Air Scoop June 2006

Highlights in this Issue

Vueling: Interview of Carlos Munoz Air Berlin: Chaotic Stock Exchange Introduction Debriefing of the Air Transport Conference WindJet: Looking Past the Horizon Factors of LCCs Business Model Evolution

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A Month Full of Challenges

M

ay 2006 has been a quite challenging month for European LCCs. As the summer season is coming, low cost carriers had a hard time with unions. easyJet had to face a possible industrial action from the Transport & General Works’ Union that would have disrupted the summer season. The airline will know this week if its cabin crew and ground handling do or not accept a lower pay offer than its pilots. Aer Lingus had to cope with SIPTU, which represents most Aer Lingus staff, during the 70th birthday of the carrier. Aer Lingus unions protest against the privatisation of the airline arguing the recent disappointing privatisation of Air Berlin. Ryanair always had an aggressive policy towards unions. For instance, Warwick Brady, a Ryanair’s top official, recently declared “we recommend fast women, slow horses or even greyhound racing, at least you’ll have a few minutes of fun, which is more than you’ll have with BALPA (British Airline Pilots Association)”. Ryanair has also begun a legal action to find out who is behind some hostile messages on REPA (Ryanair European Pilots Association) website. LCCs also had to confront with regulatory authorities, especially in Italy. Thanks to a PSO decree (Public Service Obligation), ENAC (the Italian National Civil Aviation Authority), has refused to allow LCCs to fly to some routes to Sardinia. So, Ryanair is not allowed to operate flights from Rome to Alghero, nor easyJet from Milan to Olbia. And at least but not last, Michael O’Leary took up a challenge from LOT, the Polish national airline. After the spokesman for LOT declared that Ryanair would “drop their trousers” for extra publicity, Ryanair’s CEO took up his words by saying he would walked naked through the streets of Warsaw if LOT removed the fuel surcharge it charges customers by the end of May. We are now in June, LOT didn’t remove its fuel surcharge, so Polish citizens won’t have the opportunity to see an Irish man naked this time. When will be the next challenge Mr O’Leary? Bremen: easyjet new

IN THE AIR Latest Rumours...

Check Air Scoop Website for more details on rumors...

Ryanair could set up a base in Nice

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p.2 p.3 p.7 p.8 p.9

Air Scoop does not only provide analysis and daily news of LCC European market; Air Scoop is above all a network, made of its correspondents, airlines public relations, analysts and journalists, which gathers news and rumors about the market. Air Scoop offers you the opportunity to get updated with the latest rumors in the air concerning the market. What is said about you, about your competitors...? On the right column of our website, you will find a block with all the « Latest Rumours ».

Air Scoop Recruits! We recruit more “correspondents” over Europe to cover regional news and analysis. Your role will be to cover the Low Cost Carriers market in your country and near area. You will write about specific topics and propose your own articles. We may ask you to attend special events concerning the LCCs market occurring in your country or near area. It is a requirement to be a fluent writer in English. Join Air Scoop Team by sending us your CV and a covering letter by email to: [email protected] We look forward to seeing your application soon.

base or just more flights? Ryanair in Banja Luka?

Ryanair: Hub in Wroclaw

Aer Arann to introduce another Dublin flight soon

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BIRD’S EYE VIEW ANALYST PORTHOLE Interview of Carlos Munoz (CEO of Vueling)

