Kevin O'Toole/LONDON
Europe's low-cost airlines could be heading for a shake-out within the next year warns airline veteran British Midland (BM) chairman Sir Michael Bishop, highlighting a slowdown in growth and the prospect of a steep rise in airport charges.
"Some of the special advantages that low cost carriers have had will be eroded," says Bishop, highlighting the artificially low fees imposed by UK airports keen to attract new business. New airlines may typically be offered half-rate charges during their first year, he says, but airports such as London Stansted have agreed to hold fees down to 25% of their normal rate for several years to attract operators such as Ryanair, easyJet and Debonair.
"They are getting airport fees and charges which we would die for, but there will come a time when they have to pay the full market rate," says Bishop. He also points to the phase-out of duty free shopping within Europe in 1999, which will end a lucrative source of on-board sales for the no-frills sector. There are also signs that low cost expansion is beginning to tail off after a year of spectacular growth, he says.
Low fare airlines, such as Debonair, will see their charges rise, says Bishop
Bishop comments come as BM revealed a strongly improved set of figures for 1997. Pre-tax profits virtually tripled to £17 million ($29 million), helped by rising load factors and an overall growth in yields of around 4% as premium traffic grew. The airline also made a gain of around £3-4 million from the strike at British Airways in 1997.
BM expects to push up capacity by around 5% a year over each of the next five years with the arrival of 22 Airbus A320/A321s to replace Boeing 737s. The first A321 was handed over on 30 March.
Meanwhile, BM is pressing ahead with plans to start transatlantic services, depending on the outcome of the American Airlines/BA alliance, which is linked to UK-US open skies and the availability of new slots at London Heathrow.
Bishop says that new services could be launched within 9-12 months and for little more than the cost of a new European route, backed by BM's existing widebody maintenance and handling operations at Heathrow. He adds that the minimum would be for two aircraft, with prospects that these would become available as struggling Asian carriers defer orders.
Source: Flight International
