Highlights in this Issue
Air Berlin Swallows LTU p. 3
Analysis of the LCCs’ Slovakian Market
SWOT Analysis of European LCCs Industry
(R)evolution of Ryanair’s Business Model
The Great Carve Up in the Nordic Sky
The Low Cost Carriers Analysis Newsletter
EDITORIAL
I
n the coming months, LCCs’ industry will have many opportu-
nities to meet, exchange ideas and do some networking. Indeed,
this month some of the most influential people in European
low-cost aviation will gather at the French Connect 2007 in La Bau-
le (April 25-27). Then in May, EastEuroLink will bring together key
players of Air Transport in the region of Central & Eastern Europe
in Bratislava (May 4). In June, we will be back in London thanks
to MarketForce and their annual Low Cost Air Transport Sum-
mit (June 13-14) presenting current issues facing LCCs market and
focusing this year on this question: “Where next for the low-cost
carriers?” Finally, after the summer break, we will all be back to the
World Low Cost Airlines Congress (September 17-19) with a new
formula to improve networking. For instance, attendees will know
how the climate change debate does affect LCCs industry and what
customers really think through live focus groups… At each event,
Air Scoop will be there to discuss with top managers of LCCs, finan-
cial analysts, and market journalists.
Consolidation of the European LCC market is more than ever on-
going. The Scandinavian LCC FlyMe had to report bankruptcy and
cancel its flights (p. 13) due to a lack of money to continue opera-
ting flights. Local competitors such as FlyNordic or Norwegian (p.
2) hope to benefit from this collapse and replace some of FlyMe’s
flights. On another market, time is also to strong consolidation: in
Germany. Air Berlin which already bought its strong partner DBA
last summer has simply swallowed its competitor LTU to become
the fourth airline in Europe (p. 3). On the UK market, FlyBe has
planned a similar growing strategy by acquiring BA Connect, but fa-
ces more concrete difficulties (p. 10). To survive in this highly com-
petitive environment, LCCs have different options. One of them is
to conquer new markets always farer. Central & Eastern Europe is a
dynamic market, full of opportunities for LCCs, so after the Hun-
garian market (Read Air Scoop March 2007), we have analyzed the
Slovakian market, with its strength and weakness (p. 6). One cur-
rent trend is also to study opportunities of long-haul flights. Many
analysts have speculated that Ryanair will offer long-haul flights,
possibly in conjunctions with its Aer Lingus bid. However, such
strategy will definitely affect Ryanair’s business model (p. 12). Ano-
ther issue that will certainly alter LCCs business models is climate
change. We notice a clear trend of air travelers changing their flying
habits because of climate change concerns (p. 14). To get a better vi-
sion of European LCCs’ market, we have realized of SWOT analysis
of it (p. 8). Each month, we will provide a SWOT analysis of a low-
cost carrier, next month we will publish a SWOT of Ryanair).
Air Scoop - April 2007
p. 6
p. 8
p. 12
p. 13
AIR SCOOP ANNOUNCEMENTS
2007 Ancillary Revenue Airline
Conference (ARAC 2007)
November 14 and 15 in Frankfurt
Air Scoop is proud to be media partner of the
ARAC 2007.
The Ancillary Revenue Airline Conference
(ARAC) is the first global event in the air-
line industry to completely define and deve-
lop the concept of ancillary revenues. Airline
Information has teamed up with the leading
research consultancy in airline ancillary re-
venues, IdeaWorks to produce this ground-
breaking event.
President of IdeaWorks and chairman of
ARAC, Jay Sorensen defines ancillary reve-
nues as “Revenues beyond the sale of tickets
that are generated by direct sales to passen-
gers, or indirectly as a part of the travel expe-
rience.” This definition includes the commis-
sions earned by many airlines on the sale of
hotel accommodations, car rentals and travel
insurance.
http://www.airlineinformation.org/confer-
ences/2007_ARAC/arac_intor.html
The Budgie Awards 2007
The Budgie Awards have been created to
recognise the leaders, innovators, creative ta-
lents, and pioneers in the global Low Cost
Airlines industry.
Due to take place on the evening of the
World Low Cost Airlines Congress, the
Budgie Awards promises to be a spectacular
event.
http://www.terrapinn.com/2007/budgies
www.air-scoop.com

