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seriously. Southwest flew to smaller regional airports, helping to lower operating costs to almost half that of US legacy carriers. Te result was much lower fares than the incumbents, and the creation of a whole new market of plane travellers who previously wouldn’t have considered air travel. Tis disruption hit not only the airlines but also the bus and rail industries, which lost customers to this new airline concept. Te Southwest model quickly came to Europe through
the rise of Ryanair and Easyjet, with both airlines using a similar model focused on flying out of regional airports that established carriers such as British Airways, Luſthansa and Air France would never have dreamed of using. How things change – Easyjet was the biggest carrier at Gatwick in 2017. Ryanair is now the second largest airline in Europe,
narrowly beaten by the Luſthansa Group. Te liberalised EU open-skies policy has allowed Ryanair, Easyjet and more recent additions such as Wizz Air and Norwegian to operate freely out of several hubs in different countries within Europe, including to the US, Asia and beyond. Norwegian even went a step further: registered in Dublin, subsidiary Norwegian Air International was set up to take advantage of Ireland’s aviation-friendly regulatory environment – operating as a fully integrated subsidiary to its Norway-based parent, using hubs in Spain, Italy, the UK and Denmark among others.
DISRUPTION FROM THE GULF Looking beyond Europe and Asia, liberalisation has also fuelled the disruptive effect of the Gulf carriers on the full-service airline market globally. Taking advantage of location and the open-skies agreement with the US dating back to 2002, the “ME3” of Emirates, Etihad and Qatar Airways have risen to become market leaders in both product and technology, with Emirates currently keeping the A380 in production. Concerns raised by certain US carriers over subsidies
seem to have quietened with the US recently reaffirming the open-skies agreement with the UAE (and the nation
S E P TEMBE R 2 0 18
of Qatar) in return for greater transparency and a promise that Emirates would drop any plans to launch further direct flights between the US and destinations other than via the UAE. In any case, Qatar Airways and Etihad have had enough on their plate, with the former still restricted in where it can fly within the Gulf, and Etihad announcing a US$1.52 billion loss in June 2018, an improvement on the US$1.87 billion it lost the previous year following the failure of its ambitious Air Berlin and Alitalia experiments. Sometimes, disruption and change doesn’t pay.
Ryanair is now the second largest airline in Europe, narrowly beaten by the Luſthansa Group
NEW BRANDS AND NEW TECHNOLOGY Disruption fuels change and encourages competition, resulting in lower prices and a significant expansion in the types of fare products available (see the “Economy à la carte” feature in Business Traveller’s July/August 2018 edition). It has also resulted in an expansion of brands. In 2017 BA and Iberia’s parent company, IAG, launched Level – a low-cost brand targeting the cost-conscious leisure market. In 2018 Air France followed suit with Joon, which focuses on lower-yielding destinations such as South Africa. Luſthansa has done the same with Eurowings out of its Munich hub to leisure destinations such as Bangkok, while operating the mainstream Luſthansa services
out of Frankfurt. In Australasia, the pattern is similar. Scoot, and previously Tigerair, has allowed the Singapore Airlines Group to compete on cost and product with
Malaysia’s mega LCC AirAsia, also flying long haul to destinations such as Athens. Jetstar has done the same for Qantas, being used as that airline’s growth vehicle for expansion into Asia. Tigerair subsequently merged with Scoot in 2017, but the brand lives on under Virgin Australia as that airline’s competitor to Jetstar. Scoot, Jetstar, Joon, Level, Eurowings and Norwegian
all offer a premium cabin partially aimed at capturing the cost-conscious corporate market, particularly SMEs. More
busin e s s t r a ve lle r . c o m →
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