Carlos Munoz Mr Carlos Munoz (CEO of Vueling) had the kindness to answer our questions. Air Scoop: Vueling is presenting itself as the « new generation airline », what do you do better than your competitors? What are your specificities compared to other European LCCs? Carlos Munoz: What sets Vueling apart from our competitors is our innovative new airline concept: the aim to be different from all other airlines and offer “High Quality at the Best Price” As a new generation airline, we want to guarantee all of our passengers a new way of flying and implement our own philosophy of high quality at the best price. This new formula is changing the face of the airline market and we believe this is a key part of our continuing success. Our formula seems to attract more and more European passengers who know they can fly in comfort and safety with a professional and friendly company whilst paying the best price. Vueling´s success can also be attributed to the following, namely; the fact that our passengers are all flying on brand new aircrafts (all our fleet is based on the same aeroplane model Airbus A320), we always fly to main airports, Charles de Gaulle in Paris, Fiumicino in Rome, Malpensa in Milano, we guarantee no overbooking on all our flights and customers can choose their seat on line, we have total flexibility with our tickets (one can change the dates of travel, the passenger or destination), we have a check in system online, we guarantee high punctuality and finally we know that almost all passengers value on board entertainment. These attributes help to create the face of Vueling and make us different from the rest. A recent survey of more than 8,600 frequent flyers carried out by a European consumer organisation in France, Belgium, Holland, Italy, and Portugal ranked Vueling as the best Spanish airline. Out of the 110 airlines analysed, Vueling ranked in 23rd position. People taking the survey stated that the keys factors which helped them rate the airlines were: reliability, punctuality, customer service, and the relationship between quality and price.

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Are you looking more for Business or Leisure passengers? Both? Our Business to Leisure passenger ratio is what we would expect. Approximately 40% of our customers choose to travel with Vueling when travelling on business. Without a doubt they value the fact that we fly to principal airports, our no overbooking policy and the punctuality of our flights gives us our personality and obviously makes us different. Equally we have a high proportion of our passengers who choose Vueling as their choice airline for leisure breaks. Our prices and high quality and service ensure that all trips whether leisure or business work for everyone as the price factor is no longer an obstacle. Why Barcelona as a choice for your base? What are the advantages? We saw an opening in the market and we took it. Barcelona was crying out for the type of airline we were planning. In fact there was no low cost company established in El Prat and as this airport is strategically very important for the rest of Spain and the south Mediterranean, we seized the opportunity to establish Vueling. Our leading position has always been in Barcelona although we are equally aware of the important role Madrid is now playing. We have already established a base in the capital, and with the new terminal T4 in Barajas we promoted our operations from Madrid. How do you analyse the competition with Ryanair, easyJet and Air Berlin? Especially with easyJet since the settlement of their hub in Madrid? Which one is for you the main competitor? To compare Vueling with other low cost companies is difficult, our aims and what makes us a success are very different to those other airlines, we believe there is enough room in the skies and we fly in our own space and they there’s. The entry of companies in the market stimulates the lawsuit. There’s no doubt that the airline industry has seen an unprecedented transformation in the past 10 years with the low cost phenomenon but this a welcoming situation for all passengers and we believe the skies can hold us all. The new situation has enticed almost everyone to get on a plane and travel safe in the knowledge that they will not incur huge costs, which used to be the case. The difference between all the actual low cost companies lies in the way they choose to fly and the quality of service on offer. Customers nowadays have plenty of options, they just have to decide which one is the best for them. In Vueling we think our philosophy is logical and simple and we try to keep on achieving our promises... and it seems to be working.

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BIRD’S EYE VIEW Iberia has announced the creation of a LCC based in Barcelona, what do you think about it? The competition is always welcome, with Iberia’s low cost aims we are slightly sceptical, we really do not know how they are going to manage if they try and model themselves on LCC. We reserve all judgements and are happy to sit back and watch the developments. It will be interesting to see how they implement this, which aircrafts are they going to use, which airports and which destinations do they intend to fly, etc. Are you worried about the shortage of pilots and crew hitting LCC market? We are not overly concerned about this matter there will always be professional graduated pilots who want to work for a new generation airline. Vueling continues to increase its staff every month with more and more pilots and cabin crew with each new aircraft. This Wednesday 30th of May we will accept our 12th A320 and by the end of 2006 we expect to have 16 aeroplanes in our fleet. Do you have expansion projects in a near future? (IPO? New planes? Partnerships?...) Vueling currently covers 6 countries; do you plan to open more routes to/from these countries, or to open new routes to other countries? Vueling has been growing and developing since it was established in July 2004. We began flying Barcelona-Ibiza and now we operate in 7 European countries (LisbonPortugal, Paris-France, Amsterdam-The Nederland, Brussels-Belgium, Milan, Venice and Rome-Italy and Santiago de Compostela, Bilbao, Madrid, Sevilla, Málaga, Granada, Valencia, Barcelona, Mallorca and during the summer

