In August, Monarch's chief executive, Andrew Swaffield, revealed that after 47 years operating as a leisure carrier, it plans to cease charter operations for good in 2015 and focus entirely on scheduled low-cost operations.

Though Monarch acknowledges that its name had once been a "byword for charter flying", a wide-ranging review of the business concluded that changes in the Luton-based airline's core markets meant the future lay in being a low-cost carrier "that knows how to work in the leisure travel sector".

Says Swaffield: "Monarch's success depends upon us delivering the best possible operation and quality of service for our customers – and at sustainable levels of profitability." He adds: "It is for these reasons that we are taking important decisions to reshape our base network and flying schedule next year."

Details of the changes to be made are sketchy at present, but a source familiar with the situation has indicated that more than 1,000 jobs may be cut. The carrier also intends to pull out of the UK's East Midlands airport as part its transformation into a low-cost carrier.

Monarch has been moving away from its charter roots since at least the 1980s and today, they represent just 15% of its total operations.

Nor is it the only European leisure carrier set to part with charter flying for good.


Ever-tougher operating conditions, overcapacity in short-haul markets and competition from low-cost carriers and online rivals have forced some leisure carriers to rethink their strategies entirely.

One example is Corsair. The Paris-based carrier has long offered charter and scheduled flights to luxury destinations in the Caribbean and Africa for the French market, but since 2010, the carrier has moved away from its charter business under the stewardship of chief executive Pascal de Izaguirre, who says he sees no future in the "doomed" model.

"When I was appointed at the head of the company in May 2010, I conducted a global analysis which made me understand that the charter model was doomed in the French market," says de Izaguirre.

"French tour operators are not powerful enough to support and sustain airlines. TUI France will only account for 6-7% of Corsair's global turnover this year."

The airline chief says tour operators in France, such as TUI France, having been pulling out of long-haul routes because of the impacts of global economic conditions and the Arab Spring. This has forced companies like Corsair to diversify their core products.

“This is why I have launched an in-depth transformation plan to turn Corsair into a long-haul scheduled airline, revisiting entirely the business model. Fleet, branding, product, customer experience and service, distribution, have been totally rethought,” he says.

It should be noted that TUI is looking to sell some or all of its stakes in Corsair, and Izaguirre admits that the German travel group was “never meant to remain Corsair’s sole shareholder forever, as the group operates charter airlines, not scheduled carriers”.

Transavia Airlines – historically a Dutch leisure charter operator, is being turned into an aggressive low-cost operator by owner Air France-KLM as its answer to the EasyJet and Ryanair threat.

Under the group’s five-year Perform 2020 plan, the expansion of the Dutch-based leisure unit Transavia Airlines and its French sister company Transavia France will be accelerated, while charter services will be steadily ditched in favour of scheduled services.

"For Transavia, we are pushing hard for repositioning, in particular, developing Transavia France by increasing the fleet and opening 19 new destinations," Air France-KLM chairman and chief executive Alexandre de Juniac said in July, adding: "Repositioning us on the Dutch side with a model that was essentially charter- and tour operator-dominated to a more normal B-to-C base.

"Just to give you some comparison, two years ago it was a 70:30 split between tour operators and business class, but now we are at 50:50, so the repositioning has been extremely quick for Transavia Netherlands and France. The growth has been very, very fast," says de Juniac.

The group's plans envisage growing Transavia's fleet from roughly 50 today - split across its Dutch and French units - to 100 aircraft by 2017. It also involves a third Transavia operation concentrating on developing routes outside of France and the Netherlands.

Aegean executive vice-chairman Eftichios Vassilakis says the carrier is seeing a consistent fall-off in demand for charter flights year on year, with the change on markets such as France to the Greek islands particularly dramatic.


So is the charter model in terminal decline in Europe? Not at all, argues Carl Denton, managing director of SvenCarlson Aviation Consulting.

"Charter – or, more accurately, the package holiday – is not dead; in fact, it is growing again because consumers have come to realise the returns it offers them in contrast to booking with scheduled airlines," says Denton, adding: "A UK ATOL [Air Travel Organiser's Licence] protected package holiday gives the consumer peace of mind that they will not lose their holiday if a provider goes bust. At the same time, consumers are more aware of the risk of airline failures."

