Vueling: The battle for the short haul market – the final frontier

Vueling is playing a big part, with its low cost base (the second lowest in Europe) and enhanced business offering, in delivering a viable solution in the highly price sensitive short haul sector, where the traditional carriers are losing ground, CEO Alex Cruz highlighted today in an address to the UK's Aviation Club.

He expressed support for the Single European Sky initiative, SESAR, but highlighted the need to see it implemented in the right way - to enhance safety, create more efficiency and capacity. He also praised the work being undertaken by the UK NATS and German DFS - outlining "such initiatives help the industry and lead us faster to where we need to be."

But the new taxes on passengers across multiple countries in Europe he condemned as "short sighted, self-defeating and almost suicidal initiatives." The idea of hiking airport fees from anywhere between 5% and 100% is a perfect example. "This hits our customers with an increase of as much as €10 per segment per passenger. So a typical British family of four, holidaying in Spain could see their travel costs increased by up to €40, with further increases expected in 2013 and 2014."

Cruz acknowledged that Vueling's domestic market has suffered some 'major political mismanagement'. However he believes the fundamentals of Spain remain solid and he remains convinced the current business generation will get Spain back on its feet, given the chance.

Vueling has worked long and hard to carve out a niche in Europe's most competitive commercial aviation arena," he said, evolving a young business at a time when deregulation, the fall of political and commercial barriers, increased disposable income, more efficient and bigger aircraft and many more factors have combined to transform the aviation industry into a thriving market. Vueling approached the challenge from a radically new perspective, asking what passengers today really wanted, rather than assuming.

"We experienced some initial teething problems," conceded Cruz. "But when Vueling merged in 2009 with Clickair, everything started to come together. Today, we fly 16 million passengers annually on 59 Airbus aircraft over 150 new routes from 14 bases across Europe. In the UK Vueling is already operating nine routes from four airports: London Heathrow, Southampton, Cardiff and Edinburgh.

Transforming cost-control from a management function to a cultural trait

"Vueling unashamedly follows the passenger, wherever he or she may be," said Cruz. "There's one overriding mantra that has enabled us to do this and thrive - that is a relentless control of costs. At Vueling we've managed to transform cost-control from a management function to a cultural trait. At every level in the company, Vueling staff knows that keeping an eye on each and every cost item enables us to manage our price and revenue equation."

Cruz highlights the importance of being as clever as possible regarding fuel. "We don't like the cost of fuel, of course, but we have to be smart about hedging and involve aircrew intensively in fuel management. Crew become very committed to fuel economy once they realise the tonnes per year that can be saved by being ultra-efficient.

"We have also achieved a sustained load factor in the mid-70 percentile, which is fine as more than 40% of our overall passengers are business travellers and we aspire to increase this number to nearly 50% by the end of this year. We will do this by continuing to add frequencies on key routes, plus add new services like access to business lounges."

Alex Cruz closed his address stating that Europe still has a long way to go in terms of waking up to the harsh business realities faced by the aviation industry. "However, we at Vueling think we've done a fairly decent job of looking reality in the eye and adapting to it. Even leading it. For us, the trick is not to become complacent."