story The history The explosion in low- cost travel has historical parallels T he boom in European low-fare airlines shares many similarities with the explosion in the UK 30- 40 years ago of inclusive tour (IT) "package" holidays. The legacy of today's low-fare airline passenger in Europe originates with the "bucket-and-spade" package market of the 1960s and 1970s. The birth in the 1960s of charter airlines such as Britannia Airways and Monarch Airlines, as well as the now-defunct carriers Dan-Air and Laker Airways, provided capacity for the embryonic tour-operator business and opened air travel and over seas holidays to the masses. Although those airlines operated non-scheduled flights, they infiltrated and diluted Europe's short-haul market and provided the same thorn in the side of established full-service carriers as today's low-fare scheduled airlines do. Like the low-cost carriers (LCCs), these airlines flew from what were then sec ondary airports (such as London Gatwick) and provided incredible value for money - packaging accommodation, flights and transport to resorts for a rather unsophisti cated first generation of budget interna tional holiday maker. Like the current trend, these no-frills, cheap travel providers forced the mainline carriers to spend many hours working out how to tackle them, with several creating their own charter subsidiaries, like UK flag carrier BEA's Gatwick-based arm BEA Airtours, which was set up in 1970. While the UK was establishing itself as the world's largest charter airline market, the budget airline business was crystallising in a subtly different way in the USA. The sheer size of the continent ensured that air travel had become a way of life much more quickly than it had in Europe. "Air travel had been commoditised in the USA before the low-cost boom there," says Buzz com mercial director Tony Comacho. "That was not the case in Europe." Although Dallas-based Southwest Airlines is the grandfather of today's LCCs, the recognised pioneer of this market sec tor was another US airline, San Diego- based Pacific Southwest Airlines (PSA), which operated Lockheed L-188 Electra turboprops during the 1960s on high-fre quency north/south flights throughout California. Despite its pioneering strategy, the airline disappeared in 1988, following a take-over by US Airways. Using PSA as its model, Southwest was started in 1967 by Rollin King and Herb Kelleher as Air Southwest before adopting its current name in 1971. It was the begin ning of deregulation in the USA in 1978, however, which really lit the blue touch paper for the growth of the independent airlines and Southwest in particular as it established the no-frills "peanuts" image, now so widely imitated, as its own. Surviving deregulation However, the gold rush that followed US deregulation was a false one for the vast majority who pursued it. As one industry observer puts it, since deregulation, 500 start-up airlines have emerged - but only 10 have succeeded. By the late 1980s, the European leisure- travel market was dominated by the tour operators, which underwent a period of consolidation and created powerful in- house flying divisions. This left a few inde pendent carriers to fight over third-party or ad hoc charter work. In 1987, Europe's air-transport market began a European Union (EU)-led re-organisation, just as it had in the USA nine years before. Undertaken through a W-COST AIRLINE PASSENGER GROWTH n240 - 170 1999 100 2000 Note: Go figures for 2001 are for 9 months only. Note: Low cost airlines include Ryanair, EasyJet, Buzz, Go and Virgin Express. FLIGHT m BROWN MM 10-year, three-phase programme, the process did away with the old system where schedules, fares and passenger numbers had been largely controlled by bilateral agree ments between European nations. As a result, since 1997 any airline holding a valid air operator's certificate (AOC) in the EU can fly any route within the region, including services entirely within another country. Irish independent scheduled airline Ryanair, which was the first LCC to put the EU reforms to good use, almost failed to survive long enough to see the package fully implemented. Launched in 1985 offering cheap fares on the Dublin-London route, by the early 1990s it was facing clo sure after failing to control costs. A new management team, headed by "company doctor" Mike O'Leary, was put in place in 1990, and Ryanair relaunched as Europe's first "low-fare/no-frills" airline, dropping 14 non-profitable routes and focusing on just five routes from its Dublin hub. Fares were substantially reduced so that 70% of all seats were offered at the two lowest fares. A year later it went into the black for the first time. In 1997, Ryanair took advantage of the completion of the the EU reforms, setting up a second hub in London Stansted to serve continental Europe with initial ser vices to Oslo and Stockholm. It now flies 41 Boeing 737s and last year carried over 10 million passengers from five hubs throughout Europe. With Herb Kelleher as professed mentor, Greek shipping tycoon Stelios Haji- loannou decided in 1995 that the UK was ripe for the Southwest formula, and estab lished EasyJet at London Luton. The airline fast-tracked its start-up by using the AOCs of Air Foyle and GB Airways, inaugurating services from Luton to Edinburgh and Glasgow with two leased 737-200s in October 1995 - just six months after it was created. The airline secured its own AOC two years after launch. With the larger-than-life Haji-Ioannou at the helm, its aircraft painted bright orange and the advertising slogan: "Making flying as affordable as a pair of jeans", EasyJet quickly made a name for itself, with the industry and the public alike. Haji-Ioannou pursued a strategy of selling direct to his customers, much to the chagrin of travel agents, with the carrier's telesales number painted in huge characters on the side of its aircraft. Although it was not until April 1998 that EasyJet became the first European LCC to sell tickets on the web, internet sales now account for well over 90% of business - as it does for most operators in the sector. 34 9-15 APRIL 2002 FLIGHT INTERNATIONAL www.fliqhtinternational.com
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