Menorca and Ibiza). We are dedicated to fly to more and more cities whilst continuing to increase the frequencies with our well established routes. New destinations, more schedules and our constant improvement in all aspects of our company are our constant goals. Ryanair, easyJet and Air Berlin have routes to Morocco. Vueling is close from this market, do you plan to open routes there before it’s too late? What is your point of view about this market? As I said before Vueling is an airline focused on the south Mediterranean, and our business plan is based on a specific model which considers a determinate type of routes and destinations based on our customer’s preferences. We are still very young and Morocco at this stage is to far from our plans right know. That does not mean we may never fly there in the future however increasing our actual routes and improving our services in the countries we fly remain our aims. Thank you very much Mr Munoz for your time and your answers.

Perspectives of LCCs in 5 main European Markets TNS Infratest has recently released a representative consumer survey conducted in the five key European markets: UK, Italy, Germany, France and Spain. After monitoring the German LCC market over the last 3 years, the Low Cost Carrier Monitor 2006 has now included these four main markets. One of the main results of the survey has been a classification of these five markets with regard to low cost carriers. UK is the most advanced market for low cost flights (41% of consumers claimed to have already flown with an airline offering low cost flights). Italy takes the second place with 20%. Its market potential for low cost is in an extremely dynamic phase with many promising growth opportunities. Finally, Germany is in third position with

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only 13% of people who admitted to having flown with a LCC. Unlike British and Italian passengers who are especially interested in low-price tariffs, Germans are not ready to accept a lower standard of comfort and service. Similar user rates to those in Germany have been recorded in France and Spain. Perception of low costs carriers is quite different depending on the country. While British and Italian passengers are loyal customers thanks to low-prices, Germans are looking for «personal consideration» and good service, and Spanish have expressed the «strongest doubts» about low cost carriers safety. TNS Infratest - Low Cost Carrier Monitor 2006, http://www.tns-infratest.com

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BIRD’S EYE VIEW Air Berlin Faces Chaotic Stock Exchange Introduction Air Berlin’s introduction on the German Stock Exchange was chaotic: first scheduled for May 5th, it finally took place almost one week later, on May 11th. The reason for this delay: many potential investors, especially from Great Britain and the United States, considered the first projected issue price of the share, estimated by Air Berlin between 15 and 17,5 Euro, too high, particularly because of significant risks on air transport due to high kerosene prices. Lufthansa’s challenger on the German market therefore decided to reduce the price of the share to 11,5 to 14,5 Euro, and to postpone the introduction. The share was finally launched on the market at the price of 12 Euro. After the first quotation day, it had fallen to 11,40 Euro, and to 10,70 one week later – the Lufthansa share, however, followed a comparable trend during that period. Furthermore, a few days after the introduction, Joachim Hunold, Air Berlin’s CEO, announced the company’s kerosene taxes would be raised by 5 Euro. The reducing of the share’s issue price may penalize Air Berlin’s ambitious development policy. Joachim Hunold wants to keep the company’s number three position among

