air scoop march 2007

8/14/2019 Air Scoop March 2007

1/13

EDITORIAL

Environment, environment, environment! It seems these days

that environment has become the main issue concerning Eu-

ropean low-cost carriers. Sam Sellers, from Air Bulletin, pre-

sents us the second part of his exclusive article on environmental

public relations strategy for LCCs (p. 11). Two trends are clearly

becoming apparent (p. 9): On one hand, some LCCs, such as easy-

Jet(p. 9), have realized the clear and present danger on the planet

and have prepared a strategy to reduce their carbon emissions; and

on the other, some LCCs led by Ryanairrefuse to accept their roleand accuse government and institutions to add more taxes and to

regulate the market. This attitude goes against associations such as

Plane Stupidwhich has declared they will continue to target direct

actions against LCCs (p. 10).

Air Scoopstarts this month a deep investigation on LCCs subsidies

in Europe (p. 8). Further articles in our coming issues will follow

this global introduction. Just before the recent announcement of

bankruptcy ofFlyMe(Read Air Scoop April 2007), Air Scoophad

an exclusive interview of Finn Thaulow, CEO of the Swedish car-

rier (p. 2). From the same region, we made a focus on Blue1, thesecond largest airline in Finland (p. 4). Whereas Nordic skies are still

mostly held by local carriers, it is not the case of the Austrian LCC

market, largely dominated by foreign companies (p. 7). IdeaWorks

Companygave us once more a clear analysis of frequent flying pro-

grams. This month Jay Sorensenexplains why frequent flyer exe-

cutives are concerned about reward availability (p. 5). One of our

correspondents covered the FITUR 2007 in Madrid (p. 12). We had

the opportunity to ask few questions to representatives from Ger-

manwings, Meridianaand Blue Air(p. 13).

At last but not least, Air Scoopis proud to announce it will be me-

dia partner of the main LCCs European events:

- 2nd Air Transport Conference for CSEE (4th of May 2007) Bra-

tislava (EastEuroLink)

- Low Cost Air Transport Summit (13th and 14th of June 2007)

London (MarketForce)

- World Low Cost Airlines Congress (17th to 19th of September

2007 London (Terrapinn)

Air Scoopwill of course cover all these events starting next month

with French Connect (25th to 27th of April 2007) in Nantes - La

Baule Atlantia.

Highlights in this IssueBlue1: Low Prices - High Standards p. 4

Frequent Flyer Executives... p. 5

The Austrian LCC Market p. 7

LCCs Subsidies: The Birth p. 8

LCCs and Environment: Green Wars p. 9

Air Scoop - March 2007 www.air-scoop.com

The Low Cost Carriers Analysis NewsletterAIR SCOOP ANNOUNCEMENTS

Air Scoop and TripVision:

A Partnership for Polls

Air Scoop is proud to announce a par-

tnership with TripVision, the UKs only

travel specific tracking survey collecting

attitudes and behaviors of the travel con-

sumer.

The UK travel industry can now benefit

from a major new research program that,for the first time, aims to give meaningful

insight into all aspects of traveller behaviour

patterns - including future intentions.

TripVisionis a mixture of quantitative and

qualitative research combined with data

analysis to give a complete picture of the

size of the market, the traveller patterns

and how different categories of travellers

approach their individual trips.

Therefore, with TripVision, Air Scoop

will be able to provide more trends frompassengers and other sources.

http://www.trip-vision.com

Air Scoop - In the Air

Plovdiv

Airport

openning?


2/13

BIRDS EYE VIEW


Exclusive Interview of Finn Thaulow

(CEO of FlyMe)Finn Thaulow

CEO of FlyMe

Could you please present FlyMe to

our readers? What are your specifi-cities compared to other European

LCCs? What do you do better than

your competitors?

FlyMe Swedenwas founded in 2003

and started its commercial flights in

April 2004. The business model was

to operate a limited number of do-

mestic flights plus charter flights. The

utilization was very low, approx 4

hours per aircraft /day. FlyMe Swe-den is owned 100% by FlyMe Eu-

rope ABwhich is traded on the First

North at the Stockholm Exchange.

New owners and a new Board of

Directors took over in August 2005

and it was decided to turn FlyMe

Sweden into a true LCC airline by

investing in the FlyMebrand. Num-

ber of frequencies were increased on

the domestic routes and 12 new Eu-

ropean destinations were introduced

from Gothenburg from the Summer

2006 traffic program. FlyMepresent-

ly operates a fleet of 5 leased aircraft

(4 Boeing 737-300 and 1 Boeing 737-

500). From the Summer 2007 traffic

program the fleet will be increased to

7 aicraft (6 737-300 and 1 dampleased

MD87). The domestic operation has

been increased in terms of frequen-

cies and FlyMe has achieved a market

share of 34% on the route between

Gotehnburg and Stockholm/Ar-landa and 38% between Malm and

Stockholm/Arlanda. European des-

tinations have been introduced from

Stockholm in November (Alicante

and Nice) and more will be added

from Summer 2007 when also Malm

will have flights to European destina-

tions. Stockholm-Lule will be added

on the domestic route net. FlyMe

expects to carry around 1.5 million

passengers in 2007 and the growthin turnover will in principle double

from 2006. FlyMeis financed throu-

gh equity and has therefore posted

losses in the build-up phase. With the

current trend and size of the airline,

the financial results will improve andprofits are expected from the second

quarter of 2007.

How do you analyze the compe-

tition in Sweden, especially with

Ryanair with its base in Stockholm?

Which LCC is for you the main

competitor?

The LCC airlines are taking more and

more market share but also growingthe market by being able to offer at-

tractive fares and thus enable more

people to fly. The important thing is

to keep very tight cost control as ul-

timately the one with the lowest unit

cost will be the winner

Why did you choose Gothenburg as

your main base? What are the ad-

vantages to be there?

