15-May-2017 10:59 PM

Blue Air: a new Liverpool base signals growing emphasis as a pan-European LCC model

Analysis

According to data from OAG, Romanian LCC Blue Air's total seat numbers will grow by 64% year-on-year in the summer 2017 schedule - faster than for any other European airline group in the top 30 by seats. Blue Air, which launched operations in 2004, is now larger than Romania's flag carrier TAROM by annual passenger numbers and fleet size. Its growth has been prompted by the aggressive expansion of Wizz Air, which is number one in Romania, and of fourth ranked Ryanair.

Although Romania is still at the core of its network, Blue Air has embraced the pan European LCC model with a more geographically expansive strategy. Its second largest base, after the Romanian capital Bucharest, is in the Italian city of Turin, and Larnaca in Cyprus is also an important base.

At the start of the summer 2017 schedule, Blue Air added a third non Romanian base at Liverpool, helping the northwest England airport to 7% passenger growth in Apr-2017. In all three of its foreign bases Blue Air operates to destinations outside Romania. It is still small on a Europe wide scale, but in launching a UK base Blue Air is taking the fight to LCCs such as Ryanair and easyJet in one of their strongest markets.

Summary

Blue Air's total seat numbers will grow by 64% YoY in the summer 2017 schedule, making it the fastest growing European airline group in the top 30 by seats.
Blue Air has embraced the pan-European LCC model with a geographically expansive strategy, including bases in Italy and Cyprus.
Blue Air has overtaken TAROM to become the largest home-grown airline in Romania, with a seat share of 18%.
Blue Air's passenger numbers are expected to exceed 4 million in 2017, a significant increase from 1 million in 2014.
Blue Air's fleet of 25 aircraft, consisting entirely of Boeing 737 variants, is larger than TAROM's fleet of 21.
Blue Air has established bases outside Romania, including Liverpool, Turin, and Larnaca, and is taking on LCCs such as Ryanair and easyJet in their strong markets.

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Blue Air adopted a customised Liverpool livery

Blue Air has adopted a customised livery for its Liverpool based Boeing 737-800, after running a competition for local people to submit their designs.

The final choice was an amalgam of three designs, as Blue Air wanted to include aspects of all three. The design tries to embrace Liverpool's musical heritage, its hospitality and its skyline, while incorporating both the red and the blue of the city's two football teams.

Although aesthetically lacking in focus, this combination demonstrates Blue Air's desire to be seen as a local airline in its new base -something that may be helped by its non ethnic and non national name. This approach may also be of value if it chooses to expand to more bases across Europe outside its home country.

Blue Air Boeing 737-800 in its Liverpool livery

Blue Air is now number two in Romania

Wizz Air is the biggest airline by seats operating in Romania, with a 35% share of seats in the week of 8-May-2017 (source: OAG). Blue Air is now the number two airline in Romania, and the largest home grown airline in the country. It has a seat share of 18%, ahead of the flag carrier TAROM, on 13%, and Ryanair, which has 11% of seats.

Blue Air's six Romanian bases are at Bucharest Otopeni, Bacău, Iași, Cluj Napoca, Constanța and Sibiu.

Wizz Air has seven bases in Romania: Bucharest Otopeni, Cluj Napoca, Tirgu Mures, Iași, Sibiu, Craiova, and Timișoara. According to OAG, it also operates routes to/from Suceava Salcea, Satu Mare and Constanța.

Romania: airlines by share of total seat capacity, week of 8-May-2017

The chart below illustrates how Blue Air's rapid growth has taken it above TAROM in the ranking of airlines by seats in Romania.

It shows the development of weekly seat numbers on international routes between Romania and Europe. Since 92% of Romania's seat capacity is international and 95% of international capacity is to Europe (source: OAG, week of 8-May-2017), this closely reflects the development of total capacity to/from/in Romania.

Blue Air has overtaken TAROM, but Wizz Air's rapid growth has kept it in the lead in Romania. Ryanair's rapid growth is bringing it close to TAROM's level of seat capacity this summer.

Romania: one way international weekly seat capacity to Europe by airline, 19-Sep-2011 to 9-Oct-2017

Blue Air passenger numbers to exceed 4 million in 2017; were 1 million in 2014

According to data from OAG, Blue Air's seat capacity increased by 75% in 2016, to 3.8 million seats, after growing in 2015 by 118%, to 2.2 million seats. As recently as 2014, Blue Air's annual capacity was only 1.0 million seats.

Blue Air annual seat capacity: 2014 to 2017*

Data on schedules filed with OAG indicate seat capacity growth for Blue Air of 68% year-on-year for the first 41 weeks of 2017 (i.e. up to and including the week commencing 9-Oct-2017).

Blue Air reportedly carried 3.6 million passengers in 2016, an 80% increase on its 2015 volume (business-review.eu, 10-Jan-2017). It has also been reported that it expects more than four million passengers in 2017 (romania-insider.com, 27-Jan-2017).

Given that a figure of 4 million would only be 11% higher than the 2016 figure, Blue Air's seat growth outlook suggests that the 2017 traffic figure could be comfortably higher.