low-cost airliners in Europe (behind Ryanair and easyJet), by opening new routes, especially to Eastern Europe and Scandinavia, and by developing business customers. Air Berlin also ordered 60 new Airbus jets. Two weeks before the introduction, Hunold told his company needed 290 million Euro to carry all these development projects through. Yet, whereas it expected almost 300 million Euro from the Stock Exchange introduction, Air Berlin has « only » collected a net amount of about 195 million Euro to finance its development. Will this be enough? Hunold thinks so: he announced he would not change his plans, and his company has enough liquid assets to fund them. But he may not have enough money left for major strategic operations, such as external growth or aggressive pricing policy. Air Berlin also announced the composition of its board of directors. The chairman is Johannes Zurnieden (Bonner Phoenix Reisen GmbH), non-executive directors are Eckhard Cordes (Haniel & Cie GmbH), Hans-Joachim Körber (Metro AG), Nicholas Teller (Commerzbank AG), Claus Wülfers (ex-Hapag Lloyd AG). Executive directors are Joachim Hunold (CEO), Ulf Hüttmeyer (CFO), Karl Friedrich Lotz (COO) and Elke Schütt (CCO).

DBA-LTU Partnership Shows Hardening Competition on the German Market Since he picked up in February 60% of Germany’s fourth biggest holiday airline LTU, the businessman HansRudolf Wöhrl, already controlling the low-cost carrier DBA, considers he has enough means to achieve his ambition: Create the first worldwide low-cost airline, and a significant German challenger to Lufthansa. Wöhrl took control of DBA, formerly affiliated to British Airways, in 2003. His plan is now to combine DBA’s mainly internal German routes and LTU’s international network (USA, Egypt, Caribbean, Sri Lanka...). Both companies already cooperate via their online booking system. However, no merger is planned. Wöhrl is first aiming to strongly improve LTU’s tricky financial situation. In 2006, he wants to reduce the com-

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pany’s costs by 45 million Euro, by creating synergies with DBA, attracting new customers and reducing the wages. By the end of April, Wöhrl also transferred 24% of the LTU shares to LTU’s CEO Jürgen Marbach, in order to enhance top management’s involvement in the company’s results. This coming closer of two German most important airliners was a surprise for the German air transport sector. Last year, DBA had picked up Germania Express’s routes, and even begun an online-partnership with Air Berlin, which is still running. But Wöhrl’s strategy makes sense given the growing competition on the German market. Even the « traditional » airline Lufthansa now competes on the low-cost market with his 99 Euro Europe-round-trips.

Other – less ambitious – partnerships are going on: Germanwings and Condor, for instance, exchange ad banners on their respective websites. There were even rumours about collaboration between Air Berlin, DBA, HapagFly and HLX, finally denied. All companies may not survive the competition - Wöhrl warned LTU’s employees the airline could go bankrupt if its financial situation did not improve. If his risky strategy fails, Wöhrl may choose an alternative plan for DBA, for example a partnership with Air Berlin or easyJet. Whatever happens, he announced he would definitively step out from air transport business by the end of 2007, when he is 60 years old.

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FROM THE GROUND

Inaugural Air Transport Conference For Central and Southeast Europe Air Scoop was proud to be Media partner of the Inaugural Air Transport Conference For Central and Southeast Europe organised by EastEuro Link Air Transport. Under the auspices of Ministry of Transport, Posts and Telecommunications of the Slovak Republic, this conference has been held in Bratislava, Slovak Republic, the 26th of May. Two important speakers came to outline the LCC market in CSEE and the perspectives of their company within. Jim Callaghan is the Head of Regulatory Affairs with Ryanair Limited. Mr Callaghan insisted on the success of low fair airlines in Europe, based on his Ryanair experience. Ryanair’s success is due to five points: a maximisation of efficiency (a 25 min turnaround, using both exits…), a single aircraft type fleet, the use of regional and secondary airports, a P2P network model (no waiting for connecting passengers…) and cost reduction (Internet sales, no free meals…). In two words: increase efficiency and reduce costs! Concerning CSEE, the transition to LCCs was very sudden. Mr Callaghan regrets the important protectionism from the eastern governments. Overregulation, over taxation, state aids to national flag carriers and elimination of competition between airports are for him among the greatest threats to liberalisation.