And rather than a simple "them and us" scenario, Denton paints a picture of a leisure market that is becoming ever more complex and interconnected, where the differences between a charter leisure operator and a scheduled airline, and between a traditional high street travel agent and an online provider, are becoming increasingly blurred.

"You now have a situation where Jet2 Holidays is ATOL-bonded for over 1 million passengers and EasyJet Holidays is, ironically, working with its leisure rival, TUI, to supply beds via Hotelopia, while companies like Travel Republic and [website] On the Beach are selling packages online but not on the high street," he says.

Denton says Jet2 and, interestingly, EasyJet, now "rule the roost" in the UK leisure/tour operator business. "EasyJet is as much a charter operator as it is an airline – it's a very important segment for them," he says.

EasyJet uses a different package protection scheme to the CAA ATOL bonding scheme and as such EasyJet package holiday numbers are not published by the CAA, but Denton believes the airline is one of the leading providers of holidays as well as seats for other tour operators and online travel agents to create ATOL-bonded packages.

Having repositioned their businesses following the Arab Spring conflicts in North Africa, tour operators across Europe are now feeling the impact of the fresh crisis in Ukraine. This has already led to the exit from the market of Russian tour operators such as Labirint Travel and Roza Vetrov.

But elsewhere, the mood is positive. Europe's two biggest travel groups – TUI and Thomas Cook – have both repositioned following the Arab Spring and are seeing their restructuring programmes bearing fruit.

Germany-based TUI has continued to improve its financial performance, with operating profits up 20% in 2013 to £589 million ($968 million). The group is consolidating its five airlines into one aviation group under the direction of former Thomson managing director Chris Browne in a bid to generate new operational synergies.

TUI remains committed to its charter businesses as the best way to compete with the low-cost carriers, as summarised by chief executive Peter Long to explain its rise in third-quarter profits: "As the trading environment in the commodity space has become more competitive and airline capacity continues to increase, our flexible and resilient business model – focused on unique holidays and our relationship with the customer throughout their whole holiday experience – enables us to deliver sustainable, profitable growth and outperform the market."

Rivals, he adds, "do not benefit from this level of interaction".

This is echoed by Denton, who says that by becoming the first leisure airline to deploy the Boeing 787, Thomson Airways is putting itself at the forefront of service ahead of its competitors.

Similarly, Thomas Cook has consolidated its airline divisions under one umbrella with a management board headed by Christoph Debus, and is seeing improvements in financial results and confidence in its product.

Both travel companies are also pursuing ways to work with scheduled carriers to maximise revenues. Last year, Thomas Cook entered into an interline partnership with Flybe so that passengers flying on regional routes into Manchester airport can connect to long-haul leisure services.

A similar agreement was reached between Thomas Cook-owned Condor and Lufthansa in July, under which Germanwings will provide connecting flights for Condor long-haul leisure routes from Cologne Bonn airport.

And not all scheduled airlines are so pessimistic about charter operations. Italian carrier Meridiana is a case in point: chief executive Roberto Scaramella sees opportunities to expand the airline's presence in the charter business in Italy, and even carve out new markets across the Mediterranean.

"Gradually, we want to consolidate our charter presence. We are mainly a charter outgoing from Italy: we are the number-one outgoing charter operator from Italy. This will gradually allow us to probably also extend outside of the Italian market into other Mediterranean markets and opportunities," Scaramella says.

So what will the future bring for the European leisure market? Denton suggests Thomas Cook will continue to pursue its restructuring programme in emulation of TUI.

He also expects EasyJet to continue to develop and grow its leisure and tour operator business, and Ryanair to take the plunge and enter the market in the coming years.

"Ryanair have dabbled in that sort of operation but nothing like the extent of EasyJet and Jet2. Perhaps that is because they are not as focused on leisure routes," he says.

“But Ryanair are making some radical changes. It is all to do with controlling distribution, they have put a lot of effort into preventing screen scrapers from packaging up their flights but up to now they have not done much to do it themselves. I am sure it will come eventually.”

Far from being on its deathbed, the leisure business in Europe continues to evolve.

Source: Cirium Dashboard