easyJet soars

Courtesy easyJet

Courtesy easyJet


It is a dream come true for easyJet, which in October revised its full year pre-tax profit upwards to between £575m (US$899m) and £580m, previously expected to be between £545m and £570m. (See easyJet rides on Air France’s troubles, Oct 8, 2014)  The budget carrier announced profits of £581m for the year ending September 30, an increase of 21.5 per cent from last year’s £478m.

The good results arose from:

  1. Acquisition of additional slots at Gatwick Airport from rival airline Flybe;
  1. A 7-per-cent increase in traffic to 64.8m passengers carried, filling up 91 per cent of seats available’ and
  1. Cheaper fuel.

Going forward, easyJet expects positive results particularly in light of fuel prices continuing to dip. (See Falling fuel prices do not necessarily lead to lower airfare, Nov 13, 2014) the airline has not ruled out likely fare increases.

The success of the likes of easyJet and Ryanair reflects the competition that budget carriers pose to legacy airlines. (See Ryanair attributes success to its business model, 6 Nov 2014) Air France and Lufthansa, for example, are trying to give more punch to their version of low-cost travel via Transavia and Germanwings respectively. (See Budget phobia grips European airlines, Oct 22, 2014) Why should the experienced full-service airlines be concerned?

easyJet chief executive Carolyn McCall told the BBC: “When people sample us, when they try for the first time, they tend not to go back to legacy airlines.”

The lure of low fares is a starting point, and when budget carriers begin to focus a little more on service and what travellers genuinely want, therein lies the threat for the traditional airlines. Ryanair for one has said it was changing its image to be a more caring airline. (See A humbler and more caring Ryanair, May 22, 2014) For the short haul, budget carriers have finally shown that they can crack the legacy airlines’ dominance. They may not be able to afford the full complements of the big boys, but what they are offering is a value proposition, the strategy of balancing what travellers would pay or forgo for what they offer.

Flybe’s bleak future not a good sign for low-cost carriers

WHILE legacy airline British Airways (BA) trumpeted impressive results this past week, Flybe is going down the same path that Ryanair took. (See IAG’s performance augurs well for industry, Nov 12, 2013, and Can Ryanair change to be less macho? Sep 21, 2013.) Interestingly, Flybe is 15-per-cent-owned by the International Airlines Group (IAG), the parent of BA, Iberia and Vueling.

Courtesy Reuters/David Moir

Courtesy Reuters/David Moir


Flybe’s passenger carriage has been flat and profit after tax turned into a loss for the last couple of years (the year ending 31 March). It incurred a loss of GBP6.4m (US$10.3m) in 2012, which deteriorated to GBP 41.8m.

The airline, which is headquartered in Exeter, Devon in England, planned to close six bases and reduce staff numbers. Chief executive Saad Hammad said: “I know that these proposals are creating great personal uncertainty, but they are necessary to secure a long-term future for Flybe.”

Considering how European carriers such as Air France-KLM, Lufthansa and Iberia – are continually taking measures to reduce staff numbers, it points to the redundant weight those carriers are carrying in better times that are incommensurate with increased competition and a changing environment.

If there are any mixed signals from the different performances reported by BA and its less profitable rivals, this may point to a recovery in premium travel and the converse saturation of the low-cost market restricted by the small hinterlands. Flybe planned to close its bases at Aberdeen, Guernsey, Inverness, Isle of Man, Jersey and Newcastle.

So if BA chief Willie Walsh and Ryanair boss Michael O’Leary appeared to be talking at cross purposes, it could be that the two honchos, who are known not to see eye-to-eye on several issues, were operating in different worlds.

Is Virgin Atlantic on the verge of extinction?

Courtesy Virgin Atlantic

Courtesy Virgin Atlantic

RIVALS Virgin Atlantic and British Airways have never been the best of friends. The long-running feud between the two airlines is taking on a new confrontation since the `dirty tricks” campaign in the early 1990s when Virgin chief Richard Branson successfully sued BA for  poaching Virgin passengers and staff and for scandalizing his name.

The two airlines have long been engaged in fierce tussles over landing slots at London Heathrow.  Sir Richard has expressed dissatisfaction with the advantage held by BA, enhanced by IAG’s acquisition of British Midland International and BA’s alliance with American Airlines.

In the latest bout, Sir Richard said he would bet £1m that Virgin would still exist in five years, following an alleged comment by BA and International Airlines Group (IAG) chief Willie Walsh that the Virgin brand would soon disappear. IAG, a British-Spanish holding company, owns BA and Iberia Air and has minor stakes in smaller operators that include Flybe, Royal Air Maroc and Air Mauritius. The winner of the bet will distribute the money to the respective airline’s staff.

Courtesy time.com

Courtesy time.com

Sir Branson, who founded Virgin 28 years ago, insisted: “We have no plans to disappear.”

Doubt over Virgin’s future took root in Delta’s interest in acquiring more than the 49-per-cent stake that Singapore Airlines owns in Virgin. (See Singapore Airlines in discussion to sell Virgin stake to Delta, Dec 4, 2012). Since European Union (EU) regulations do not permit majority ownership by a foreign carrier, rumours had it that Delta’s partners in the EU – Air France-KLM – would then acquire part of Virgin’s 51-per-cent stake. This would expand Delta’s cross-Atlantic operations and secure it slots at London Heathrow, fanning suspicion that it might well mean the end of the Virgin brand.

Courtesy news.delta.com

Courtesy news.delta.com

Sir Branson had said it was time that Virgin form alliances to ensure its survival.

Five years is not a long time but anything can happen in the volatile airline business. Admired as a shrewd entrepreneur and respected for his management expertise, Sir Richard is an industry enigma. Even as he reduces his stake in his “baby”, there are ways to retain the Virgin identity – at least for five years. New majority owners may want to retain Virgin brand loyalty and continue to ride on Virgin’s popularity.