Sector Insight: short-haul airlines

The recession has hit low-cost airlines, with passenger numbers flattening as consumers look to cut back on holidays abroad.

When budget airlines such as easyJet and Ryanair first hit the UK market, travellers couldn't believe their luck. Suddenly travel was faster and cheaper. The European weekend break to regions never before considered and their availability to those previously prohibited by their budget became a possibility.

Tourists from the UK have come to take a freedom and cheapness to air travel for granted, thanks to the no-frills short-haul airlines, and until last year, this was behind the boom in air travel as a whole.

Yet over the years some of the appeal has dwindled. The scramble to get a dec­ent seat, the airports miles away from the cities they are badged as, hid­den costs and the increasingly Dracon­ian luggage restrictions have led to a growing disquiet among travellers.

Then last year the recession took hold: passenger numbers declined and short haul was particularly hard hit. This combined with the volatile oil price, an increase in Air Passenger Duty, grow­ing environmental concerns, better European rail services and this year's swine flu pandemic has meant people are more reluctant to fly.

Given bargain-hunting is a national hobby, the no-frills operators should be in a better position than the full-service airlines, and this appears to be borne out by British Airways' recent problems. Less than one-fifth of adults look for full service on short-haul flights, according to TGI.

By the end of 2009, Mintel estim­ates that 180m passengers will have flown, and of that figure about 73% will be short-haul. Last year started well with continued growth but the second half of the year brought a fall in demand. In 2008, passengers handled at UK airports fell 2%, the first decline for more than 15 years, according to BAA. In the first half of 2009, numbers fell by 7.5% year-on-year.

ABs are the most likely demographic to have flown short-haul in the past three years, followed by C1s. More than half of the UK population has flown in this manner in the past three years, and consumers continue to see holidays as a priority when deciding what to spend their money on.

The trend for independent travel has resulted in a rise in flight-only bookings, to the detriment of chartered airlines.

Price continues to be the most crucial factor for consumers when choosing their airline. More than 55% cited it as a top priority in 2008, according to TGI data, and the fierce competition in short-haul has kept costs down for flying in Europe. While some airlines have fallen by the wayside, the biggest battle continues between market leaders Ryanair and easyJet. Despite the over­riding market conditions, they have carried on adding passengers.

Ryanair continues to ‘innovate' - or court controversy, depending on your viewpoint. Recent money-saving ideas touted have included charging for using its aircrafts' toilets. The Irish airline claims to be Europe's biggest; in June it posted a 13% rise in traffic year on year. However, it has cut its Stansted flights by 30% and pulled the majority of its Manchester services, citing high landing charges.

EasyJet, meanwhile, has added flights on its winter schedule to Agadir, Cyprus, Lanzarote and Tel Aviv, among others.

BA has tried to fight back against its low-cost rivals by exploiting their hid­den charges. The airline launched an online calculator comparing prices including extras. While BA is still a dominant force. It recorded pre-tax annual losses of £401m in March, and its passenger numbers are down.

The outlook for the industry as a whole is no better, with the number of short-haul passengers predicted to fall in 2010 and not recovering until 2011, according to Mintel.

 

Airlines by Number of Passengers Flown to Europe
RankBrand20082007200620052004% change
000s000s000s000s000s
1easyJet  30,72923,82921,81119,80814,881107
2British Airways  13,59012,69511,06710,98611,76116
3ThomsonFly/Airways  8972748376027760n/a
4Thomas Cook Airlines  5714326334413387343266.5
5Monarch  5342511845944227394835.3
6Bmi  4513477750745254n/a
7Jet2.com  3230361125242045n/a
8Flybe  1899179012411261111869.9
 
Source: CAA/Mintel 

 

Destinations by Estimated Number of Visits
RankDestination20082007200620052004% change
000s000s000s000s000s
1Spain  13,82013,86914,42813,83713,833-0.1
2France   10,85911,20110,85411,09411,602-6.4
3Republic of Ireland  39764205468242214125-3.6
4US  39293923398642414167-5.7
5Italy   3352356933803374297412.7
6Portugal  2678217719371855180414.6
7Germany   2534268626982493233640.5
8Greece   20862511243624352709-23
 
Source: IPS/Mintel 

 

Factors When Choosing Airline, Passenger Preferences
Factors20082007200620052004% change
Most important%%%%%
Price  55.347.948.347.744.510.8
Convenience of airport  34.626.324.12424.89.8
Convenience of timings  12.110.88.99.79.62.5
Personal experience  7.74.94.55.15.32.4
Safety record  6.83.83.54.43.14.5
In-flight comfort/service  5.83.53.83.42.73.1
Customer service  5.12.92.83.23.12.8
Personal recommendation  2.221.72.20.71.5
Company image  1.711.11.60.61.1
Home country's national airline  1.40.90.71.30.41.1
Frequent flyer/loyalty schemes  1.31.21.11.21.4-0.1
Advertising  0.20.70.50.20.6-0.4
 
  Souce: GB TGI, Mintel

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