Gothenburg has historically been an

underserved area. The national car-

rier, SAS, offered very few non-stop

services to and from Gothenburg

trying to channel as much traffic a

possible via its main hub in Copen-

hagen. Consequently, there was an

untapped potential in Gothenburg

and its catchment area; stretching

also far into Norway.

The European Low cost carriers

market has reached a certain ma-

turity which leads to its consolida-

tion. During this transition, what

are, for you, the greatest threats to

the European Low cost carriers?

Fuel rising? Overcapacity? Evo-

lution of airports? Regulation?...

Overcapacity and lack of airport

slots pose the biggest challenge.

Again, it is important to monitor thecost base continuously and also the

traffic program in terms of frequen-

cies and destinations. A high degree

of flexibility is needed to respond to

changes in the market and competi-

tive actions

What are your expansion projects

for the coming year(s)?

FlyMewill continue to grow and gra-dually increase its network between

Stockholm and Euope as well as Mal-

m and Europe. Furthermore, flights

on intra-Scandianvian sectors will also

be introduced. FlyMe Europehas an-

nounced the purchase of 51% of Ri-

ver Don, which owns 51% of Global

Supply Systems. The transaction is

conditioned by necessary approval by

the British Civil Aviation Authorities

as well as an endorsement from theGeneral Assembly ofFlyMe Europe.

Global Supply System is a profitable

747-400 cargo operator today and has

the potential to partly develop the

existing cargo business but could also

serve as a platform for the introduc-

tion of long haul LCC in due time.

A project is looking into this exciting

possibility right now. A proposal or

recommendation will be made to a

General Assembly by the 28th of Fe-

bruary 2007.

Many LCCs look after extra-reve-

nues to offset the low price of their

tickets. What are the projects of Fly-

Me in terms of Extra-revenues?

Ancillary revenue is very important.

FlyMe is presently strengthening this

part and will put in a lot of efforts

in 2007 to substantially increase re-

venues from non-airline products.The website is being up-dated and

ancillary services presented more at-

tractively and efficiently. It is a most

prioritized area


3/13

BIRDS EYE VIEW


Do you believe that consolidation

of the market will lead to 2-3 main

LCCs in Europe, or do you think

there will always be many LCCs on

niche markets?

There will certainly be consolida-

tion in the market with maybe 3-5

main LCCs. FlyMeaims to be part

of this group. Additionally, there will

always be a number of smaller LCCs

but probably shrinking

Are you worried about the shortage of

pilots and crew hitting LCC market?

The overall airline market is growingby an estimated 5% annually the co-

ming years according to IATA. The

LCCs continue to grow faster and to

represent a higher share of the to-

tal number of passengers traveling

reaching around 20% of the total

in 2007. This high development ratewill definitely put pressure on get-

ting sufficient number of pilots also

considering that other parts of the

world have an increased demand and

corresponding shortage as well. The-

refore, it is important to be regarded

as a good and attractive employer

and first and foremost to have an

excellent relationship and working

climate

What are the options for FlyMe to

transform its business model in

order to make more costs savings?

Cost savings is a matter of continuous

improvements and the right menta-lity throughout the entire organiza-

tion. Additionally, it is the flexibility

to respond to changes in the market

and being able to make adjustments

in a reasonably short time.

Read Air Scoop February 2007 for a

complete analysis on FlyMe.

Six European consumers protection organizations from different

countries (Belgium, France, Italy, Portugal, Spain and The Nether-

lands) have evaluated more than 36 000 flights from legacy airli-

nes, charter airlines and low cost carriers.

The 9 000 passengers questioned gave detailed information on

their travel experiences on board flights from July 2004 until Sep-

tember 2005. With a rank at the 14th spot, GermanWingsis the-

refore the German airline with the highest evaluation marks. This

result is particularly due to the punctuality of its flights, the good

relation between price and performance, the cleanness on board

and the efficiency of the ground staff.

GermanWings: Best German Airlines

UP & DOWN

According to a French judicial source, French prosecutors have

opened a preliminary inquiry into allegations that Ryanairsad-

vertisements were misleading after receiving more than 40 formal

complaints. Indeed, Ryanairhighly publicized the launch of new

routes from Marseille to Morocco scheduled to begin in Novem-

ber 2006. But the flights have been cancelled indefinitely as the

necessary licenses had just not materialized on time.

The company denies any responsability for this fiasco. A spokes-

man of the airline accuses the French government of delibarately

trying to damage Ryanair.

Passengers of these cancelled flights accuse Ryanairof selling tic-kets before getting the green light for the routes, and sue the carrier

for misleading advertising. Although Ryanairhas paid back the

cost of the tickets, the carrier failed to reimburse related expenses,

such as deposits for hotels and hire cars.

Ryanair Cancelled Flights and

French Investigations


4/13

BIRDS EYE VIEW


The 4th French Connecttakes place on 25-27th April 2007 in La Baule. This unique event offers you the op-

portunity to network with some of the most influential people in European Low Cost aviation.

French airports, the legislators and Europes low cost operators all in one place with first-class conference faci-

lities, superb hotels and dining and a relaxed, entertaining business environment : book your place today!

For further information, please check www.frenchconnect.net

The Nordic sky has always been a tough place for airlines

where the survival of the fittest law can be applied vi-

vidly. What survives survives and goes on holding posi-

tions. Blue1entered the market after two previous brands

had failed (Air Bonitaand Flying Finn) and managed to

evolve into the second largest airline in Finland.