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Chris Mandl is the CEO of SkyEurope Airlines. During his speech, Mr Mandl described his company and its integration to CSEE market. SkyEurope has five bases: Bratislava-Vienna, Budapest, Prague, Krakow and Warsaw. According to Mandl, the growth potential in the CSEE area is huge because of the lack of speed and inter-region transport. The building of a high speed trains network or highways will take some time. But the CSEE market is still not mature enough to focus exclusively on leisure travellers, so SkyEurope has decided to fly to convenient airport for business passengers. For instance, this strategy explains the choice of Orly in Paris (SkyEurope is now the second LCC in Paris, behind easyJet), and not Roissy-Charles-de-Gaulle because the carrier doesn’t need connecting traffic, nor Beauvais because of the distance from the city centre is too far for business travellers. This immaturity of the CSEE market has an impact on tickets sales. Because of the lack of Internet and credit card penetration, SkyEurope decided to offer innovative alternatives: a centre call in Bratislava, and a cash deposit in the bank partners. Therefore banks have become points of sales for the carrier.

Currently

Future? Air Scoop - June 2006

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FROM THE GROUND Financial situation and financing strategy: To finance an aggressive strategy, it was important to access the capital market; therefore SkyEurope is the first airline in Central Europe to be listed on a stock exchange (Vienna and Warsaw).

With this financial asset, SkyEurope wants to achieve critical mass, so the airline decided to order 32 new aircrafts by 2010 (16 firm orders: 12 financed by operating leases with GECAS, and 4 bought directly from Boeing backed by the Bank of Scotland and put on balance sheet). The choice for new aircrafts is a cost issue: lower fuel burn, lower maintenance costs and downtime, and higher aircraft utilization and reliability.

New fleet network planning: Thanks to the large aircraft order, the carrier will be more predictable in the aircrafts allocation and will make early deals with airports as they know when the aircrafts will be delivered. SkyEurope has three strategic priorities: increase frequencies on existing routes, join the dots within the existing SkyEurope network (reducing of marketing investments…), and open new destinations to satisfy the local needs of the respective bases. The choice of new destinations is based on destinations which are under-serviced, which are in the optimal range of two hours flight time (because of the rhythm of two or three rotations a day), and which may be served from more SkyEurope bases. SkyEurope management focuses on profitability and not just passenger volumes. Two strategic initiatives: “Go East” consists of developing East-East connections in addition to the East-West flights and entering markets of future European Union countries (Croatia, Romania, Bulgaria…), and maybe to Ukraine and Russia in the future. “Winter Offensive” has been launched trying to offset the seasonality and to offer fights to attractive winter ski resorts (Innsbruck, Salzburg, Poprad/Zakopane).

QUOTES OF THE MONTH « Our difference:

leather seats and real Italian espresso », Chris Mandl, CEO of SkyEurope

“All the people that tried to copy the Southwest model, they failed. The people that succeeded were the ones that introduced little differentiation factors. (…)We are the first short haul airline in the world that sales a real Italian espresso on board” Sky Full of Possibilities, Bratislava, May 26th, 2006.

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BIRD’S EYE VIEW WindJet Airlines: Looking Past the Horizon This summer, more individuals than ever are scheduled to take advantage of the wide range of ticketprices and travel locations offered by low-cost carriers. Certainly one of the bright spots heading into the peak tourist months can be felt from Cantania’s WindJet Airlines. Within the low-cost carrier industry, WindJet has turned more than a few heads, and for all the right reasons. Consider the following: - In 2005, WindJet moved more than two million passengers - The total number of flights from 2004 to 2005 increased by 274%. Jumping from 3200 to 12,057. - Enjoyed an increase in profits from 23.3 million Euro in 2003 to approximately 139 million Euro in 2005. In short, WindJet is the only airline in Italia that is growing. But numbers like that don’t come by accident. According to Windjet’s Commercial Director Mr. Massimo Polimeni, it all comes down to providing a product that the public wants. These days it seems like every airline will promise its customers the moon. WindJet’s success is a bit more concrete. In the physical sense, a larger fleet of airplanes translates into a more flexible operation and more flights that can be offered. What the Italian public notices either directly or indirectly is the attention addressed to customer concerns by the airline’s Customer Management Team and the quick turn-around to questions by the WindJet CallCenter staff. Adds Polimeni, “...We try to be pragmatic about adopting the true “industrial model” that governs low-cost carriers. There are a lot of companies out there doing

