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Airline structural change in Europe: a major turning point – if labour allows it


Announcing British Airways’ response to moribund business travel within Europe, Mr Walsh in mid Feb-2010 outlined a plan which reflects the dilemma that now confronts all major European carriers – BA, Air France-KLM and Lufthansa in particular. The issues are basic, but apparently near-insoluble. With new restructuring attempts under way, the three majors are feeling their way through the mire, adopting broadly similar strategies. They really need low cost subsidiaries to help them, but only compromise measures are being proposed. Whether even these are successful will depend on how well managements can convince their labour unions to adopt the new realities. [8275 words]

Unlock the following content in this report:


  • Introduction: short haul survival
  • The ideal model: a quality low cost subsidiary
  • Structural changes in the European aviation market - airlines adjusting to a “new normal”
  • Demand and yield deterioration here to stay: IATA
  • “Structural upheaval” means the European aviation industry will “not return to ‘normal’ again”: AEA
  • “Not a cyclical feature….It is a structural upheaval, and we must adapt structurally”
  • Strong performance by LCCs helps “curtail the severity of the decline in total traffic”: ICAO
  • Premium fares and premium travel growth in negative territory in 2009
  • Revenues from premium passengers slump 30%
  • Have LCCs taken over the European short haul market for good?
  • Network carriers to confront massive changes in short-haul markets
  • Lufthansa: To apply some “low-cost” elements  
  • Air France: Recognises shift in customer travel behaviour; to use Transavia and CityJet (and trains) for low cost domestic services? 
  • British Airways: Moving away from all-inclusive pricing; maintaining short-haul presence to feed premium international markets
  • Aer Lingus: Planning to become a ‘hybrid carrier’ – but differentiated
  • Iberia: is Vueling an option? Or a new BA-Iberia joint venture LCC?
  • Alitalia: European airlines must prepare for a “new normal”
  • Finnair: Looks to recovery Asian markets; reinforcing connecting network
  • airBaltic: Focuses on niche markets and transit product
  • CSA Czech Airlines:  Click4sky “virtual low cost” airline to appeal to broader range of customers
  • The yield dilution problem exists in other regions - but most severe in Europe
  • Conclusion: A dilemma for Europe’s network carriers – connectivity the added complication

Graphs and data:

  • Traffic Growth by Route: Nov-2009
  • Premium traffic share & revenue share within Europe
  • Selected European carriers’ yield/unit revenue year on year growth developments: Apr-2008 to Dec-2009
  • LCC capacity share (seats) within Europe: 2001 to 2009
  • LCC capacity share (seats) within worldwide regions: 2009
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