LOIS JONES LONDONc
Cut-throat competition between low-cost players at London Stansted airport looks set to cause casualties with the launch of KLM uk's BuzzKLMuk is to set up a low-cost fares airline next year called Buzz at Stansted to compete with Go and Ryanair.
The carrier, which will provide ticketless travel, sold direct over the internet and by telephone, promises a "simple but transparent fares policy" while "inflight" and "on-the-ground" frills will be charged for on a pay-as-you go basis.
Buzz is to take over KLM uk's Dusseldorf, Frankfurt, Milan and Paris services as well as launching three new routes including Vienna and Lyons. Using eight of KLMuk's BAe 146s, the services will be three times daily.
Meanwhile, Go - BA's response to the Irish carrier Ryanair - is already feeling the pressure of increased competition, reporting a £20 million ($32 million) loss since its launch in May last year. But Go remains positive about the losses, which drop to £13.7 million after tax.
"We are pleased with our financial results," says Barbara Cassani, Go's chief executive. "These figures reflect the investment we have made in setting up a new airline and growing the business quickly in what is an extremely competitive market place. We are on track to meet our target of breaking even at the end of year three."
Andrew Barker, analyst at Warburgs, sees no cause for concern at Go. "When you look at BA as an entity, £20 million is neither here nor there," he says.
The results generate good publicity for low-cost rivals such as Ryanair and EasyJet. "Even we were shocked that Go is losing so much money," says Ryanair chief executive, Michael O'Leary.
Europe's largest and most profitable low-fares airline, warns of even tougher times ahead: "If at the moment the other low-cost airlines are losing money when fuel is at an all-time low, what's it going to be like in a couple of years when fuel prices go up?" says O'Leary.
Industry sources predict that Go may set up a business class product although the company says it is currently "unaware" of any such move. Around 30% of Go's current passengers are business executives. "If you look at Go's scheduling and early in-bound flights, it's obvious that Go is aimed at the price-conscious business market," says Barker.
EasyJet, which is to begin flying out of Stansted in November, points to Go's price restructuring as an indication of a move towards business class: "Go is offering five different fare bands - it's classically what's offered by the big airlines. Go is also reliant on return fares."
O'Leary also predicts that Go will introduce a business class product: "Go will turn into BA in Stansted - they won't be able to resist going after the business class market there. It's the only chance BA will ever have of making money out of Go," he says.
Source: Airline Business
