Eastern Airways
Sundstrand make auxiliary power units for Airbus in Dijon, but there was no service to Toulouse. It took three years of talking to the community and business leaders. It’s important to engage all the local partners; everyone has to be involved
services to Birmingham and Manchester, with the focus being on convenience rather than price. The response of the market was impressive, with Manchester generating over 15,000 passengers in its fi rst full year of operation in 2003 and Birmingham generating almost 13,000 passengers in 2004.
The powerful low-cost carrier Ryanair subsequently introduced an off-peak single daily service from Inverness to Liverpool, which is close to Manchester, in competition with Eastern. However, the LCC found that, despite low fares, the dynamics of the LCC model didn’t work in this case and Ryanair terminated the route while Eastern continued to operate.
Capacity and frequency were added over time and ultimately the routes became so successful that they attracted the attention of Flybe, which moved in with larger aircraft and lower fares but also lower frequency. At this point Eastern decided to withdraw. “That’s competition,” says Lake, while pointing out that were it not for his company’s pioneering move into the markets, 70,000 passengers per year would not be fl ying between Inverness and the two English cities.
www.routesonline.com Case study 2: Dijon
The airline has continued to seek out similar niche opportunities where the service convenience model can be applied, and this recently led to a move into the French domestic market. It was the same detailed and non-conventional approach to market research that resulted, after several years of analysis and negotiation, in the establishment of a base in Dijon in the Burgundy region of France.
Through his own requirement to travel to this part of France, Lake had noticed, with astonishment, its complete lack of air services. As a sizable French city, Dijon had had no regular scheduled air services, either domestically or internationally, since its low-cost link to London (operated by buzz) was ended when the KLM subsidiary was sold to Ryanair in 2003. “Sundstrand make auxiliary power units for Airbus in Dijon, but there was no service to Toulouse,” Lake observes. He strongly believes in what he terms the technique of “lifting the lid and peeling the onion – the more you do the better”. “It took three years of talking to the community and business leaders who wanted to get from A to B. It’s important to engage all the local partners; everyone has to be involved,” he notes.
The Dijon base opened in September 2010 with two Jetstream 41s and the launch of two routes to Toulouse and Bordeaux, with their natural links in the wine production industry. Over 10,000 passengers have used the services at the time of writing in mid-March, and a third route to Nantes will commence in May 2011.
Lake believes that this model can be rolled out in other cities around Europe, but he points out that it is not without its challenges. “You need to learn the subject, be resilient and offer competitive prices to the transport alternatives. Cultural differences have to be overcome but that’s actually a pleasure,” he comments. He doesn’t see his airline being crowded out by the activity of larger players. As economic pressures increase, he expects that they will fi nd it even more diffi cult to maintain their presence in smaller markets. “Provided we keep on our toes, opportunities will increase; the natural growth of a major carrier is away from the regions but the role of minors is key.”
Tax burden
Lake doesn’t hide his anger and frustration at the growing tax burden (“it’s the thin end of the wedge,” he says) as air passenger departure taxes are added to emissions levies and local infrastructure charges. If this brings into question the viability of a number of unglamorous but essential and unsubsidised services operated by regional carriers, such as Eastern Airways, the very economic livelihood of a number of cities and regions could be brought into question. Lake sums up by observing: “Any community that takes itself seriously, really has to be enthusiastic about aviation if they want to make business happen.” It seems that in a number of these markets the business model of the small regional carrier is indispensable after all.
RN
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