Under its name Blue1was launched in 2004 after tender

call for the re-branding, which was won by SAS. The

carrier started operating flights to those destinations that

had previously been served by Flying Finnbut more suc-cessfully. Though Blue1 is positioned as an individually

branded airline appealing in its colour scheme (white and

blue) to Finnish identity it is strongly backed up by SAS

group. Apparently it was that good fellowship with SAS

that helped Blue1to become the first regional airline to

join Star Alliancein 2004. At the moment Blue1is code

shared with SASbut it can also fulfill the task in getting

regional passengers feed into other airlines within the al-

liance. On the other hand, Blue1passengers can enjoy the

full range ofStar Alliancefacilities: EuroBonus program-

me, through check-in and lounges.

1 in the name stands for the fastest developing airline

in Finland and probably the first national airline to chal-

lenge Finnair. With its new 11 international destinations

opened in 2006 Blue1has to some extend undermined

Finnairs position. This also intensified overall competi-

tion in Scandinavia and led to response from other airlines

such as Sterling. Danish LCC made an attempt to create

its sixth base in Helsinki serving 11 destinations. But the

story was short and the project was terminated almost 4

months after, leavingBlue1one of the largest operators

between Finland and Scandinavia.

Blue1succeeded in finding its own way in business tra-

vel niche-market. It has elaborated a certain strategy ad-

dressed to short business travel segment. Not only fares

were reduced but several facilities added that made Eco-

nomy Flex a business-like class with the features requi-

red: fast check-in, front seats and special meal offers. The

company has recently introduced brand-new tariff sche-

me with three types of fares: WebSaver with the lowest

prices possible without any re-fund permitted; BestBuy

with higher prices but with the possibilities of rebooking;

and FullFlex with flexible conditions of rebooking and fullrefund. Such a variety of choices means that the airline is

oriented both towards usual low-cost passengers and to

people with higher demands. This has a good impact on

the carriers image bringing it closer to a full service airline

than to a no-frill one.

But still there are some fields where Blue1cant beat Fin-

nair in the nearest future: Russia, for example. Though

the LCC has initiated consultative sessions with Russian

aviation authorities regarding flight permission to start

operation regular flights to Moscow; it is unlikely thatFinnairwill concede its monopoly in the region.

According to Blue1web-site, the main goal is to become

the best regional airline for the North European business

and leisure traveller. And there are just two steps left to

achieve this. In September 2006 Blue1was voted the third

best regional carrier in Europe by the European Regions

Airline Association. No wonder the award would foster

further development and expansion. But as long as it is

Finnish the airline doesnt disclose its plans preferring to

develop quietly without unnecessary excitement in order

to show then great results at once.

Blue1: Low prices - High standards

AIRWAY MARKERS

EVENTS


5/13Air Scoop - March 2007

DOWN TO EARTH

www.air-scoop.com

Representatives from more than 70 frequent flier pro-

grams recently gathered in Vancouver Canada for thethird annual FFP Conference. Low cost carriers sending

representatives included Air Berlin, Frontier Airlines,

JetBlue Airways, Southwest Airlines, Spirit Airlines,

and Virgin Blue. The event is the worlds largest gathe-

ring of frequent flier program executives and provides a

unique opportunity to measure the pulse of the loyalty

marketing industry.

IdeaWorks, in cooperation with conference organizers

Airline Information and Global Flight, distributed a

survey during February 2007 to more than 100 registe-red attendees. The survey results demonstrated an al-

most painful level of awareness of consumer resentment

over reward availability issues. Management at low cost

carriers might find the results of interest as they react to

competitors that offer frequent flier programs, or as they

consider the development of programs of their own.

67% of program executives recognized that consumers are

frustrated by the lack of basic reward availability for the

entire airline industry. This awareness seems to be having

an affect on policy, as nearly 60% of survey respondentsanticipate some level of increased reward availability for

2007. But the dynamics of frequent flier programs have

clearly changed over the years. What began as a method

to increase loyalty has now become a source of attrac-

tive revenues. 42% of program executives indicate top

management now rates the ancillary revenues generated

by frequent flier programs as the benefit of greatest im-

portance.

Booking reward tickets is a top-of-mind issue for frequent

fliers. It seems every frequent flier has a tale of woe on

the topic reward availability. Consumers might be sur-

prised to learn program executives are very aware of the

problem. The survey measured perception of the reward

availability issue by comparing it to other areas of com-

plaint, and by seeking feedback for the airline industry as

a whole. By every measure, reward availability appears to

be problem number one in the airline industry.

One of the survey questions addressed the issue directly

by asking program executives about the perceptions held

by the members of their frequent flier program. Program

executives expressed concern over issues such as extrafees and upgrades. But, the greatest source of member

frustration is the trouble associated with booking reward

seats.

The issue of reward availability was also measured in a

broader sense by asking about consumer perceptions for

the entire airline industry. Here again, program executi-ves acknowledged the scope of the problem; 57% agreed

its a major problem and members are very upset. Only

6% of program executives indicated reward availability

is not a problem and that members are happy with the

ability to secure reward seats.

Perhaps the surprise result of the survey was the impor-

tance placed by top management on the ancillary reve-

nues produced by frequent flier programs. Loyalty was

the primary objective when frequent flier programs were

introduced 26 years ago. Over time, and largely concur-

rent with the advent of co-branded credit cards, the pri-

mary mission of these programs has become the genera-

tion of cash flow for the parent airline. Meanwhile, the

Stormy Weather: Frequent Flier Executives Are

Concerned About Reward Availability and Other

Consumer Issues

www.IdeaWorksCompany.com

by Jay Sorensen

(President ofIdeaWorks)

IDEAWORKS AISLE


6/13

BIRDS EYE VIEW


Everybody knows the packaged holiday tour business has

been ripe for consolidation for some time. There were no

surprises when First Choice put their mainstream business

up on the block. Soon the suitors were circling like 30-so-

methings at a speed dating party. Thomas Cookwas hot,

My Travel was ready to rumble and even Kuoniand Vir-

ginwere strutting their stuff.