In 2015, TAROM's annual traffic volume of 2.3 million passengers was a little more than Blue Air's total of a little more than 2 million. In 2016, Blue Air's 3.6 million passengers meant that it comfortably overtook TAROM, which reportedly carried 2.4 million passengers (business-review.eu, 10-Jan-2017).

Blue Air weekly seat capacity: 2014 to 2017*

Blue Air's fleet of 25 beats TAROM's 21

Blue Air's fleet size also overtook that of TAROM in 2016. At the end of the past year Blue Air had 23 aircraft in service, compared with TAROM's fleet of 21. At the end of 2015 TAROM's fleet had totalled 23 aircraft in service, compared with Blue Air's 14 (source: CAPA Fleet Database).

So far this year, Blue Air's fleet has grown further to 25 aircraft (as at 8-May-2017), while TAROM's remains at 21.

TAROM and Blue Air: total fleet numbers at year end 2006 to 2016 and at 8-May-2017

Blue Air's fleet of 25 aircraft consists entirely of Boeing 737 variants. Since the end of 2016 Blue Air has added two Boeing 737-800s, according to the CAPA Fleet Database.

The average age of Blue Air's fleet is 21.8 years, and it includes 14 aircraft that are more than 24 years old (the oldest is 28 years and the youngest 7 years). Ten of its aircraft are owned, and 15 are leased.

The CAPA Fleet Database currently lists no orders for new aircraft, but Blue Air manages its fleet growth and controls its fleet age through aircraft leases. However, its rapid growth and ageing fleet may prompt an order for new aircraft at some stage.

Blue Air fleet summary as at 8-May-2017

Aircraft	In Service
Boeing 737-300	2
Boeing 737-400	9
Boeing 737-500	5
Boeing 737-700	1
Boeing 737-800	8
Total:	25

Liverpool is Blue Air's third base outside Romania, adding to Turin and Larnaca

Blue Air's new base at Liverpool is already its ninth largest airport by seats, according to OAG data for the week of 8-May-2017.

It is the airline's third base outside Romania (i.e. an airport where it bases aircraft and crew), behind Turin (Italy) and Larnaca (Cyprus). Turin is also its number two airport by seats, and Larnaca is its seventh ranked airport by seats.

Blue Air's biggest base overall is Bucharest Otopeni and its other five Romanian bases are at Bacău, Iași, Cluj Napoca, Constanța and Sibiu.

In addition to its three bases outside Romania, three other foreign airports also rank among Blue Air's top 10 by seats.

Although Rome Fiumicino is not a base, it is Blue Air's number three airport by total seats. London Luton, also not a base, is its number six airport by seats. Catania, on the Italian island of Sicily, is also in its top ten airports by seats (but is also not a base).

Blue Air: top 10 stations by seats: week of 8-May-2017

Liverpool: five routes to W Europe, three to Romania

From the start of summer 2017, Blue Air has based one Boeing 737-800 at Liverpool John Lennon Airport. It has served Liverpool since 2014 and has routes there from its Romanian bases at Bucharest, Bacău and Cluj (there are no other airlines operating these three routes, according to OAG).

This is its third base outside Romania and its first in the UK. In addition to the Liverpool-Romania routes already operated, it has launched four new routes to destinations outside both Romania and the UK - namely Rome FCO, Milan Bergamo, Hamburg and Alicante. In Jun-2017 Blue Air will add Larnaca to its Liverpool network.

Liverpool to Rome FCO, Milan Bergamo and Hamburg are all monopoly routes for Blue Air, according to OAG. However, on Liverpool-Alicante, Blue Air is competing head to head with Europe's two biggest LCCs: Ryanair and easyJet. Blue Air will also compete with easyJet on Liverpool-Larnaca.

Blue Air routes from Liverpool*

	Blue Air rank by seats on city pair	Competitors on city pair
New routes launched summer 2017
Alicante	3	Ryanair, easyJet, Blue Air
Hamburg	1	Monopoly
Larnaca	2	easyJet, Blue Air
Milan BGY	1	Monopoly
Rome FCO	1	Monopoly
Routes to/from Blue Air bases in Romania
Bacău	1	Monopoly
Bucharest	1	Monopoly
Cluj	1	Monopoly

Turin: 12 routes to W Europe, including seven in domestic Italy, and three to Romania

Blue Air's biggest foreign base is Turin, where it plans to handle one million passengers in 2017, according to director general Gheorghe Racaru (ttgitalia.com, 30-Nov-2016).

The airline flies to Turin from three of its Romanian airports: Bucharest, Bacău and Oradea. It competes with Wizz Air on Turin-Bucharest, but has a monopoly on the other two routes.

Blue Air also operates 12 routes from Turin to destinations outside Romania, including seven domestic Italian routes (Alghero, Bari, Catania, Lamezia Terme, Naples and Pescara) and five to third party countries (Berlin Tegel, Copenhagen, London Luton, Madrid and Málaga).

On the Italian domestic routes it has three monopolies (Alghero, Lamezia Terme and Pescara), but competes with Alitalia on three routes and with Ryanair on two. Alitalia withdrew from Turin-Lamezia Terme in Sep-2016.