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business and most will call themselves “low-cost” but in effect, they are only trying to copy the pricing model of the true “low-cost” airlines. [That isn’t the way to run a business] and sooner or later these other companies are going to have problems. As a result they will lose everytime….” WindJet has experienced phenomenal success with its most popular flights departing to such diverse locations as Barcelona, Madrid, St. Petersburg, Paris, Oslo and Bucharest. Departure points are scattered from Palermo and Catania in the South and from Forlì and Venice in the North. But access to an even larger hub in the north is the key to even more expansion in the coming years. Comments Polimeni, “…When it comes to increasing our presence, we can’t really anticipate anything until we open a base of operations in Northern Italy. We did in fact have a plan in motion for just such a thing for this summer, but ultimately we decided to re-schedule this initiative until the winter months…” WindJet has concentrated on scheduled activities and limiting its commitment to charter flights and, most importantly, it has made huge investments in its fleet, increasing the number of 180-seater Airbus 320 planes from 8 to 11. Furthermore, a significant partnership agreement with Lufthanza Technic (the largest international supplier of MRO (Maintenance, Repair and Overhaul) aeronautical services) assigns them technical support for WindJet’s entire fleet of 11 Airbus A320’s. Furthermore, the contract includes the supply of components to the carrier’s bases in Catania and Palermo, while also supplying its complete range of ARC (Airframe Related Components) services.

The low-cost carrier industry is a competitive one. Other airlines in Italy include Volare and Eurofly and both have successfully managed to grab a respectable portion of the market share. Ryanair looms even larger across Europe. But WindJet stands on the brink of making huge gains across the board as it continues to position itself as a reliable carrier to and from Sicily as well as other location throughout Europe. Adds Polimeni, “...Volare and Eurofly aren’t actual “lowcost” airlines. And we don’t know if Alitalia – which recently aquired Volare – will transform that airline into a true “lowcost” carrier. With respect to easyJet and Ryanair, it’s impossible to consider ourselves as their “competitors” at this point because those airlines function on another level all together. What that means, remarks Polimeni, is that WindJet can only look to grow by operating within its means and allotted space. “…Within 5 years we hope to experience significant growth within our fleet and also the number of flights and locations we offer. Accomplishing that will place us within the top 3 low-cost carriers in Italy with regards to the number of passengers and flights. Above all, the only way to ensure our continued growth is to keep moving forward, continue to re-invest our profits as we offer unsurpassed customer service…” As the halfway point for 2006 looms into view, WindJet continues to be a force to be reckoned with, and is on track for achieving its goals of servicing over 2.5 million passengers -- an increase of more than 20% over the last year. ** For more information on WindJet Airlines log on to www.volawindjet.it

