Routes
In a drive to enhance profitability in the face of the pandemic, low-cost airlines like easyJet and Ryanair added dozens of new routes.
The rise of the low-cost carrier While the challenges will affect everybody, it seems clear that some carriers are better placed to ride out the storm than others. On one hand, business travel is facing a muted recovery – according to Bloomberg Intelligence, US business travel was down 50% in February, compared with February 2019. On the other hand, leisure travel is making a stronger comeback, and within that, low-cost carriers are stealing the lead.
“Everybody wants to get out and go on vacation – they’ve been through a pandemic for a couple years – and a lot of these people are price-sensitive,” says Ferguson. “With the spike in oil prices, they will be drawn to low-cost carriers because they can deliver seat miles more cheaply and keep fares lower. It’s harder for the full-service carriers to do that.” Of course, low-cost carriers are not immune to price hikes, especially given that fuel costs account for a higher proportion of their fares. Already, we are seeing debate around how much of this cost should be passed onto the consumer, and how much can be absorbed by the airlines themselves. However, the market appears to be in relatively good health.
According to the global travel data provider OAG, low-cost carriers had reached 87% of their pre- Covid capacity by March, compared with 79% for full-service carriers. And while low-cost carriers still only account for 32.1% of capacity globally, just a slight rise on 30.1% two years ago, there have been significant shifts in Europe, South East Asia and the Middle East. In western Europe, for instance, market share has grown from 36.9% to 45% – the result in part of aggressive expansion strategies from airlines like easyJet and RyanAir. “Over the past two years, significant capacity has left primary airports around Europe as legacy carriers dramatically scale back in short haul,” says Sophie Dekkers, chief commercial officer at easyJet. “This has enabled easyJet to further strengthen our
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position at these primary airports, where we have very high head-to-head overlap with legacy carriers. At the end of 2021, as we saw other airlines retrench, we put over 1.1 million additional seats on sale from our largest airport, London Gatwick.” She adds that easyJet is adding 25 aircraft to its operational fleet in 2022, having launched 16 new routes from the UK at the end of 2021 and eight more since then. “We are continually reviewing our network to identify profitable growth opportunities, and we have added thousands of additional seats across our entire network to serve the increase in demand,” says Dekkers. “We will of course continue to compete even more strongly against other low- cost carriers on our head-to-head routes with them, and, as always, we welcome healthy competition as it is good for consumers to have a choice.”
Capitalising on demand
This chimes with a broader trend among budget airlines, which have been looking to take advantage of renewed demand. Wizz Air recently launched 18 new routes from London Gatwick, as well as three new routes between Italy and the Greek island of Skiathos. RyanAir has announced 14 new routes from its three London airports, while Vueling has added five new Spanish routes. What is more, these kinds of ambitions are not limited to existing low- cost carriers. Since the start of the pandemic, we have witnessed the launch of several new airlines, including Breeze and Avelo in the US and Flyr, Norse Atlantic and PLAY in Europe. Although it may seem like a counterintuitive time to be entering the industry, these start-ups have several points working in their favour. For one thing, they lack the debt accrued by legacy airlines. For another, they can build something from the ground up, responding to today’s market conditions as they find them rather than having to rejig their business models. “It certainly is challenging to start an airline during a pandemic – it may even sound bizarre to
87% 79%
Capacity reached by low-cost carriers of their pre-Covid levels by March 2022.
Capacity reached by full-service carriers of their pre-Covid levels by March 2022.
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