So it was quite a surprise when Thomas Cookcaught My

Travels eye across the crowded dance floor and announced

they were an item! Was this unexpected outcome an op-

portunistic grab it now that could be a synergy trap as

some industry experts have observed....or a carefully thou-

ght through plan?

TripVisionran the numbers on the deal from a unique

standpoint - that of consumer ownership. As well as trac-

king the absolute numbers of consumers who have used a

particular travel agent, TripVisionis also able to identify

those consumers who have NOT used a particular agent.

TripVisionis the only data source to be able to do this.

This is a crucial factor as it determines whether the merge

will produce incremental business, or if consumers from

either party end up cannibalising each others sales.

The customer ownership results are available to subscri-

bers (its free to subscribe) of our web site www.trip-vision.

com - to the right hand side of this item entitled Thomas

Cook & My Travel Presentation. The analysis shows it was

a good move for both companies. Read on and reflect - re-

sults for the entire industry are also included on our chart

and clearly, there are still plenty of merger and acquisition

opportunities out there.

...so make sure you pick the right partner by considering

the consumer ownership perspective as well as the finan-

cials !!!!

Was Thomas Cooks and My Travels merger

the right outcome?

ANALYST PORTHOLE

pure loyalty benefit has been reduced to a lower level of

importance.

42% of survey respondents suggest their top management

says show me the money when placing a value on theirfrequent flier program. Only 15% of those surveyed opted

for loyalty as the primary benefit recognized by an airlines

top management.

Readers are encouraged to note the importance placed

upon the revenue generating power of frequent flier pro-

grams. What was launched as an initiative to further the

loyalty of key customers, has become a significant con-

tributor of profits from the sale of miles to partners suchas co-branded credit cards. But as the issue of reward

availability demonstrates, airline management should not

forget the key purpose of these programs - - to drive

loyalty, provide recognition and enhance customer ser-

vice. After all, these programs are designed to serve an

airlines best customers. If airlines fail to maintain the

value of these programs for their customers, they will be

useless as revenue sources.

Readers are invited to browse the complete 9-page report

online at the IdeaWorks web site: www.IdeaWorks-Company.com

Get more information:

http://www.trip-vision.com/TravelNews/index.cfm?ccs=61&cs=193


7/13

BIRDS EYE VIEW


At the beginning of 2007, the LCC

headlines in Austria were dominated

by... a Slovakian company, SkyEuro-pe. For two reasons: first, two Aus-

trian businessmen, Ronny Pecikand

his partner Georg Stump, took over

16,5% of the Bratislava-based com-

pany, quoted on the Vienna Stock

Exchange. Thus, they challenged the

other big SkyEurope investor, the

American hedgefond York (23% of

the shares).

Secondly, at the end of March,SkyEuropewill land at the Vienna

Airport for the first time ever. In

2007, the LCC will open 16 new

destinations from Vienna to Hol-

land, Greece, Spain, Belgium, Italy,

France, Romania, Bulgaria, Cyprus

and Croatia, and also an internal

route to Innsbrck. This year, the

Slovakian LCC expects more than

700 000 passengers in Vienna. Two

of its planes will be based in Austrias

main airport, and ten in two years.

This is an important evolution in

SkyEuropes strategy : with two hubs

both in Bratislava and in Vienna,

the LCC now really reinforces its

leading position in Central Europe.

Previously, SkyEurope was only

connecting Vienna with a shuttle

bus from the Bratislava airport, one

hour away from the Austrian capital

city, but located in another country.The same strategy than Ryanair, not

operating a single flight to Vienna,

but connecting four British cities and

Milano to Bratislava.

In Vienna, SkyEuropewill have to

compete with the local low-cost lea-

der: the German-Austrian alliance

Air Berlin - Niki.

Austria has only two small LCCs.

The first one, InterSky, is based at

the German Friedrichshafen airport,a few miles away from the western

Austrian border. It operates three

small aircrafts to 13 destinations. The

second one is Niki, the company of

the former formula-one champion

Niki Lauda, created in november

2003. It owns six aircrafts, and car-

ries more than one million passen-

gers per year.

Niki could not exist without itsGerman big brother , Air Berlin.

The German leader and third biggest

LCC in Europe owns 24% of Niki,

which is, in fact, its affiliated com-

pany in Austria. Nikioperates fli-

ghts from Vienna to Air Berlins hubs

(Palma de Mallorca, Nrnberg...),

from where the German LCC brings

the passengers further to other des-

tinations. It also benefits from Air

Berlins logistic support (marketing,

Internet, call-center...).

In Vienna, 2,2 of 16,9 million passen-

gers yearly choose low-cost flights

- among whom 1,8 million fly with

Air Berlin - Niki. SkyEurope will

have to fight hard. Fortunately, the

low-cost activity is dynamic in this

airport: in 2006, it grew by 13,2%.

Austria, with 8 million inhabitants

and high living standards, is an attrac-

tive market for LCCs. Their market

share is growing behind national lea-der Austrian Airlines. In addition to

Vienna, five other Austrian airports

are connected to low-cost flights. In

their case too, foreign companies are

predominant.

In Salzburg, an important LCC plat-

form (12 companies, among which

Air Berlin Niki, Flybe, RyanAir,

TUIfly, SkyEurope, Norwegian, Aer

Lingus, Transavia... ), new routesto Manchester and several German

cities will open in 2007. In Graz

(Niki, Condor, InterSky, RyanAir,

TUIfly ), news routes to Palma de

Mallorca and Berlin are planned. In

Innsbrck, Transaviarecently ope-

ned a route to Rotterdam and TUI-

flyto Kln. Linz (RyanAir, TUIfly,

Air Berlin - Niki) will be connected

with Kln in March. RyanAir and

TUIfly also serve the smallest low-cost airport in Austria, Klagenfurt.

