Less than five months after British Airways started up its controversial low-cost operation at London Stansted, GO has sparked off what promises to be a cut-throat price war in Europe. The battle began on 7 September, the day before GO launched onto the high density London-Edinburgh route. Determined to face off this threat at its Stansted base, KLM UK anticipated the move by slashing prices and boosting frequencies to Stansted, including new routes from London City.
Although KLM UK (formerly Air UK) acts primarily as a feeder into Amsterdam for its Dutch parent, the regional carrier competes in its own right. John Grant, who heads domestic services, believes that GO will soon add further services to Scotland out of London and fears an oversupplied, "unstable" market.
Further responses to GO are planned for late September, says Grant, adding that this will involve initiatives in mainland Europe, where it has been competing on the Stansted-Milan route since GO's launch in May. John Grant says that "…traffic continues to hold up" on the Milan run and denies that Go has hit its yields. He pledges that KLM UK will remain "price competitive on all occasions".
KLM UK's relatively high cost base raises doubts over its ability to sustain price cutting over a long period. GO chief executive Barbara Cassani estimates that KLM UK is twice as costly to run as her non-frills operation. She would not reveal where GO intends to fly to next, saying that she "-wants to make Edinburgh work first". Cassani denies that GO is eating into BA's customer base, citing surveys which point to GO generating new traffic, but could not rule out competing with BA in the event of a recession. In fact, BA has indicated that it may withdraw from some short haul services and let GO operate them instead, to comply with European Union regulators' conditions for a tie up with American Airlines.
Source: Airline Business
