In his article 'Europe's Cost Crisis' (Airline Business, May), Hugh Parry failed to emphasise the biggest barrier to entry in launching a Southwest style startup in Europe - namely, money.
Obtaining adequate seed financing is traditionally much harder in Europe than in the US, particularly for high risk ventures such as these.
The no-frills services of Ryanair, EBA and EasyJet were started by people with more than sufficient funds. I am convinced that others would already be flying, despite the operating issues highlighted by Mr Parry, were it not for the scepticism of European venture capitalists.
At Hambrecht & Quist we have four successful Southwest style startups under our belt worldwide, with a couple more in the pipeline. We have conducted extensive research into the opportunities in Europe and believe that low cost scheduled airlines will follow in the footsteps of numerous other innovations that have crossed the Atlantic.
Mr Parry makes some valid points warning of the pitfalls, but the achievements of Ryanair and EBA so far are proof that the formula can work in Europe when carefully applied to appropriate markets, with a few small adjustments if needed.
Their slightly higher fares are still far lower than their competitors could ever profitably offer, particularly when one looks at the numbers on a stage-length adjusted basis. As for slots in Europe, there are many interesting, underserved city pairs with underused airports at each end. The operating environment is undeniably different in Europe compared to the USA. The amount of VFR travel, extensive rail systems and established charter services all impact the number and size of suitably attractive markets.
However, if one adds up the number of aircraft operated by the airlines mentioned here, plus those of the few others which are implementing the formula correctly, the total is less than ValuJet's entire fleet. Our analyses suggest there is room for more. We would welcome the opportunity to compare notes with entrepreneurs who want to prove to Hugh Parry that it can be done, but who need strong financial partners to do so.
Russell Winter
Airline analyst - venture capital
Hambrecht & Quist
San Francisco, USA.
Source: Airline Business
