Budget carriers are expanding their operations in France in spite of high entry barriers and tough competition
EasyJet's decision to open two more French bases at Paris Charles de Gaulle and Lyon is the latest sign that low-cost carriers are ready and willing to make a serious push into an airline market that offers significant potential, but has traditionally installed high barriers to entry.
The UK budget operator launched its Paris CDG base in early February and will open its base at Lyon Saint-Exupery airport in April. The carrier also has a base at Paris Orly.
EasyJet regional general manager for France and Benelux, François Bacchetta, says there is plenty of potential for low-cost carrier development in France, despite the fact that "the cost of landing at French airports is the highest in Europe", and there is strong rail competition from the TGV. "The penetration of low-cost carriers in France is half the European average," says Bacchetta. "There is big potential and less competition so now is the right time."
Air France has a 60% market share in France by capacity while easyJet is "at number two with just under 6%", according to Bacchetta. "We have to pioneer the market - it's all about market stimulation." He adds that easyJet plans to increase its passenger numbers at French airports to 10 million by 2010 and base between 10 and 15 aircraft in the country. The airline carried 6.5 million passengers in this market in 2007 and aims to carry 8 million this year. This growth will be achieved using its Paris Orly, CDG and Lyon bases, but "if opportunities for new bases arise in the future we will take them". EasyJet operates several domestic services in France, and Bacchetta says flights from Paris Orly to Nice and Toulouse "perform well because we're the only alternative to Air France".
Another UK carrier that has been rapidly expanding in France is regional operator Flybe, which since March 2007 has increased the number of weekly departures at CDG from 19 to 91. Flybe chief commercial officer Mike Rutter says the carrier has "more routes to France than any other carrier from the UK", and is looking at further growth. Flybe had been planning to establish a number of bases in France from which to set up a French domestic operation, but these plans were put on ice when the carrier acquired BA Connect, a deal announced in late 2006.
However, this is still a possibility: "The French market is still very attractivewe are still very interested in a domestic operation and we will watch with interest the success that easyJet will have in opening the market up to low-cost carriers," he says.
Teething problems
Spanish low-cost carrier Vueling last year opened a base at CDG, its first outside Spain. Vueling country manager for France, Edo Friart, admits to a few teething problems with the base, including the need to pull out of routes to Amsterdam and Milan Malpensa due to strong competition. The carrier now serves Venice and Rome from CDG, as well as a host of destinations in Spain.
"We faced high competition on the Amsterdam route from Air France-KLM and the TGV. We thought we could have made it a success but it was a question of perception for passengers people thought we only flew to southern Europe and it was not easy to say we that we fly to northern Europe as well," says Friart. He adds the carrier had difficulty gaining market share on the Milan route, especially when easyJet moved in to the market.
"When you open a base with 10-14 destinations you can't succeed on all routes. We had disappointments with some routes but it was the first time we opened a base outside Spain. We've had to launch a huge campaign to let people know that we fly to markets other than Spain." Friart also points out that "it is not the right time to enter the domestic market in France because of competition from Air France and easyJet".
For now Vueling plans to focus its efforts on routes to Italy and Spain, although the carrier's growth in Paris is constrained by the fact that it is unable at this point to base more than three aircraft at CDG. "For the moment, due to the freeze on fleet expansion, we won't add any strong capacity from Paris," says Friart.
Vueling, which saw its full-year pre-tax losses widen to more than E63 million ($93 million) in 2007, announced last October that it would scale back its fleet expansion plans. The carrier had planned to expand its fleet to 37 Airbus A320s this year, but later scaled this back to between 27 and 31 aircraft.
Barriers to entry still remain high in France, according to Rutter, and Air France "is very comfortable in using the power that their dominance gives them".
However, things are starting to improve with a growing number of French airports building dedicated low-cost terminals including Lyon, which opens in April a low-cost terminal capable of handling up to four flights simultaneously. France's new government also has a more positive view of low-cost carriers, says Bacchetta: "The new Sarkozy administration is much more business friendly and low-cost carrier friendly. We're heading in the right direction."
Source: Airline Business
