As Sabena throws itself into revamping its shaky operations it had better remember to watch its back. Both Virgin Express and City Bird are attacking the flag carrier's Brussels base with gusto.
The two airlines claim to be revolutionising the services on offer in Europe with a cheap, fun and distinctive product, though Virgin provides a no-frills product on short-haul destinations while City Bird offers a more 'comfortable' product on long-haul routes.
As well as sharing common ambitions in launching low- fare, 'fun' services, the two are likely to cooperate and already have ownership links. City Hotels sold Eurobelgian Airlines to the Virgin Travel Group, enabling the latter to establish Virgin Express in April 1996. City Hotels then invested 10 per cent of its profits from the sale in a new long-haul airline, City Bird. Its partner in the venture is tour operator group NUR, with City Hotels holding a 58.5 per cent stake.
Indeed, City Bird president Victor Hasson sees City Bird as 'a new product for the world market' just as 'EBA was a new concept for continental Europe'.
Brussels may be more synonymous with the European Commission, elegant façades and exclusive restaurants than the words 'cheap and cheerful' but so far at least the concept seems to be working for Virgin Express. At first sight, the carrier's vivid red colours and its effervescent US chief executive appear to sit uneasily with the staid, grey Brussels/National airport. Yet the low fare carrier has firmly entrenched itself in the European capital and claims it is posting profits.
CEO Jonathan Ornstein, ex-president of Continental Express, sees Virgin Express as the European version of Southwest Airlines - the vanguard of the low-fare, short-haul carrier mania that swept through the US.
'We're following Southwest in Europe and will emulate them where we can and when we can - why reinvent the wheel?' exclaims Ornstein.
Virgin differs from many poverty-stricken startups, however, by having deep pockets. The low-cost carrier can piggyback on the success of the already famous Virgin brand and if need be even dip into the group's coffers.
For the moment at least, the carrier does not need any financial assistance. In 1996 revenue rose to BFr 6.0 billion (US$173 million), 30 per cent more than the former Eurobelgian operation.
Traffic growth is equally impressive. VirginExpress was operating 1,609 flights in May 1997 compared to just 300 scheduled services carried out in its first month. The airline now flies to 150 charter destinations and operates daily scheduled services between 10 major European cities. Passenger numbers increased by 35 per cent to 1.8 million in 1996. Four new aircraft were taken on last year to service new routes, including Nice and Copenhagen. This will give Virgin a young fleet of 12 Boeing 737-300s and four B737-400s by mid-1997.
Unlike many other startups which cower in the incumbents' shadows, Virgin appears to be pulling at Sabena's purse strings. In October 1996 the carrier signed a commercial agreement with Sabena under which it operates all nine of the larger carrier's daily frequencies on the prime London/Heathrow-Brussels route. Under the arrangement Sabena wet-leases three Boeing 737-300s from Virgin for this purpose. The singular deal specifies that Sabena only sells business class seats while both carriers compete for economy seats on the flights.
Ornstein's declaration that he 'loves this arrangement' is hardly surprising. The deal provides Virgin with 'access to airports we never could have got access to'. In January Virgin doubled its Brussels-Barcelona services under a similar deal to operate Sabena's five daily frequencies. On 30 March Virgin Express and Sabena replicated the arrangement again from Brussels to Rome/Fiumicino five times a day and to London/Gatwick, a new service, twice a day.
Already on Brussels-London/Heathrow the vibrant Virgin brand easily overrides Sabena's somewhat disjointed image, creating the impression the service is solely Virgin. The rockbottom roundtrip fare of ú64 ($104) is producing results - Virgin achieved a 70 per cent load factor in March.
Although the agreement with Sabena is undoubtedly 'a very attractive way to grow', and Virgin is keen to cooperate to other UK destinations, the two airlines have no current plans to extend the deal as 'Sabena has a lot of internal issues that it has to resolve', says Ornstein.
Ornstein quashes rumours that the Heathrow arrangement was used as a tradeoff by Swissair and Sabena for Virgin to drop its attempts to launch low-cost services to Switzerland. Virgin abandoned plans to launch a Brussels-Geneva service despite initially declaring that it would ask the European Commission to intervene if the Swiss authorities failed to drop their objections. Ornstein insists that Virgin merely decided to capitalise on potential elsewhere. 'Why fight this bureaucracy when you can do other things with the planes?'
Predicting that competition will be 'tough up north', Virgin identifies most potential to southern Europe destinations, particularly Spain and Italy. This year the carrier is contemplating building Barcelona or Rome as a hub in addition to Brussels, says Ornstein. Virgin started scheduled operations from Rome to Barcelona and Madrid in 1996.
Alternatively, Virgin is looking at whether to either build a small hub in northern Europe, such as Munich, Stuttgart or in Scandinavia, which it sees as a major growth area, though it may decide simply to build up services from Brussels, adds Ornstein. Virgin also plans to start cabotage operations in due time, he says.