Among the important European

LCCs, only easyJetis absent in the

country. Its route to Bratislava was

suppressed in 2006.

Most of the LCCs in Austria fly to

Germany, Great Britain and Southern

Europe. Charter activity is signifi-

cant, from Austria to the southern

seas in summer, and from abroad

to the Austrian snow in winter. But

Austria is also the door to Central

and Eastern Europe. And this mar-

ket has just begun to emerge. From

Salzburg, Niki already flies to Bu-

dapest, and SkyEurope to Warsaw.

And from Vienna, SkyEurope will

launch in March flights to Bucharest

and Sofia, and Nikito Moscow. The

beginning of a battle to the East

? Maybe... But Niki Lauda, the par-

tner ofAir Berlin, is also a friend ofRonny Pecik, the new Skyeuropein-

vestor. And he announced he could,

one day, cooperate with SkyEurope.

The Austrian LCC Market Is Dominated By Foreign Companies


8/13

BIRDS EYE VIEW


The Birth of LCC Subsidies

Subsidies for airports and low-cost carriers (LCCs) have

long been a center of debate. With Ryanairgreeted the

New Year facing European Commissions queries overthe carriers airports deal with Derry in the mist of scrutiny

and suggested illegal state aid, LCCs and airports subsidies

once again strike European media.

State aid in aviation sector is not a new breed. It has long

existed in European Union when all airlines are privately

owned, of partial or complete state ownership. As a result,

complete or partial state ownership has frequently invol-

ved state capital injections into airlines having financial

difficulties. State aid has been justified on various grounds

ranging from economic and military to legal and psycholo-gical. In the present European aviation scene in which fair

competition is emphasized, many aviation development

funds are taken in more subtle and implicit forms.

When Ryanairand easyJetstarted low-fare operations in

Europe in the 1990s, they offered modest flights connec-

ting small and secondary airfields. However, this started to

change when European governments launched route de-

velopment funds to support cultivation of direct regional

flights connecting local airports with major transport hubs

and even exotic international destinations, with the aim tobolster business travel and tourism and ultimately maxi-

mize commercial interests for the airports, carriers and the

cities concerned.

Various route development funds are set up as indirect

initiatives to promote, secure and enhance existing and

new direct air services between regional airports and more

popular destinations. As a strategic move to consolidate

city and even country image, direct air connection is con-

sidered to help create more popular business and tourism

gateway. As early as November 2002, Route Development

Fund (RDF) was set up in November 2002 by the Scot-

tish Executive. The RDF is operated on a partnership basis

with Highlands & Islands Enterprise, VisitScotlandand

Scottish Enterprise, which administers the fund on the

Executives behalf, allocating funding to airports and new

external direct routes proved to be economically beneficial

to Scotland. It has helped lure more than 40 new services

than mere European routes that were on the wish list in

2003, including lucrative links from Glasgow to Dubai and

Boston and Edinburgh to New York and Atlanta.

Northern Ireland followed suit shortly after by launchingan air route development fund in 2003. Similar to the

Scottish flagship funds operational structure, the northern

Irish initiative is operated by a company called Air Route

Development (NI) Ltd. This company was created by the

Department of Enterprise, Trade and Investment and In-

vest Northern Ireland, providing investment support toairports that offer discounts on aeronautical charges to

airlines introducing new routes, as well as match funding

which allows the airports to double the amount of dis-

count offered. By June 2005, it has subsidized nine new

routes include one direct flight linking Belfast and New

York.

From carriers perspective, launching new air routes con-

necting major destinations and airfields is no easy task.

Airports are natural assets to countries and at the same

time, monopolies. Apart from fuel and operational cost,airport charges levied by the airfields is what each carrier

strives to reduce through individual negotiation. After

slimming down operational cost through e-ticketing, re-

duced complimentary services and back-office operations,

low-cost carrier is burdened by steepened airport charges.

This creates another contradiction to route development

funds which offer financial aid for respective airports

and carriers to develop direct routes. If the airports are,

in a way sources of carriers financial expenditure, to what

extent they can be justified to receive government incen-

tives to discount carriers on landing and other adminis-trative charges in order to encourage them to fly to these

airports?

Notably, European Commissionstrives to put an end to

such subsidies and retain a competitive air market. The

new EU rules will outlaw start-up subsidies for long-haul

routes launched after the end of May and all flights to air-

ports with 10 million or more passengers a year. The Com-

mission hopes to put many lucrative links that are made

possible by route development funds to date back on the

ground. However, since many of the regional airports such

as Edinburgh and Belfast still have missing links to many

Europes biggest economic and transport hubs, the execu-

tives would still offer scaled down financial backings to

routes that would have started by June. As a matter of

fact, the new rules do let the Scottish executive to use

RDF to support routes from Edinburgh duplicating those

that already existed from Glasgow.

Find more articles about LCCs Subsidies in our next

newsletter: Air Scoop April 2007.

LCCs SUBSIDIES



DOWN TO EARTH

www.air-scoop.com

Tense debates over certain issues have always accompa-

nied the EU Commission LCCs relationships. The la-

test ecological initiative set out by the Commission hasbrought forward discords that exist within the European

Low Fares Airline Association (ELFAA). The two lea-

ders, Ryanair and easyJet, appeared to have different

approaches to the problem of CO2 emissions and envi-

ronmental protection. However, the idea to include LCCs

in the emission trading scheme met rather cool reaction

from ELFAA, the organization that was created in order

to protect LCCs interests and defend their rights against,

amongst others, the EU policies.