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BIRD’S EYE VIEW Barclaycard Business Travel Survey 2006 «The Barclaycard Business Travel Survey is this year celebrating its 10th anniversary. It is one of the most comprehensive business travel reports in the UK and is used by many to track trends within this dynamic and changing industry. This year, in addition to summarising the current state of business travel, the Barclaycard Business Travel Survey looks ahead to the trends business travellers might experience in 2015. The Barclaycard Business Travel Survey predicts that by 2015 half of all business travellers will consider improved services an important reason to choose an airline. Furthermore, the number of business travellers using business class services is likely to rise from 25% in 2005/2006 to approximately 33% in 2015. Low-cost air travel is not expected to increase further, with the level of business travellers who have used these services staying at the 2004/2005 level of 74% through to 2015. Nearly a third (30%) of all flights taken for business are with a low-cost provider. This year, for the first time, a low-cost airline (easyJet) has become the second favourite airline for business travel overall. easyJet is also seen as the number one choice within the low-cost airline category. Trust in the brand and the route offered have replaced reliability and comfort as the main reasons why people choose a particular airline. This is in part due to the airline industry, and particularly the low-cost sector, becoming much more brand driven and the growing trend for travelling longer distances. In 2005/2006, when asked which methods they had used for checking into airlines in the previous 12 months, traditional check-in was still the most widely used, although the majority prefer the newer technologybased solutions. It is predicted remote electronic check-in procedures will be preferred by almost all (90%) business travellers in 2015.»

The survey can be downloaded here: http://www.companybarclaycard.co.uk/information_centre/tibs/tibs2005_06_survey.pdf

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BIRD’S EYE VIEW Internal and External Factors of LCCs Business Model Evolution The original business model of Low Cost Carriers has been based on few simple points: a single product (single class, no-frills, no frequent flyer program…), a secondary airports policy, a point-to-point development strategy, and a low operational cost (single fleet, direct sales distribution…). The whole system is based on “quantity” which implies that LCCs must constantly develop their load factor to reach this critical mass. As price is THE main weapon against legacy carriers, a war on price between LCCs could be dreadful. So at first LCCs intended to avoid such direct confrontation. The result: In 2005, LCCs had a fifth of the European market, and in 2009, it should be a third. Ryanair and easyJet still control 88% of the European LCC market. This system is no longer the European market reality. In fact, it is now impossible to talk about a single business model for LCCs. That’s the main reason why Air Scoop has been created: to analyse these differences and to study their evolution to dominate the market and competitors. LCCs will face both internal and external evolutions. While airlines management can handle and drive first ones, they are heavily dependent of the seconds. We may focus on four main internal evolutions for LCCs: Restructuration implies getting new extra-revenues sources, opting for IPO strategy or not… Consolidation of the market could happen through partnerships, franchises, buyouts… Externalisation of services like pilots, cabin crews, ground handling… will be one option to reduce heavy operational costs as airlines keep growing. Distribution will evolve to cut prices by all means (websites, supermarkets…). On the other hand, external factors, such as constant rise of fuel price, airports’ mutation (read the article on French Connect), the global economy growth, and even the technology break-out, have a deep impact on these internal evolutions. For managements, evolution means corporate adaptation in order to survive. These “adaptations” will lead to a new generation of LCCs, far from their genuine business model. Systems in mutation are always subjects to instability. This instability occurs in a time of strong competition between LCCs for similar routes and airports.

The Low Cost Air Transport Summit 12th and 13th June 2006 One Whitehall Place, London The Low Cost Air Transport Summit is a strategic conference dedicated to the rapidly expanding low cost sector, held in the historic London venue of One Whitehall Place. The summit is organised by the Institute of Economic Affairs (IAE) which is considered as one of the world’s leading policy think-tanks. The main topics of the summit will be about Competition, Regulation, Consolidation, Cost-efficiency and Emerging Markets.

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« This event comes during a period when the low cost industry is in highgrowth mode, and where the rewards on offer attract massive competition as

Air Scoop - June 2006

well as the watchful eye of the regulator. Furthermore, a restructuring legacy sector is eager to capitalise on the growth which successful newcomers have experienced, and these competitive and regulatory pressures compel low cost carriers to develop incisive strategies if they are to succeed. » The summit will last two days with four sessions each day. Day 1: «Facing the global challenges of competition & regulation»; «Future trends, future challenges»; «Defining your strategy in a crowded marketplace»; «Exploring emerging markets - An international panel».