Exclusive Interview of Daniel Skjeldam
(Director Network and Revenue of Norwegian)
Could you please present Norwe-
gian to our readers? What are your
specificities compared to other Eu-
ropean LCCs? What do you do bet-
ter than your competitors?
Norwegian is Scandinavia’s largest
LCC with 5,2 million customers in
2006 and 22 aircrafts. It is the lar-
gest carrier on international flights
from Norway. We fly a many high
frequency routes on the domestic
network with up to 14 daily round-
trips. To achieve this, we have built
a product with emphasis on an ef-
fective airport product. For instance,
you can go directly to the gate with
your creditcard or barcoded travel-
document on any domestic airport
if you only have a hand-luggage. On
the international network, we mainly
focus on primary airports, but we fly
to secondary airports where it’s sui-
table for our customers. We have a
very effective flight-program, with
20 minutes turnaround and up to 12
daily sectors per aircraft.
You already cover many routes
between Norway and European
main cities. Do you plan to deve-
lop new routes within the Scandi-
navian market; are there sufficient
population catchment areas to open
new routes in Scandinavia? If not,
towards which market do you tend
to?
Most of our network originates out
of Norway, but we’ve also built a
base with two aircrafts in Warsaw,
and we also fly 4 routes out of Stoc-
kholm. The catchment area in Scan-
dinavia is smaller than in other Eu-
ropean regions, but population flies
more due to both topography of the
area and distance from the rest of
Europe. Though, by having a smaller
catchment area you have to adapt the
2 Air Scoop - April 2007
BIRD’S EYE VIEW
Daniel Skjeldam
Director Network
and Revenue of
Norwegian
product to it. For instance, we codes-
hare with other Scandinavian LCC’s
on the intra-Scandinavian routes.
Which are the low cost carriers
serving the Scandinavian market?
Who are your most dangerous com-
petitors: local LCCs or “Islanders”
(Ryanair and easyJet)?
The largest LCCs in Scandinavia apart
from ourselves are Sterling and Fly-
Nordic who are Scandinvian-based,
and Ryanair with a base in Stoc-
kholm and a number of routes from
Norway and Denmark. Air Berlin,
easyJet, WizzAir, Sky Europe and
Germanwings also operate to Scan-
dinavia – but on a smaller scale. On
the domestic and intra-scandinavian
network, we compete a lot with the
SAS, whereas on the leisure-routes
we compete with a number of car-
riers. Though, having a very strong
brand in Norway, and operating al-
most 90 routes from this market,
puts us in a very comfortable posi-
tion as opposed to airlines having a
smaller position in the market.
The European Low cost carriers
market has reached a certain ma-
turity which leads to its consolida-
tion. During this transition, what
are, for you, the greatest threats to
European Low cost carriers? Fuel
rising? Overcapacity? Evolution of
airports? Regulation?...
In my opinion the greatest threat
towards LCCs in Europe are stupid
ideas and regulations from EU that
could limit further traffic growth. Of
course the Environmental side is an
issue we need to follow closely, but
LCC’s in general should have a huge
advantage over traditional airlines,
with LCC’s having newer fleets, hi-
gher seating-density, avoiding traffic-
jams at hubs like LHR and FRA and
not the least flying with much higher
load factors. Traditional airlines with
business cabins and low density sea-
ting focus on business-yield Vs filling
and standing in line at LHR for hours
are the worst threat to the Environ-
ment.
Many LCCs look after extra-reve-
nues to offset the low price of their
tickets. What are the projects of
Norwegian in terms of Extra-reve-
nues?
As most LCC’s we sell hotels, rental
cars, insurances and other things on
our website. In addition we have im-
plemented assigned seating for a fee
of EUR 3,5 as well as a luggage fee.
On domestic flights we also take car-
go on the last flight of the day, where
we have a little more generosity in
the schedule.
Do you believe that consolidation
of the market will lead to 2-3 main
LCCs in Europe, or do you think
there will always be many LCCs on
niche markets?
I believe it’s quite difficult to achieve
a low cost level with a small number
of aircrafts. For ourselves, we didn’t
make profits until we reached 15 air-
craft. I believe there is room for more
than 2-3 LCCs in Europe, but not for
the around 50 LCCs flying in Europe
today.
During last World Low Cost Airli-
nes Congress, you expressed your
worries about the shortage of pi-
lots and crew hitting LCC market?
Could you explain us your point
www.air-scoop.com

