FlightGlobal.com
Home
Premium
Archive
Video
Images
Forum
Atlas
Blogs
Jobs
Shop
RSS
Email Newsletters
You are in:
Home
Aviation History
2004
2004-09 - 0926.PDF
AIR TRANSPORT EXPANSION JUSTIN WASTNAGE / LONDON Ryanair to slow capacity growth With seven of its Boeing 737-200s due to be retired, the Irish airline has decided that they will not be replaced Irish low-cost carrier Ryanair is to cut capacity growth this year by not replacing seven aircraft damaged in maintenance, as competition in the sector hits the airline's profits. Ryanair chief executive Michael O'Leary says Irish maintenance provider FLS Aerospace has agreed to pay around $10 million in com pensation to the carrier for the retirement 18 months early of seven Boeing 737-200s, which allegedly sustained potentially damaging scribe marks on their fuselages dur ing paint stripping (Flight Inter national, 10-17 February). O'Leary says the aircraft will not be replaced, taking the carrier's capacity growth from 20% forecast to 16% this year. Traffic growth will also slow to 20% over the next 12 months. The air line is receiving deliveries of new Ryanair is phasing out its ageing 737-200s Boeing 737-800s as part of an 80- firm, 80-option order placed in 2001, with 27 aircraft entering ser vice this year. "In the current competitive situa tion, it is quite good to have slightly fewer aircraft," says O'Leary. The airline is phasing out 13 remaining -200s, which will leave service by December next year, he adds. Capacity growth could return to forecast levels, however, if International Lease Finance lowers its lease rates for six 737-300s oper ated by Ryanair's UK subsidiary Buzz Stansted, he adds. Failure to halve the rates, negotiated by previous Buzz owner KLM UK, would result in closure of the unit, says O'Leary. Ryanair suffered its first fall in profits last year, to €227 million ($272 million) for the year to March compared with €239 million for the same period last year. O'Leary says the decline is attributable to the euro/sterling exchange rate and a tougher market. "The level of com petition we are facing from many new entrants is higher than we had thought, and the massive rise in overall capacity has led to a reduc tion in fare levels across the indus try," he says. O'Leary adds the next 12 months will be "a bloodbath" as several loss-making European low-cost car riers will cease operations. Joachim Hunold, chief executive of Europe's third largest no-frills carrier Air Berlin, says Ryanair's profit decline shows that "increasing passenger numbers by using every technique possible does not lead to profits". O'Leary says the forthcoming cri sis in the no-frills sector vindicates Ryanair's decision to opt for a fleet of all-189 seat 737-800s, rather than a mixed fleet. "Higher seat density reduces the unit cost and lowers our break-even load factor, and thus increases our profit margin." SEE BUSINESS P26 LOW FARES LEITHEN FRANCIS / SINGAPORE Air India to set up low-cost carrier for short-haul flights Air India is planning to establish a low-cost subsidiary early next year that will operate on short-haul international routes using leased Boeing 737-800s. The board at a 29 May meeting approved the establishment of a low-cost unit that will start services on 1 April 2005. It will operate flights from six airports in India to points in the Middle East and South-East Asia, charging around 25% less than other interna tional airlines. "There are two factors behind why we are establishing a low-cost airline. Firstly we know what is happening in the Gulf region and how airlines are being set up there. If they start flying into India with low fares then we have to be prepared for it. Secondly, we have huge pockets of consumers in India who are very price sensitive," says Air India. The six Indian cities chosen are Chennai, Delhi and Mumbai as well as the three international airports in the southern state of Kerala: Calicut, Cochin and Trivandrum. The operation will commence with six aircraft on 1 April with four more added in time for the start of the winter timetable and four more in the summer 2006 timetable, says Air India. By the end of the first year of operations, the new airline plans 127 weekly flights. Air India says the 737-800 was chosen because it already has a proposal pending with the government to purchase 18 of the type. It says the yet-to-be-named low-cost carrier's 737-800s would be on operating leases and would be in addition to the 18 Air India plans to buy for its mainline operations. STRATECY Air Malta strikes union deal to control costs Air Malta has struck an agreement with its four trade unions as part of a strategy to reverse losses as the air line prepares for increased competi tion and opportunities following the island state's entry into the European Union. The deal essentially comprises a moratorium on pay rises from 2004 to 2007, curbs on allowances, a recruitment freeze and voluntary early retirement. The unions' legal adviser George Abela has called the agreement "historic", but the airline admits it will have to reduce costs by far more than the Maltese Liral.3 mil lion ($3.73 million) that the work force deal alone will save. Air Malta chairman Lawrence Zammit points out that losses on the airline's "core business" last year were Maltese Lira9.S million, and he is looking to save another Maltese Lira3 million in opera tional costs and improve revenue by more aggressive marketing, bet ter fleet utilisation and the exploitation of new opportunities offered by entry into the EU. Zammit says the airline's new no-frills services to London Stansted, UK, are proving popular, but Malta's information technol ogy and investments minister Dr Austin Gatt predicts that, if low- cost carriers take an interest in the Malta market, the "whole strategy" might need to be redrawn. Meanwhile the carrier is taking advantage of its EU privileges by operating, since 1 May, two new services between Malta and London Gatwick via Catania and Palermo, Sicily. The airline is also operating a charter service to Spain for UK tour operators using two of its A320s based at Manchester. www.flightinternational.com FLIGHT INTERNATIONAL 8-14 JUNE 2004 15
Sign up to
Flight Digital Magazine
Flight Print Magazine
Airline Business Magazine
E-newsletters
RSS
Events