Day 2: «The Low cost model - Creating value, maximising efficiency»; «Fleet strategy - Planning for the future»; «Exploring innovative business models»; «New routes, new airports». The Low Cost Air Transport Summit will gather industry leaders, analysts of the market, aviation associations... Some european airlines represented during the summit: Ryanair, Air Berlin, Sterling, Sky Europe, Germanwings, FlyBe, MaxJet, FlyNordic... Air Scoop will cover the conference and provide a detailed debriefing in our next issue.

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FROM THE GROUND

French Connect to Anticipate Airports Mutation… The third edition of French Connect, the Low Cost forum for French airports, took place in Marseille, May 9th to 11th. This forum gathered the community of low cost carriers market, from airlines and airports managers to analysts, investors and journalists. The choice of Marseille for the forum has been strategic as the airport faced passengers’ loss since the opening of the TGV rail

route. The Mediterranean airport bets on LCCs to gain back passengers. The impact of this type of conference has been quite impressive on French LCC market, as 66 new low cost routes were created in France during the year following the latest edition in 2005. During the last decade, regional French airports mainly invested in heavy facilities. Nowadays, their strategic approach is different as low cost carriers are included in most airports business models. The mutation is ongoing: From a “tran-

sit place” designed for departures and arrivals, airports are evolving to a “market place”. Analysts notice that recent evolutions of secondary airports are quite similar to LCCs ones. The objective is to raise the profitability by reducing constant operational costs and by adding extra-revenues. Airports bet on stores and lights facilities, like in Frankfurt-Hahn airport where stores are now covering 3300 m2 (just 180 m2 in 2002).

The 2006 World’s Low Cost Airlines Congress Air Scoop is proud to be the Media partner of the 2006 World’s Low Cost Airlines Congress.

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FROM THE GROUND UPS AND DOWNS EuroAirport: Low Cost Carriers Unwanted The Administrative Court of Strasburg has demanded the abolition of the incentive measures stipulated in the new EuroAirport (Basel-Mulhouse-Freiburg) tariff regulations, after a claim filed by Air France. This justice decision is a bad news for easyJet that chose EuroAirport as a major base in the area. easyJet already deserves 18 destinations to many different countries, and designed the airport to be a Ryanair Frankfurt-Hann like. This case occurs three years after a similar justice decision involving Ryanair in Strasburg-Entzheim Airport. The airline finally left the French airport in fall 2003 for the nearby German Baden-Baden Airport.

www.easyjet.com

BLOGS TREND Ryanair: Still the Largest Weblog Coverage Ryanair had three important blog peaks in May. The first peak is due to the investigation of the Irish Aviation Authority against Ryanair’s airplanes that landed at Stansted Airport when visibility was below minimums. The second peak occurred in the middle of the month when Ryanair announced the settlement of its new base in Marseille. This move is seen by many as a sign of further activities development in South Europe (Morocco…). Finally, the most important peak of the month happened because of the conjunction of two events. First one, Ryanair has gone to court to find out who is behind messages on its pilots website and to know the identity of those people who go under the codenames ‘ihateryanair’… And second one when Michael O’Leary responded to a challenge of LOT. The Polish national airline said that Ryanair would “drop their trousers” for extra publicity. Right! Michael O’Leary declared he would walk naked through Warsaw if LOT removes the fuel surcharge on its tickets by the end of May. easyJet weblog coverage is as usual lower than Ryanair. Two peaks can be identified, but they both relate to the same event: Flight attendants and ground staff have to vote on industrial action in a row over the handling of a pay

offer. easyJet management has faced a tense month as they waited for a verdict from flight attendants and ground staff on the contested pay deal. As they know, this could lead to a strike that would disrupt the airline’s crucial summer season Air Berlin has the lowest weblog coverage of the three European LCC leaders. The unique main peak of the month concerns its IPO. Air Berlin announced first they would postpone its planned stock market flotation, and then they would cut price of IPO. With this price cutting, Air Berlin will lose out on 100m euros from the initial 290m euros.

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Air Scoop - June 2006

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