Transavia Airlines

IAG, Lufthansa and Air France-KLM confront short-haul cost options; Air France will be sorely tested

International Airlines Group (IAG) CEO Willie Walsh has indicated that he is fully prepared to meet any opposition head-on in restoring the Group’s short-haul cost disadvantage against Europe’s major LCCs like easyJet and Ryanair, a reference to Iberia’s pilots who have been striking on a weekly basis in protest against recently-established subsidiary Iberia Express operating off a lower cost (and pilot salary) base.

Rather more timidly, Lufthansa recently appeared to confirm it was exploring a “business case” to merge operations of the Group’s lower cost Germanwings subsidiary with the full brand Lufthansa fleet. Germany’s Bild Zeitung reported that a new low-cost subsidiary, project named Direct 4 You, was also being considered.

These reports follow Air France-KLM chairman and CEO Jean-Cyril Spinetta’s recent comments that the company was considering using Air France-KLM Group’s French version of its Dutch subsidiary Transavia as an umbrella for an apparently similar low-cost model to its two major European rivals.

Finnair’s new short-haul model has to be ‘ruthlessly’ low-cost, says CEO Vehviläinen

This is the year of Europe’s legacy carriers finally addressing their unsustainably unprofitable short-haul networks, and the answers so far have primarily been to strip costs out of existing models to make the carriers competitive against low-cost rivals. But Finnair’s decision to outsource its short-haul flying to a joint-venture partner suggests hybrid models can only achieve so much savings, while the structure of legacy carriers has inherent higher costs that cannot be taken out. Starting afresh becomes another, better, solution.

And a tabula rasa today in Europe, or at least Scandinavia, cannot be used to launch a hybrid carrier, Finnair CEO Mika Vehviläinen tells CAPA. Rather, when Finnair’s new short-haul operation commences in 1H2013, it must be “ruthlessly” low-cost, Mr Vehviläinen said. Yet this poses quandaries for Finnair’s business model of efficiently linking Europe with Asia as long-haul passengers, premium in particular, will be subject to LCC-style service on onward connections.

Conversely, lower-cost feeder flights could make Finnair’s long-haul services more price competitive.

European airlines report single-digit traffic growth in 2010; profits remain weak

European airlines reported single-digit growth last year - a welcome improvement from 2009's depressed level - but 2010 was a lacklustre year overall. Full year data has been released by the Association of European Airlines (AEA), the European Low Fares Airline Association (ELFAA) and EUROCONTROL. As noted by EUROCONTROL, growth across the continent last year was driven mainly by LCCs.

KLM’s proposed low-cost role for Transavia brings Schiphol’s issues to the fore

KLM let it be known it plans to reduce services to key European cities in an effort to compete better with LCCs, with fares to be available for less than EUR100. Some routes will be switched to subsidiary Transavia but there is growing political opposition to the downgrading of Schiphol Airport’s hub role in Europe

SAS and LCCs: Denmark’s international LCC capacity share in decline, domestic share stabilises

LCC capacity share in Denmark grew dramatically in both the domestic and international segments from 2005 to 2008, but has stabilised in 2009 (domestic) and slipped back (international) in 2009. For all the contributory factors, the demise in 2008 of Sterling, Denmark’s own LCC, figures highly.