Positioning itself as a green and environmental friendly air-

line Ryanairis absolutely against any additional taxation

regarding ecological issues. The LCC is convinced that

factories and road transport are much more to be blamed

than aviation. Being the largest LCC in Europe with the

fleet of more than 120 aircraft Ryanairis not interested in

any additional costs. The company accuses the Commis-

sion of speculating; and states that the offered measure

will do nothing but decrease the overall economic growth.

Environmental agencies in the UK, in turn, chastised Rya-

nairfor its position, calling it irresponsible.

easyJet, on contrary, admits airlines negative influence onthe environment and is ready to improve it at any stake.

The company sees minimising this influence as a crucial

part of the strategy. The British LCC is rather supportive

of the scheme and does not see any threat in it. Unlike

Ryanair, easyJetbelieves that this measure is worth ta-

king to cut down greenhouse gas emissions.

The scheme itself has two-step implementation with intra

EU flights being added in 2011 and flights operated out/

into the EU in 2012. This basically means that LCCs are

the first to feel the burden of new taxation. ELFAAin-

sists on long-distance flights entering the scheme together

with the domestic EU flights. ELFAAsees such division asdiscriminatory and afraid that the delay in out-EU flights

entering can end up with no entering at all.

To defend member airlines and to accommodate both

Ryanairand easyJetinterests ELFAAhas published the

Frontier Report stressing that the whole idea of scheme

implementation is just a waste of time. The report highli-

ghted that airlines are not the biggest polluters and should

not be treated as such. The main goal of the report, which

was to disclose all the myths that surround airlines nega-

tive impact on the environment, was much in accordance

with Ryanairs position. But considering that the present

Chairman of the Environment Working Group at the EL-

FAAis also a representative of easyJet it is plausible that

some kind of compromise is to be found.

Positions of other members ofELFAAare not that clear

as of the two mentioned. Sterling, for example, is aimed

at reducing C2O emissions and introducing new environ-

mental friendly fleet by its own efforts. The approach is

really close to Ryanairs: we dont pollute, so there is no

need to pay.

Although Ryanairs and easyJets attitudes towards buying

so called pollution credits are fundamentally different,

ELFAAitself (meaning all the member airlines) took a so-

mewhat middle of the road position acknowledging the

importance of environmental protection but being stron-

gly against any additional taxation. However, this could

be a matter of further bargaining with fuel taxation, for

example, being an objective.

LCCs Green Wars LCCs ENVIRONMENTAL ISSUES

Among all European LCCs, easyJetappears as the most

open to discussion on Environment and ready to make

some proposals to reduce its carbon emissions. Here under

are the latest positions of the carrier:

easyJettoday publishes its Corporate and Social Respon-

sibility Report which outlines its strong environmental

credentials and includes three promises to help balance

aviations huge social and economic contribution with its

impact on climate change.

Andy Harrison, easyJet Chief Executive, declared: Its

hard to see how anybody who has read the recent IPCC

report and the Stern Review can deny that global warming

is a clear and present danger and that this generation has a

responsibility to take action now. Most within the aviation

industry recognise that aviation pollutes and that we must

improve the environmental efficiency of todays operations

and work on tomorrows technologies.

It is time for a proper debate of the sort that has been lar-

gely missing of late. Given that aviation CO2 only accounts

for 1.6% of global greenhouse gas emissions, grounding

every aircraft in the world would have a miniscule impact

on climate change yet a vast impact on our economies. So,

airlines have a responsibility to do what they can and go-

vernments have a responsibility to ensure that their policies

incentivise the right behaviour.

easyJet: Friend of the Environment...



DOWN TO EARTH

www.air-scoop.com0

Plane Stupid: Yes. We will continue to target direct actions against LCCs

Probably if somebody conducted a survey today about

the most often heard word in the news and read in the

newspaper the answers would be firstly Environment andsecondly Climate changes. Be honest with yourself, does it

not seems to you as if the words had been discovered few

weeks ago. Everybody is speaking about environmental is-

sues, their changes and consequences for the future - for

our future. Supposedly everybody cares about the future,

and therefore also about the environment, but what can

be done? Who is responsible and what is the solution?

Air Scoopasked the association Plane Stupidwhy are Low

Cost Carriers, in their opinion, not environmental friends

and if they plan any action against LCCs in the future?

Leo Murray, Press Officer ofPlane Stupid, answered as

follow:

Low cost carriers are driving the massive growth in air

travel we have seen and expect to continue to see over the

next decades if our governments do not adopt a policy of

demand restraint. Air travel is the most environmentally

damaging form of transport, both because of the very high

levels of CO2 it deposits in the upper atmosphere - exact-

ly where it is not wanted - but also because of the seldom

mentioned other greenhouse gas emissions, such as NOX

and contrails, which make the warming effect of aircraftemissions at least twice that of the CO2 alone. All of this

adds up to make aviation the fastest growing contributor

to climate change, especially here in the UK and the EU.

Low cost carriers are only able to offer their services so

cheaply because of the enormous tax subsidies they re-

ceive through 0% tax rating on aviation fuel and no VATon tickets, aircraft or aircraft spares and repairs. All of the

LCCs in the UK lobby aggressively to maintain their uni-

quely tax-free status; see Ryanairs APD stunt earlier this

year, or indeed easyJets deliberately misleading sustaina-

bility statement last week.

Plane Stupidtargets LCCs specifically because most of the

destinations they serve are near enough to be easily accessi-

ble by more sustainable forms of transport such as rail; 45%

of all flights in the EU are to destinations of 500km away

or less; Paris is the top destination from Heathrow airport- there are 60 flights every day to Paris from Heathrow.

The reality of transforming our economies to avoid dange-

rous climate change means we cannot allow aviation as a

whole to grow much beyond its present size, and we may

very likely even need to reduce it. This means if we are

still going to travel to places like Australia, South America,

China and Japan - places that are basically innaccessible

by other forms of transport - then we are going to have to

stop flying between nearby European cities altogether, and

find some other means of getting around instead.