According to OAG, Blue Air is the number six airline by seats in the domestic Italian market this summer (week of 31-Jul-2017).

On the international routes from Turin to third party countries: it is the only operator to Berlin, Copenhagen and Málaga, but competes with Iberia to Madrid and with three others on Turin-London on a city pair basis (Ryanair to Stansted, British Airways to Gatwick and Thomson Airways to Luton). EasyJet operated Turin-London Luton in winter 2016/2017, but withdrew in Apr-2017.

Although the airline is still relatively small in Italy compared with the well established LCCs Ryanair, easyJet, Vueling and Wizz Air, and smaller than other fast growing LCCs such as Volotea, Blue Air's Turin base and its strong growth have added to the weight of low cost competition that has burdened Alitalia.

Blue Air routes from Turin*

	Blue Air rank by seats on city pair	Competitors on city pair
Routes to destinations outside Romania
Alghero	1	Monopoly
Bari	2	Ryanair, Blue Air
Berlin Tegel	1	Monopoly
Catania	1	Blue Air, Ryanair, Alitalia
Copenhagen	1	Monopoly
Lamezia Terme	1	Monopoly
London LTN	3	Ryanair (STN), British Airways (LGW), Blue Air, Thomson (STN, winter only)
Madrid	2	Iberia, Blue Air
Málaga	1	Monopoly
Naples	2	Alitalia, Blue Air
Pescara	1	Monopoly
Rome FCO	2	Alitalia, Blue Air
Routes to/from Blue Air bases in Romania
Bacău	1	Monopoly
Bucharest	1	Blue Air, Wizz Air
Oradea	1	Monopoly

Larnaca: six routes to W Europe and two to Romania

Blue Air's base at Larnaca is its most competitive. Based on OAG data for the week of 31-Jul-2017, all five of Blue Air's routes to non Romanian destinations have at least two operators, while Larnaca-Tel Aviv has six, and Larnaca-London has nine (on a city pair basis, see table below).

Moreover, on Cluj-Larnaca Blue Air competes with Wizz Air (both launched this route at the start of the summer 2017 schedule). On Bucharest-Larnaca it competes with both TAROM and Wizz Air.

Blue Air routes from Larnaca*

	Blue Air rank by seats on city pair	Competitors on city pair (in order of weekly seat capacity)
Routes to destinations outside Romania
Athens	2	Aegean Airlines, Blue Air, Cobalt Air
Birmingham	3	Monarch, Thomas Cook, Blue Air, Thomson, Cobalt Air
Liverpool	2	easyJet, Blue Air
London LTN	8	BA, Thomson, easyJet, Aegean, Monarch, Cobalt, Thomas Cook, Blue Air, Jet2.com, Norwegian
Tel Aviv	7	Aegean, Arkia Israel, Israir, El Al, Cobalt, Tus Airways, Blue Air
Thessaloniki	3	Aegean Airlines, Cobalt Air, Blue Air
Routes to/from Blue Air bases in Romania
Bucharest	1	Blue Air, TAROM, Wizz Air
Cluj	1	Blue Air, Wizz Air

Blue Air is fastest growing top 30 European airline group

According to OAG data for the summer 2017 scheduled, Blue Air is ranked at number 30 by total seats among European airline groups. It has only 0.4% of total seats to/from/in Europe, but its 65% growth rate this summer is faster than that of any of the airline groups that are larger than it.

To find one that is growing faster, it is necessary to go down to the number 50 ranked player, Iceland's WOW air, which is increasing its summer seat capacity by 90%. However, WOW air is based in Iceland, half way across the North Atlantic, and much of its growth is focusing on US routes - using its Reykjavik hub to connect these with Europe.

It is fair to say that Blue Air is the fastest growing airline of any significant scale that is based in continental Europe.

Blue Air's strategic boldness and high growth mark it out for the future

Moreover, its strategy of establishing bases outside its home country, with routes that do not fly back to Romania or even to its home region of Eastern/Central Europe, is a bold one and marks it out among European LCCs.

Ryanair and easyJet are the two leading examples of airlines with a truly pan European base strategy, while the IAG subsidiary Vueling also adopts this approach - albeit to a lesser extent.

Looking down the list of European LCCs in order of their size, there are then few that have such a wide ranging view of being pan European. Norwegian's growth focus is now principally on long haul routes, while Wizz Air, which is bigger than Blue Air in Romania and much bigger across Europe, bases its network on routes that link Western Europe to Eastern/Central Europe.

The networks of Lufthansa's Eurowings and Air France-KLM's Transavia are based on linking their group's home countries with the rest of Europe (and, in the case of Eurowings, with other continents). Pegasus, in Turkey, and Jet2.com and Monarch Airlines, in the UK, have routes to destinations across Europe, but are based in one country only.

Among the smaller European LCCs, the only one with significant capacity operating from bases outside its country of origin is Volotea, which is a little bigger than Blue Air and ranked at number 28 among European airline groups by seats this summer. It is growing at 'only' 27%, well under half Blue Air's rate this summer.