Airlines under Pressure

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Airlines under Pressure

Post by Ryanairflyer on Fri 15 Jun 2012 - 15:18

Europe’s Regional Air Carriers Find Themselves in ‘Squeezed Middle’

The airline industry is set for another round of consolidation as regional airlines in Europe face pressure from low-cost carriers such as Ryanair and Easyjet on short-haul routes and more financially-sound carriers on long haul flights.

This year has already seen the collapse of Hungary’s Malev, regional Spanish carrier Spanair and Czech Connect but experts expect more fallout as the budget airlines continue to grab market share and strong carriers buy up or take stakes in weaker companies.

“There is less room for what we call ‘the squeezed middle’, said Roger de Peyrecave, Head of Airlines at PricewaterhouseCoopers, who have identified some 50 vulnerable airlines in this category.

“We have already seen IAG snatch up BMI and strong Middle Eastern carriers are scaling up by making investments in foreign carriers.”

For example, just this month Abu Dhabi-based Etihad Airways bought a 3% stake in Ireland’s Aer Lingus and a 4% stake in Virgin Australia Ltd.

And it’s not just the smaller airlines that face challenges — in addition to regional airlines such as LOT of Poland, Tarom of Romania and Cyprus Airways — PricewaterhouseCoopers includes Virgin Atlantic in its ‘squeezed middle.’

“Virgin lacks sufficient scale when compared with long haul rivals such as Air Franc-KLM and Lufthansa and is constantly looking at strategy to expand its global footprint with international alliances and/or finding a particular niche,” said Mr. de Peyrecave.

Meanwhile recent data shows that budget carriers have grown market share in Europe to a record 31% as at the end of May boosted by the pressure on consumers who are after only the cheapest flights.

Ryanair and Easyjet keep non-fuel costs to a minimum with their use of newer fleets, with a limited number of smaller planes and types which are more fuel efficient and they aren’t tied in to complicated network concerns which means they can swap and change routes swiftly without worrying about feeding into a long haul network.

Passengers recently flying out of London’s Gatwick said that availability as well as cost underlined their choice of budget airlines such as Easyjet and Ryanair.

“It’s down to dates and price,” said one. “Cost and flight times every time — Ryanair and other budget airlines have more flights,” said another.

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