Yes. We will continue to target direct actions against LCCsuntil they accept and admit that their business is a major

cause of climate change, and is set to become the UKs n1

contributor before 2050 unless their crazy expansion plans

are scrapped.

It is for this reason that easyJethas today published its

Environmental Code, which contains three promises - that

easyJetwill be efficient in the air, efficient on the ground

and will help shape a greener future for the industry.

The same business model which gives us low fares (newaircraft, high occupancy rates, direct flights) also gives us

environmental efficiency in the skies - easyJetemits 27%

fewer greenhouse gasses per passenger kilometre than a tra-

ditional airline on an identical route. In addition we reco-

gnise that we can and we will expect more of our ground

suppliers at airports.

We also intend to play a leading role in improving the fu-

ture environmental performance of our industry - reforming

Europes famously-inefficient air traffic system, implemen-

ting a meaningful European emissions trading scheme, wor-king on the next generation of aircraft, giving customers the

most comprehensive range of environmental information

available for travel to a particular destination, and helping

them to offset the carbon emissions of their flight.

I believe that we are on the cusp of major advances in air-

craft and engine technologies which will lead to dramatic

reductions in emissions, which have not yet been factored

into the environmental forecasts about our industry.

In the meantime airlines have an obligation to maximisetheir environmental efficiency (particularly by operating the

cleanest available technology). For their part, Governments

must ensure their policies balance the vast economic and so-

cial benefits of flying with its impact on climate change, par-

ticularly by mandating minimum environmental standards

for aircraft to operate in Europe.

Governments should also recognise that some airlines are

already more efficient than others - something that the UKs

Air Passenger Duty dramatically fails to do. APD provides

no incentive for airlines to operate the cleanest aircraft; itcompletely omits airfreight and private jets; the proceeds

are not allocated to any scheme to improve the environ-

ment; and it is disproportionate - on a UK domestic return

flight, the 20 APD is now 25% of the average fare and about

10 times the cost of off-setting the carbon emitted on an

easyJetflight.


11/13

BIRDS EYE VIEW

Air Scoop - March 2007 www.air-scoop.com1

Moreover, LCCs need to clearly explain to customers their

position on two controversial programs that impact pas-

sengers and airlines.

The first is the EU Emission Trading Scheme. Many LCCs

seem to understand that emission trading is the best system

for reducing aircraft emissions, but LCCs might consider

pressing for changes to make the system fairer. These in-

clude:

Ensuring that long-haul flights on any airline to/from Eu-rope are covered so passengers who fly longer distances

on an airplane, regardless of the airline, will pay their fair

share.

Pressing for tough restrictions on the minimum number

of seats airlines can configure their aircraft with, which mi-

ght force legacy carriers to cut premium seat sections and

make their aircraft more efficient to operate.

Ensuring that the EU presses other nations, including the

United States and China to develop similar schemes to

control emissions. EU airlines should not be the only ones

making sacrifices for the planet.

LCCs also need to communicate to passengers what green

taxes LCCs find acceptable. Many customers justifiably be-

lieve that airlines are opposed to any taxes on air travel,

but some LCCs recognize that some environmental taxes

are necessary for passengers to pay, a fact many passengers

arent aware of. LCCs need to set clear criteria for new or

expanded air travel taxes that passengers can comprehend

and empathize with. Some possible criteria include:

Tax increases must be phased in over a period of at least

six months, so a fiasco similar to the current APD crisis

doesnt reoccur. Taxes must directly fund environmental programs such

as the formation of carbon sinks.

Tax increases are proportional to the airline, duration of

flight, and class of travel. Passengers who fly more envi-

ronmentally friendly carriers shouldnt pay the same rate

as those who fly on dirtier carriers, and like the APD, pas-

sengers who fly in premium classes should pay more than

passengers who dont.

LCCs also need to offer an alternative to environmental

taxes. Perhaps the easiest idea is to allow customers to do-

nate to a carbon offsetting charity to compensate for the

emissions of their trip right from the booking page. To

launch this feature, airlines should match customer dona-

tions up to a certain figure.

If LCCs create a dialogue with customers, they must ac-

knowledge the successes, but also the steps that still needto be taken by passengers and airlines to achieve further

reductions to the human impact on climate change. An

advertising campaign that discusses the environment and

not travel may be the best way for LCCs to start a dialogue

with customers. LCCs should consider voicing their envi-

ronmental message in various formats including:

An advertising campaign similar to HSBCs latest cam-

paign in the UK. This brilliant campaign contains a posi-

tive, down-to-earth message that customers can relate to.

The campaign de-emphasizes the negative image custo-

mers have of banking and instead focuses on what HSBC

has done to reduce its environmental footprint, what more

they still have to do, and most importantly, what custo-

mers can realistically do to help.

Information in in-flight magazines and other sources on

the aircraft with the same content as proposed in the ad-

vert campaign above.

A prominent, detailed, dedicated page to the environ-

ment on their Web sites.

European LCCs shouldnt hide the fact that they contri-

bute to climate change. Instead, creating an open and frank

dialogue will help customers understand the challengesairlines face, the steps most LCCs have already taken to

reduce their environmental impact, and the steps they

plan to take in the future. If LCCs dont present their own

solutions to slowing climate change, then the uninformed

public will side with governments, which will impose hi-

gher taxes and an EU Emissions Trading Scheme that will

unfairly punish LCCs.

