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Ryanair lags easyJet on business traveller & customer service initiatives; both have great potential
Ryanair recently raised net profit FY2015 guidance (year to March) for the second time. It now expects EUR810 million to EUR830 million, up from its previous range of EUR750 million to EUR770 million. This was thanks to faster passenger growth, stimulated by lower fares, but also reflecting improved customer service and new routes.
The largest carrier of passengers within Europe, Ryanair has rebounded very strongly from last year's profit warnings. Almost at the flip of a switch, it has raised its load factor and profit margins. It is opening new routes from more primary airports and with greater frequencies, increasing its appeal to business passengers.
Ryanair lags easyJet in its initiatives towards business travellers and regarding wider customer service improvements. Moreover, revenue per passenger is set to dip in 2HFY2015 as it absorbs strong capacity growth. Nevertheless, Ryanair has a significant opportunity to grow revenue per passenger as it follows easyJet up the yield curve. In this report, we compare the two on frequencies, presence in major airports and unit revenues. There is still room for both.
At its Capital Markets Day in late Nov-2014, Flybe asserted that it "does not compete with low cost carriers, flag carriers or mid-haul leisure airlines". Moreover, our analysis shows that it rarely competes with other regional airlines. In fact, Flybe faces no competition of any kind on 78% of its city pair routes in its Dec-2014 schedule. Moreover, it is Europe's largest independent regional airline and Europe is the world's largest regional market.
In spite of these advantages and what looks to be a relatively efficient cost base by comparison with other European regional airlines (according to our analysis), Flybe has yet to re-establish sustainable levels of profitability. Much has been achieved since the change of senior management in 2013, but the regional airline's fundamental CASK disadvantage will remain a challenge even as it increases its focus on turboprops rather than regional jets.
Can full service carriers close the cost gap with low-cost carriers? Is this the right question to ask? Why do FSC groups create LCC subsidiaries? Can a network model and a point to point LCC model co-exist within the same group? What does this mean for corporate culture?
At CAPA's Airlines in Transition 2014 conference in Dublin in Apr-2014, Professor Rigas Doganis led a panel discussion examining the issues of the hybridisation of the LCC/FSC business models and operating dual LCC/FSC brands within the same group.
IAG CEO Willie Walsh, Comair CEO Erik Venter, flynas CEO Raja Azmi and Aer Lingus Chief Strategy and Planning Officer Stephen Kavanagh offered their insights.
As a recent CAPA report on global airport construction indicated, there is a great deal of construction work in progress at the US’ major gateways and hub airports - even if there is very scarce construction of green field facilities nationally.
Los Angeles World Airports is one of the leaders, with LAX's durable Tom Bradley terminal receiving the lion's share of the investment, as the airport strives to remain competitive with other Global Cities.
The upgrade timing is appropriate; of the world's top ten airports, LAX's 2013 passenger growth, at 4.7%, was second only to Dubai International.
If all goes to plan (and that is a very big if) Spain’s state airport operator AENA’s part privatisation is supposed to swing back into action in Feb-2014, having been suspended late in 2011 following a General Election and the rise to power of the People's Party (PP), led by Mariano Rajoy.
It would be first privatisation in Spain since the start of the economic crisis – as well as being that of the busiest airport operator in the world.
Prior to the election, the People's Party had been unequivocal about both the format of the privatisation and the valuation placed on the airports. But since then, the government has had to handle a sovereign debt crisis with attendant public deficit, an economy in freefall and raging unemployment, particularly amongst young people, for whom it has reached 50% of the workforce.
On 12-Aug-2013 a historic milestone rolls around, when Etihad Airways turns 10 years old. The carrier, which proudly advertises itself as the fastest growing airline in the history of aviation, has helped usher in a revolution that has reshaped the global airline industry.
Etihad Airways was born as the national airline of the UAE via a Royal Decree issued in Jul-2003. Less than six months later it began operations, with just one aircraft. It launched itself in the midst of a major shake-up of the Middle East’s market and with a mission to support the development of Abu Dhabi as a business and leisure destination and help realise the transformation of the city into a global hub.
A decade on, Eithad Airways has achieved its objectives. Through a combination of rapid organic growth, aggressive partnership development and innovative equity acquisitions, the carrier has become one of the headline players not only in the Middle East, but in global aviation. Few carriers can boast such success in such a small amount of time. Fewer still can claim to be part of a revolution that is helping to change how the world connects.