Further far-reaching plans may involve buying another carrier, such as flailing French airline AOM. For the moment, however, Virgin has 'smaller fish to fry'. Ornstein wants to 'make sure that the Virgin house is in order' and consolidate its business during 1997 before deciding in which direction to expand in 1998.
Ornstein sees no need to hurry. First, 'Europe won't be going anywhere,' and second, Ornstein believes the carrier has stumbled across a successful low-fare concept which he is confident will be the way forward for air transport in Europe. 'Not tomorrow but in ten years time this will be the way to travel - in the long run, it will be our product that will be in demand'.
City Bird is equally confident that its low fare concept will succeed, though its services are dedicated to longhaul routes.
City Bird hopes to capitalise on the obvious similarities of image between Virgin Express and City Bird by interlining with Virgin and promoting Virgin's services to its own passengers. 'Virgin Express can offer low cost connections for our long-haul customers with its good network out of Brussels,' states Hasson.
City Bird started charter flights to the French Antilles and La Réunion in December 1996 and launched scheduled weekly flights to Mexico City, Miami and Orlando on 27 March. Scheduled weekly flights to Los Angeles, New York/Newark and San Francisco are due to follow on 2 June.
Charter services, meanwhile, will operate to three Dominican Republic destinations, two Mexican locations and to Cuba twice a week. The next pinpointed expansion is to Asia - an Achilles heel in Sabena's long-haul strategy. All the services are operated with two leased MD-11s, with a third expected in March 1998.
City Bird's ambitions are lofty. The carrier is targeting a 75 per cent load factor in its first year of operations and breakeven after 18 months. It aims to carry at least 260,000 passengers in the first 12 months and already has some 50 per cent of total capacity booked until the end of December. Costs are kept low via employee numbers of only 210, high productivity, and low salaries.
Victor Hasson, president of the airline, whose livery and advertising bear the slogan the 'Flying Dream', gives two key reasons for the scheduled airline's creation. First, the need for a scheduled long-haul carrier at Brussels as 'Sabena has no real long-haul strategy' and second, an already well established relationship with the main Belgian tour operators.
Hasson sees the charter operations as a way to take advantage of 'an existing market that is easy to catch hold of', with some 50,000 to 60,000 potential charter passengers in Belgium. The airline is also looking to develop its cargo business and has already sold all its scheduled belly capacity on to Swissair.
Hasson is adamant, however, that 'scheduled operations is the way to develop in the future'. He sees City Bird as having 'two years to develop its long-haul network' while Sabena struggles to regain profitability.
The carrier's attempts to cooperate with Sabena, with a view to linking Sabena's European network with City Bird's long-haul routes, were rebuffed, however, after Sabena management received a negative response from the airline's unions. The rebuff is symbolic of the way that Sabena's pilots are attempting to control the future of the company, says Hasson, who says he 'cannot clearly see what Sabena will become in the future'.
Whatever Sabena's future, it will have to battle against City Bird's aggressively priced fares: its one-way business class fare to New York is US$500 and its economy fare is just $150.
Sabena will also have to cope with City Bird's distinctive image. The airline is cheap and fun, with added extras such as live entertainment and make-up on board, obtained via sponsorships. Yet it also offers 'comfortable' service with meals, and a separate business class. 'We're the first long-haul airline to offer a low cost, no frills, fun product to passengers,' exclaims Hasson. Unless you count Virgin Atlantic, of course. - Virgin Express' CEO Jonathan Ornstein is bringing the US low-fare carrier craze to Europe.
Wings of Flanders
VLM(Flemish Air Lines) claims to have brought shorter travel times and common sense back into aviation. For a small Belgian carrier, the claims seem somewhat grandiose.
The airline started flights from Antwerp to London/City in May 1993 and now operates over 150 weekly flights from London/City to Antwerp, Rotterdam and Düsseldorf/ Express airport, with a fleet of four Fokker 50s.
The airline's strategy is simple, declares managing director Freddy van Gaever. VLM never competes directly with other airlines, flies only to uncongested airports where fast check-in times are possible, and links a growing number of European commercial centres with London/City.
The airline is fiercely proud of its independent status and would not consider becoming a franchisee. 'I've worked all my life to be independent - I don't want to give up our identity,' says van Gaever.
VLM is, however, trying to to cooperate with other European airlines and possibly American Airlines 'on an equal basis' by codesharing on new routes. After repeatedly asking Sabena to cooperate with it during 1996, VLM finally concluded a deal to operate a joint VLM/Sabena flight from London/City to Antwerp, from 30 March 1997. VLM is also hoping to start cooperating with Sabena from Antwerp to Zürich in the third quarter of 1997.
Future possible solo operations include services from either London/City or Düsseldorf/Express to Belfast/City, Berlin/ Tempelhof or Carlisle. Van Gaever also wants to restart a service to Liverpool, stopped in September 1995. Wherever it looks to next, VLMwill continue to keep its Flemish identity. 'It's very important for the Flemish to have their own airline,' says Van Gaever.
Source: Airline Business
