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Aviation History
2004
2004-09 - 0886.PDF
Cover story Hapag- CONTINUED FROM P31 Lloyd launched in December 2002 by Express is German travel group TUI using one of five 737-700s wet-leased from Berlin- major based carrier Germania. Chief German executive Wolfgang Kurth also carriers sees Lufthansa as the main threat, operating and says it has recently become scheduled far more dangerous. "We used to low-cost choose routes that were already flights operated by full-service carriers. But now the full-service carriers are reacting to us immediately. For example, when we started operat ing from Cologne to Hamburg, Lufthansa immediately dropped the fare from more than €200 to €92," he says. 'This is below our cost level, so Lufthansa must be putting money into the route." Joachim Klein, managing direc tor of Germanwings, a subsidiary of part-Lufthansa owned regional carrier Eurowings, thinks that his airline's "German-ness" stands it in good stead against its foreign rivals. "The brand awareness of EasyJet in Germany is quite low - about 20%." says Klein. "At the moment German low-cost carriers have better awareness and loyalty in our own regions." Klein believes the new LCCs are their own biggest competitors. "When we started looking at the low-cost market we thought we would be the only one," he says. "But a lot of others have come into the market after us. We are one of four main players - Germanwings, Germania Express, Hapag-Lloyd Express and Air Berlin." He says DBA, which has chosen a higher-price strategy aimed at business trav ellers, "is not direct competition". EasyJet, however, has proved a thorn in Germanwings' side. The UK airline operates a dedi cated terminal at Schonefeld, decked out in its distinctive orange colours. Six aircraft are based there and, by the end of June, it will operate 13 routes. It has a second mini-hub in Dortmund, with three aircraft serving six European cities, with Budapest and Prague to be added shortly. "We had intended to start a hub at Berlin Schonefeld, but now we are thinking it over. Because of EasyJet it makes no sense at the moment," says Klein. As in the UK, the low-cost mar ket in Germany appears to be dividing into two distinct customer segments. On the one hand, cost- conscious business travellers, happy or compelled by their com panies' budgets to exchange frills for cheaper flights; on the other, leisure travellers visiting family, taking short city or ski breaks or travelling to second homes in the sun. This second segment has taken share from the full-service carriers, the charter operators (with people keen to "unbundle" or arrange their own holidays) and trains, and include many passen gers who - were it not for the low-cost carriers - would not fly at all. DBA and EasyJet have focused largely on the first group, with DBAs Gauss claiming the air line's strength at Germany's slot-restricted airports gives it an advantage. "We have high fre quencies at peak times," he says. For business travellers "frequency is key, and EasyJet couldn't get near our frequencies". At the other extreme, Germanwings says up to 30% of its passengers last year would otherwise have used ground transport. All the low-cost operators seem to agree that the German market alone cannot sustain them. While EasyJet and Ryanair have pur sued aggressive expansion strategies, by establishing hubs in Germany, France, Switzerland and Belgium among others, most of the German LCCs appear to be banking on deals with existing LCCs abroad. Three have done so: Air Berlin with Niki in Austria; Germanwings with Bmibaby in the UK; and Hapag-Lloyd Express with Volareweb in Italy. Germanwings' Klein says the operator is looking for relation ships with the Star Alliance partners of its part-owner Lufthansa, but this is proving tricky. "We are limited, because Bmibaby and [SAS low-fare opera tion] Snowflake are the only European low-cost carriers in the Star Alliance. We are talking to Snowflake, and we are also talking about co-operation with LOT Polish Airlines - but these are in the early stages. The first phase of any agreement will be marketing, then we will see how we can work together. EasyJet and Ryanair have such large networks that they have enough market power on their own, and don't need alliances," Klein says. Germanwings does, however, plan to make use of its links with Lufthansa. "It's possible to share slots between the members of our Lufthansa family," says Klein, adding that Germanwings could also grow by taking over routes from its parent Eurowings: "We are discussing taking routes from Eurowings...but this will be the last thing we do: first we want to develop new routes." Air Berlin signed an agreement in February with Germania under which it wet-leases three Fokker 100s and operates alone on routes where the carriers previously com peted. "Working against each other makes no sense," Germania chief executive Hinrich Bischoff said earlier this year In January Germania also took a 24% stake in Niki -which Air Berlin is partnering with - and is co-operating on ser vices to Majorca, where Air Berlin plans to set up a hub. Hapag-Lloyd Express also has high hopes for its tie-up with Volareweb. "It is not about con necting networks - we are just taking advantage of their market ing organisation, and it works," says Kurth. "We are seriously looking at some other options to expand; this could be co-operation on representatives, on booking, or on computers." But, he adds: "Linking networks loses one of our key business attributes: point-to-point travel." Like Germanwings, Hapag-Lloyd Express can also rely on the sup port of a powerful parent. "TUI will have Hapag-Lloyd Express as its preferred carrier," says Kurth. "We are one of the only low-cost carriers with links with travel agents, and we have a huge distribution network through our parent company." However, a shake-up appears inevitable. "By the end of it," says Germanwings' Klein, "There will be three German low-cost carriers in Germany, plus EasyJet, all much stronger than in the past." MAJOR PLAYERS IN THE GERMAN MARKET Ownership Air Berlin DBA Germania Express Germanwings Hapag-Lloyd Express EasyJet Ryanair 46 16 17 10 10 76 76 3 BAe 146,5 Boeing 737-400, 4 737-700 16 737-300 17 Fokker100 5 Airbus A319,5 A320 2 737-500, 8 737-700 34 737-800 6 A319, 41 737-300, 29 737-700 17 737-200, 7 737-300, 2 737-400, 50 737-800 Privately held 100% Intro (investment company) 100% Germania 100% owned by Eurowings; Eurowings 49% Lufthansa, 51% private investors 100% TUI UK listed company EasyJet includes EasyJet Switzerland; Ryanair includes Buzz Stansted operation. Source: Airclaims CASE database. Fleets correct as of April 2004 www.flightinternational.com FLIGHT INTERNATIONAL 1-7 JUNE 2004 33
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