As Manchester Airports Group (MAG) considers its route network development strategy, three major external factors will shape its future:
Firstly, the UK Airports Commission’s deliberations on future UK airport capacity increases and where they should be, if at all.
Although Manchester Airport handles more passengers, for now at least it appears to play a secondary role in the group’s strategy to MAG's recent acquisition, Stansted Airport.
Secondly, the delivery (or not) of ‘HS2’, the high-speed rail system that would serve Manchester Airport directly and also a station at Derby, close to the group’s East Midlands Airport.
Finally, the creation of an ‘airport city’ on land close to Manchester Airport, which will be the UK’s first such planned development. All these factors impose on Manchester Airport’s route network planning, which has already been undergoing a transformation in recent years.
This is the first of a two part report on MAG, the ingredients in its network planning – LCCs, Gulf airlines and China – and the likely role of the Airport City.
Eastern European low-cost carrier group Wizz has unveiled plans to expand its Vilnius base in Lithuania and establish its third Ukrainian base in Lviv. The announcements follow other recent expansion announcements that will see Wizz expand its bases in Bulgaria and Macedonia.
In the Lithuanian capital Vilnius, Wizz Air will expand its fleet of A320s at the airport to three aircraft. The carrier will use the additional aircraft to launch three new routes and increase frequencies on five existing routes.
Meanwhile the group’s Ukrainian subsidiary Wizz Air Ukraine plans to base one A320 at Lviv from 30-Apr-2014. The aircraft will be used to launch five new routes from Lviv, which Wizz Air Ukraine now serves with three routes. The A320 to be based at Lviv Airport will be Wizz Air Ukraine’s fifth aircraft overall.
Virgin Australia and Tigerair Australia are beginning to flex their muscles with Tigerair Australia making its first strategic move since becoming part of the Virgin Australia Group in Apr-2013 by launching direct services between Sydney and Perth as the carrier takes delivery of its 12th A320 in Dec-2013.
Virgin Australia meanwhile has taken another step to challenge Qantas’ domestic regional network domination with the launch of the first direct link between its home base of Brisbane and Cloncurry.
The changes signal the start of Virgin Australia’s ambitions to duplicate the successful Qantas/Jetstar model which seeks to separately maximise the returns from the full service and leisure markets.
Philippine Airlines (PAL) is planning to launch services to London in early Nov-2013, the first step in an ambitious plan for resuming flights to Europe. PAL has secured Heathrow slots but the flight times are not ideal as they do not support connecting services, which the carrier will likely need to sustain the new route.
PAL will face intense competition from several carriers in the Manila-London market as well as in planned new services to continental Europe. While PAL will be the only airline offering non-stop service between the Philippines and Europe, the market is well served on a one-stop basis by several Asian and Gulf carriers.
PAL announced on 17-Sep-2013 that London Heathrow will be its first European destination since 1998 with flights beginning on 4-Nov-2013. The Manila-London Heathrow route will initially be served with five weekly frequencies using 777-300ERs.
Air Serbia’s recent rebranding from Jat Airways is the beginning of a number of significant developments for the airline which will also lead to changes in the Serbian aviation market. Through its partnership with Etihad Airways, Air Serbia will be establishing a medium sized hub in Belgrade with a restructured network featuring 12 new destinations and a new fleet of A319 aircraft. Through this hub other airlines within the Etihad’s ‘equity alliance’ will be able to take advantage of an increased presence in the Eastern European region.
As previously reported by CAPA, Serbia's Government and Etihad Airways established on 1-Aug-2013 a strategic partnership to secure the future of Jat Airways which was subsequently renamed and rebranded as Air Serbia. The partnership included the acquisition of 49% of Air Serbia by Etihad on 01-Jan-2014 and Etihad being awarded a five-year management contract
Etihad and the Serbian Government agreed to both inject USD40 million into the airline while both parties will each provide up to USD60 million in further funding. Debt from Jat Airways was also written off by the Serbian Government which will allow Air Serbia to launch from a clean sheet.
Wizz Air recently unveiled plans to further expand its presence in the Eastern European market with expansion of its Skopje operations from Apr-2014.
The expansion will see the Hungarian-based LCC base a second aircraft at the Macedonian capital and launch three new routes, as well as increase frequencies on existing routes.
Since entering the market nearly two years ago, Wizz has grown to become the country's largest operator, accounting for more than a third of seats in week beginning 26-Aug-2013.