Low-cost in high-cost Belgium
Its base on the European mainland at Brussels National Airport sets Virgin Express apart from the rest of the European low-cost sector - at least for the moment. But managing director Neil Burrows does not expect this to last long, and his company's base at Belgium's main airport, now almost half-empty after the demise of Sabena, could bring benefits and hazards. "There are more than enough [LCCs] in the UK. They must expand into Europe and Virgin Express is already there," he says. But operating on the mainland is difficult: Virgin Express faces higher taxes and social costs and a more difficult regulatory environment than airlines based in Ireland and the UK.
Founded in 1992 as EuroBelgian Airlines, it was taken over by Richard Branson's Virgin Group in 1996 and renamed. Virgin still owns 51% of the airline, which flies 17 Boeing 737s. Again, unlike other LCCs, it has no plans to acquire new aircraft - beyond replacing those whose leases expire. Changing from a charter operator to a low-cost carrier was "a difficult transition", says Burrows.
Unlike other LCCs, Virgin Express did not make a profit last year, despite a restructuring during 2000. The collapse of Sabena, which provided 40% of Virgin Express' turnover with seat block purchases, forced it into the red for the second year running. The restructuring involved cutting the fleet from 22 737s and closing a second operations base in Ireland.
Merger plans with DAT - Sabena's erstwhile regional subsidiary and, under the name SN Brussels Airlines, its successor - were dropped last month after Virgin and DAT were unable to agree on valuations for the companies (Flight International, 5-11 March). The airlines will now operate in different sectors, although they retain a non-competition agreement on certain routes.
Operations on continental Europe have to deal with higher taxes and social expenses. Flying from Brussels National raises Virgin Express' outgoings, but the company is "not going for the lowest possible costs". Like some others, it plans to centre itself on the business market - and this means giving up some of the "pure low-cost" strategy to attract business customers away from mainstream national carriers. Virgin Express believes its competition is not EasyJet or Ryanair, which do not operate on the same routes, but rather the national airlines - especially if, as Burrows expects, they start offering their own low-cost services under separate brands, as BA and KLM did with Go and Buzz, respectively.
Sabena's demise and the recession make Burrows hopeful of attracting business traffic. Tighter travel budgets will force business travellers on to the low-cost services. "As long as low-cost carriers supply frequency, punctuality and service, there is no reason for people to go back [to full-service carriers]," he says.
As well as full-service carriers, Burrows is also concerned about the threat to short-haul mainland services from high-speed trains and speculates that they may come under competition laws, as most are state owned or supported. However, he admits, this is unlikely to happen soon.
Source: Flight International