of view on this situation and what
Norwegian does to face such pro-
blem?
I believe the airline industry will face
the challenge of very low rates of
new pilots trained in the period after
2001, but that supply and demand
will take care of this in the longer
run. I don’t think the industry faces
a problem regarding cabin crews. For
ourselves, we have a lot ex-pat pilots
wanting to return to the region, and
BIRD’S EYE VIEW
we don’t face any significant challen-
ges at the moment.
What are the options for Norwegian
to transform its business model in
order to make more costs savings?
We have a continuous focus on cost
savings in all areas. Recently we have
implemented a new reservation-sys-
tem that gives us a very competitive
distribution-cost. We have also just
implemented a new DCS-system on
our main-airports, with huge cost-sa-
vings over the old one we used. Ope-
rationally we have hedged part of the
fuel-purchases for the upcoming pe-
riod and are striving towards the 900
limit for our pilots and cabin-crews.
Aircraft utilization is now 12 hours
plus in the Summer Program by im-
plementing more red-eye flights to
offset the challenge that many short
sectors flights poses to the utiliza-
tion.

Air Berlin Swallows LTU to Grow Worldwide

Where exactly is Air Berlin flying to? In May 2006, Ger-
many’s first LCC was introduced on the stock exchange
to finance its expansion plans. Less than one year later, it
swallowed two of its challengers in the German air trans-
port business. First, it was DBA, in august 2006. And now,
at the end of March 2007, the fifty-years-old charter airline
LTU, paid cash 140 million Euros. Air Berlin will soon is-
sue 250 million Euros in new shares and convertible bonds
to finance this operation. The company also plans to buy
49% of the small Swiss airline Belair.
very competitive European air transport market, growing
quick and big is the best way to survive. This is particu-
larly true in Germany, where the market entered a phase
of consolidation. By buying LTU, Hunold not only ma-
kes his company the fourth airline in Europe, behind Air
France-KLM, Lufthansa and Ryanair. He also expects
to make important savings - between 70 and 100 million
Euros - and to settle down in Düsseldorf (West of Ger-
many), where LTU is based, « the second most important
catchment area in Europe after London », Hunold said.

Last summer, Air Berlin was operating less than 60 air-
crafts. They are now more than 100, and at least as many
are on the order form.
By buying DBA, a company it had already a strong par-
tnership with, Air Berlin’s goal was to grow and strengthen
its position on the German market, make savings and pick
up DBA’s strong business customers - Air Berlin was more
tourist-oriented. The purchase of LTU is far more daring.
This charter airline, which carried in 2006 5.75 million
passengers on its 26 airplanes, is mainly operating long-
distance flights to North American, the Caribbean, Africa,
Southern Asia, Southern Europe... That is to say, world-
wide.
No European LCC is currently flying worldwide. Long-
haul flights are said to be more profitable, but also harder
and riskier to manage. And the existing LCC model (quick
turnaround, minimal level of service, no first class...) fits
more short-haul flights. However, Air Berlin apparently
prepares to be the first to grow on the intercontinental
level. Its close European route network will help the com-
pany to feed long-haul flights. If this strategy succeeds, the
competitive advantage for Air Berlin could be significant.
Joachim Hunold, Air Berlin’s CEO, knows that on the
The takeover of LTU by Air Berlin was a coup de thea-
tre in the German sky. At the beginning of March, LTU’s
former main shareholder, the businessman Hans Rudolf
Wöhrl, had rather talked about negotiations with Condor,
the other long-haul German charter airline. But a merger
between those two companies would have been compli-
cated, since one of Condor shareholders is the national
airline Lufthansa (more than 300 aircrafts, 53.4 million
passengers in 2006), which would certainly have tried to
block the deal.
But for Lufthansa, the Air Berlin – LTU merger may not
be a better solution: after this new purchase, Air Berlin
may really become a threat for the national leader. All the
more that Air Berlin concluded a code-sharing agreement
with Condor, even if in return it stopped its code-sharing
with TUIfly.
The funny thing about all this is that Hans Rudolf Wöhrl,
who is a friend of Joachim Hunold, was already the man
who sold him DBA last summer. Each time, the scenario
was the same: Wöhrl bought the airline, improved its fi-
nancial situation – even if LTU is still unprofitable – and
sold it to Air Berlin. So, next time Mr. Wöhrl gets interes-
ted in an airline, be careful...

