COLIN BAKER AND MARK PILING LONDON
In a climate where mainstream carriers are looking at network reductions, Europe's budget airlines are taking the chance to bolster expansion plans.
Ryanair, easyJet and Go are all planning to open new bases, both in the UK and beyond. New potential is emerging at both Paris Orly and London Gatwick as unused slots become available.
Orly represents the biggest opportunity, with thousands of slots likely to be freed for summer 2002, in what is described as one of the largest slot handbacks ever at a major European airport. The prospect is that a slimmed down Air Lib could give back a third of its 75,000 annual slots after it emerges from bankruptcy protection in mid-December. That would represent around 10% of Orly's 250,000 annual slots.
Both Go and easyJet have applied for slots. EasyJet, which would like to base seven aircraft at the Paris airport, has applied for 400 slots per week for next summer. If it is successful the slot grab will make Orly its second largest operation after London Luton. EasyJet concedes that Orly will not be a low-cost airport, but believes the operation would work if it can obtain fast turnarounds to ensure the high aircraft utilisation on which its model is based. It also points out that the use of recognised hubs allows it to capture a high proportion of business traffic.
Others are less convinced. Bruno Matheu, executive vice-president network management at Air France, is sceptical of Orly's ability to act as a low-cost hub. "There is a lot of traffic. It will be difficult to do 25-minute turnarounds," he says. In addition, despite the downturn, there is still plenty of demand for Orly's slots. "There is no reason why all the slots should go to them," he says of the UK low-fares operators.
At slot-constrained Gatwick, the announcement that British Airways is handing back 200 weekly slots could also open the door for low-cost entrants. For example, easyJet would like to base six aircraft there and replicate its Luton route network. Today it operates the equivalent of two aircraft from Gatwick, but over time it sees an operation at the airport with 15 aircraft based there.
Ryanair also believes there may be openings at Gatwick and is talking to London Luton. Its chief executive Michael O'Leary, who was in typically bullish mood in announcing a 39% increase in net profits for the half year to the end of September, wants to open another base in Continental Europe for the coming summer season and is likely to expand its Charleroi (Brussels South) base following the collapse of Sabena.
Looking forward to the next half, O'Leary says:"The reduction in average air fares will be somewhat higher than budgeted. However, we equally expect to make up for much of this yield erosion with cost reductions and increased traffic volumes." Airport, maintenance and handling contracts are all being renegotiated, he says.
Ryanair has been approached by numerous airports - at major cities as well as secondary gateways - including three Swiss airports, seeking to recoup lost traffic. However, the Irish carrier takes an aggressive stance on prices with airports.
On London Stansted, its largest base, O'Leary comments: "The airport will have to lower costs or there will be no more growth." However, Stansted is already suffering a loss of revenues after the news that SAS, Lufthansa, British European and Continental Airlines are all pulling services out of the airport.
Go plans to add another 5-10 aircraft to its 18-strong Boeing 737 fleet in 2002. The carrier is eyeing up the Gatwick opening and says that it wants to add at least one other airport to its bases at Stansted and Bristol next year.
Source: Airline Business