A Proposed Environmental Public Relations Strategy for LCCs (part 2)

www.airlinebulletin.com

Exclusive Analysis for Air Scoop

Sam Sellersprovides analysis and commentary on the airline industry at his website,www.airlinebulletin.com. He is the author ofTake Control of Booking a Cheap Airline

Ticket, an ebook for travelers in the United States who are interested in purchasing

cheap airline tickets. The ebook provides step-by-step instructions that readers can use

to purchase the cheapest airline tickets. It can be purchased for $10 at

http://www.takecontrolbooks.com/airline-ticket.html

(Read the first part Air Bulletins analysis on LCCs and Environment Issues on Air Scoop February 2007)
http://www.takecontrolbooks.com/airline-ticket.htmlhttp://www.takecontrolbooks.com/airline-ticket.html



DOWN TO EARTH

www.air-scoop.com2

FITUR 2007 is the first grand tourism event on the yearly calendar for the in-

ternational tourist industry. Over 5 intensive working days, from 31st January

to 4th February, a comprehensive range of tourism businesses and destina-

tions from around the world has been presented in Madrid, which became a

FITUR 2007

veritable focal-point for Spanish and international tourism opportunities.

FITUR reinvents itself year after year, providing an Integral Promotional Service which generates fluid trade links among

all participating actors of the tourist industry before, during and after the exhibition.

An Air Scoop correspondent was at the FITUR 2007 and had the opportunity to interview LCCs representatives there.

2 questions to...

Andreas Engel: PR Spokesman International Germanwings

What are the projects of Germanwings in Malta?

Germanwingsis now a litlle bit older than 4 years, flying

from 4 hubs in Germany to 60 destinations in Europe -

and from end of March from Cologne & Stuttgart also to

Malta, starting with 2 flights per week - starting from 19

EUR (incl. all taxes, up to 15 % of all tax). We think Malta

has an enormous growth potential, is a undiscovered Islandfor 7,1 Mi. GermanwingsCustomers we had 2006.

And there is a high demand also for well situated Germans

to fly individualy with nice Germanwings Airbus, leather

seats and without any advertising for gaming, gambling nor

car rentals to Malta

How does Germanwings manage the competition with

Ryanair?

Ryanairis low-cost market leader in Europe with over 16

years experience to fly from nowhere to nowhere. Ger-

manwings is mostly flying to Primary Aiports (Hamburg

not Luebeck like Ryanairor Barcelona not Reus or Stoc-

kholm-Arlanda and not Skavsta, Paris CDG not Beauvaisetc) So Ryanairdoes not disturb us, and competition is

good for Germanwings- we have the better product, we

are Lufthansa light, like a radio station in Malta men-

tioned recently. If you want to fly cheap with a very re-

liale airline, with brand new Airbus from, or to, a big city

like Cologne and Stuttgart, Germanwingsshould be your

choice!

2 questions to...

Loredana De Filippo, Exterior Relations from Meridiana

What are the projects of Meridiana in Malta?

We will start operation between Bologna and Malta on

next April with two weekly flights (on Thursdays and Sun-

days). Last year, Meridianacarried about 8.000 passengers

on this route from June to September, the load factor on

the 3 month base was 65%, in August we reached 77%. If

2007 operations will show a positive trend we could even

add a third flight per week. We aim to reinforce commer-

cial agreement with tour operators and travel agency that

helped us last year while starting operation in Malta in or-

der to keep this service even in winter season. If well havecooperation and good results, next step could be opening

other destination and connecting Malta with Florence, Tu-

rin or Verona.

How does Meridiana manage the competition with Rya-

nair?

Ryanair is not a real competitor for Meridiana, even if

this company is strongly operating in Malta. We feel more

aggressive the competition with other Italian carriers that

operates schedules and charter flight between Malta and

Italy.

Anyway Meridianahas a very strong position in the trade

Italian market, a website known and appreciated, fares and

services standards that can compete with these carriers.


13/13

BIRDS EYE VIEW

What is the impact for Blue Air of the entrance of Roma-

nia in the EU?The entrance of Romania in the EU brings Blue Aira lot of

new opportunities: new routes that now are available to us,

easier access to the EU for our passengers that ultimately

maximizes our check-in times as the customs procedures

go faster.

We will also have new competition and this will increase

the quality of the services provided to the client.

What will you do now that you could not do before?

Now we can have flights between the EU states (like Rome

Paris for instance).

Also, other low-cost companies have entered and will en-

ter into the Romanian market and this would be a great

possibility for all of us to educate the Romanians regarding

the low-cost concept; this has been a difficult task for Blue

Airbecause we are the first Romanian low-cost carrier.

With this new opening, how do you prepare competition

with Low Cost Carriers in Europe?

Even from the start we have offered accessible and safe

flights. We offer competitive services besides the low-cost

of our tickets and this is why last year we started our own

handling services in the Baneasa Airport (ground handling,

passenger handling, lost and found services, providing the

aircraft with specific equipment).

This year we intend to buy 2 new aircrafts and to open

Blue Airticketing agencies in the EU.

Blue Airalways focuses on the quality of the services it

provides and always finds highly competitive solutions to

keep its rates as low as possible.

3 questions to...

Mariana Ion, Development Manager from Blue Air

Air Scoopis a Registered Trademark ofGlobal Wings Publications.

Subscription to Air Scoop: 290 euros for 1 year (10 issues)

Copyright 2006 - Unauthorized distribution or reproduction is forbidden.

http://www.air-scoop.com ; http://airscoop.blogspot.com(free portal news)

2nd Air Transport Conference for CSEE

Air Scoopis proud to be media partner this year again of the 2nd Air Transport Conference for CSEE.

Following the success of our Inaugural event last year, this year we are continuing in dealing with the issues Air Transport

is facing in this region. This is a unique opportunity to meet face-to-face with Key Players in this sector and discuss what

additional strategies you can easily implement to empower your business development.

How to register?

tel: +381 (11) 20 26119

e-mail: [email protected]

www.easteurolink.co.uk

EVENTS
http://www.easteurolink.co.uk/http://www.easteurolink.co.uk/

air scoop march 2007

Documents