Low-Cost Carriers Flying High On Other Side Of Pond
<B> Low-Cost Carriers Flying High On Other Side Of Pond</B>
By Amon Cohen
The European low-cost airline market has grown 25 percent every year since U.K.-based EasyJet emerged snapping at the heels of conventional competitors in 1995. As in the United States, most customers are either leisure or small-business travelers, but 1999 has seen the no-frills carriers and corporate clients finding imaginative ways of working together in spite of restrictions on cost and the absence of agency commission. Some of the ideas--including up-front corporate discounts and the ability to transfer tickets to other passengers--are ahead of the major airlines, and many difficult questions are being addressed, such as flexibility and management information.
Most of the low-cost action in Europe is taking place in the London area, although the grandaddy of them all, Ryanair, has been operating out of Ireland since the beginning of the decade. Outside the British Isles, Brussels-based Virgin Express is perhaps the only low-cost airline offering a substantial route network. Both Ryanair and Virgin Express also operate routes out of London, as does EasyJet, which now flies to 11 destinations.
There were also two airlines that attempted to offer a full-frills service for a low price, Debonair and AB Airways. Both have gone out of business in recent months. In part, this was due to the major airlines entering the low-cost market. Last year, British Airways launched Go from London Stansted airport, to the east of the city, from where it will be joined next year by Buzz, a subsidiary of KLM U.K., itself a subsidiary of Dutch carrier KLM.
It is Go and Buzz that are particularly making a run for the business market. Go claims 30 percent of its passengers are corporate travelers, a figure that is rising thanks to the introduction of additional frequencies on key business routes. It now flies seven times daily to Edinburgh and four times each to Cophenhagen, Munich and Milan.
In addition, Go has brought in a new range of highly flexible fares. They are more expensive--Stansted-Barcelona is $380 roundtrip instead of $132 for its cheapest discount price--but Go claims its flexible fares are at least 50 percent cheaper than the full economy fares of traditional airlines.
Flexibility is not 100 percent. Since Go does not overbook its aircraft, it only will allow changes until two hours before departure. Nor are there refunds for cancellations (again up to the two-hour limit); instead, the passenger receives an electronic credit note, but as a neat twist the value of the credit can be transferred to anyone he or she nominates. Similarly, a passenger can transfer their ticket to a colleague, a useful facility if, say, a manager cannot attend a meeting and sends a deputy in his place.
Go also is working hard to make its sales and distribution more corporate-friendly. "Corporate clients are coming up with process issues and we are finding solutions to them," said Sophie Newsom, the airline's business sales manager. Like most low-cost carriers, Go cannot be booked on the global distribution systems. Reservations are made either by telephone or on the Internet. However, it has opened a dedicated reservations hotline for larger corporate clients. It also is looking for other booking solutions, such as designing a Go icon for clients' employee desktops.
Go even is working on trapping management information. "At present, we are able to give some of our corporates a snapshot but we are trying to find ways to integrate with their own management information systems," said Newsom. "In the next three to four months, we will produce some kind of unique code for either the booker or the travel agent." According to Newsom, some travel agents already are producing low-cost carrier data by recording a dummy booking in the guise of a surface sector on their GDS.
One possibility Go will not endorse is corporate discounts, but these are being offered by some low-cost carriers, including new rival Buzz. The figures have not yet been set but Buzz head of sales and distribution John McMahon said the discount will be a fixed amount given up front to companies that it believes will produce reasonable volume for the airline.
"There will be discounted prices for corporate clients that are lower than published fares, but they will not be negotiable because they are as low as we can go," said McMahon. "They will be up front because it cuts out our administration and it cuts out the client's administration. We are trying to be open and honest, and we are looking for the same approach from our corporate clients.
Buzz also is aiming to produce value for clients by providing a menu of optional extras. "The essence of our proposition is that we will provide a bog-standard but excellent point-to-point flight, and it is up to the traveler to shape the rest of the service to suit their needs," said McMahon. "Passengers often find themselves paying for things they don't want. We are trying to package it so that people choose how much they want for themselves." Among the pay-as-you-go options on offer will be hot food and lounge access, the latter costing around £10 (US$16). Like Go, there also will be flexible ticketing at a higher price.
Dennis Bailey, senior buyer for agricultural machinery manufacturer New Holland, is one travel manager who is highly satisfied with the low-cost carriers. "As long as the airlines are clean, safe and on time, that is all we need. The reports I am getting are that both service and punctuality are very good," he said. Go claims a punctuality record of 79 percent.
Bailey also likes the prices he is paying. "Turin is a good example," he said. "I have a fare to there with one conventional carrier where the net cost to my company is $683. The fare we pay to the same destination with a low-cost carrier is $330. If you have to buy the guy a dinner, that still leaves you plenty to play with."
Part of the reason that Bailey likes the no-frills airlines is that many of them operate from Stansted, which is New Holland's nearest airport.
American Express Europe head of supplier relations Alan Coles said many corporate clients of the low-cost carriers are based in the hinterland around the airports they serve. Away from this local market, he noted, many companies still have not warmed to such airlines, preferring airports with heavy route frequency and carriers with full flexibility, including interlining.
Gary Hance, director of U.K. agency Seaforths Travel, also finds demand "still very small compared to conventional carriers." Another disadvantage, he pointed out, is that clients on transaction fees must pay a higher fee to the agent for a low-cost airline booking because the reservations process and data collection are both more cumbersome for the agency. Seaforths makes its low-cost airline bookings on the Internet, which reservations staff can access on their personal computers.