3 Air Scoop - April 2007 www.air-scoop.com

 DOWN TO EARTH
JetStar Clicks its Way to Ancillary Revenues ‘‘IDEAWORKS AISLE’’

Airline marketing innovation in Australia seems to be as

prolific as kangaroos in the Outback. Independent airline
by Jay Sorensen
Virgin Blue, which now claims a 30% domestic market
(President of IdeaWorks)
share, has introduced many innovations such as its Blue
www.IdeaWorksCompany.com
Zone premium seating, the Velocity frequent flier pro-
gram, and a network of fee-based lounges to serve Austra-
lia’s budget-conscious travelers. Not to be outdone in this
race, to delight consumers with amenities and choices, is
the low cost airline started by Qantas Airways. ple travel experience as the consumer moves through
the booking process. Prior to requesting payment, JetStar
JetStar started flying domestically within Australia du- offers its customers the option to pre-purchase various
ring May 2004 and six months later added medium haul services for delivery on board the flight. This is not an
international flights to Asia. The company promises its uncommon practice among a growing number of airlines
customers “a simple and fresh travel experience, with a seeking to boost ancillary revenues. However, JetStar is
vibrant approach toward low cost travel.” JetStar recently unique because of the imaginative branding it has applied
introduced its low fare strategy for long haul international to its online sales process.
operations during November 2006. It is among the first
to apply the low cost model to longer flights. The result encourages travelers to click and buy onboard
amenities through the use of whimsical language, tho-
Supported by its existing domestic network, JetStar be- rough descriptions, and pre-purchase discounts. The fol-
gan flights to Bangkok, Phuket, Ho Chi Minh City, Osaka, lowing offer is displayed after a consumer has selected
Bali, and Honolulu. These six international destinations their flights:
are served from the following key Australian gateways:
Sydney, Melbourne and Brisbane. Concurrent with this
expansion, the airline adapted its low fare model to better
serve the needs of long-distance travelers.

JetStar’s innovations focus on three marketing areas: pre-

mium class, passenger fares, and ancillary revenues. The
airline acknowledges the importance of premium class
services by including a new StarClass on its international
long-haul flights. This business class style service encoura-
ges higher income consumers to upgrade to greater com-
fort and amenities. StarClass is promoted on the airline’s
web site and is included as a fare option, along with its
JetSaver and JetFlex coach fares.

Consumers seeking maximum savings are prompted to

choose between JetSaver and JetFlex fares during the
reservation process. The airline’s web site allows easy
comparison between the benefits and restrictions of each
with a pop-up page that displays terms and conditions
in a matrix format. As the branding suggests, JetFlex is
priced higher and offers greater flexibility for refunds and
reservation changes; JetSaver fares sacrifice flexibility for The above prices listed are in U.S. dollars and apply to fli-
maximum savings and do not accrue points in the Qantas ghts operated between Honolulu and Sydney. The origin
Frequent Flyer Program. point of the itinerary determines the currency displayed;
Australian dollars are listed for passengers that begin their
travel in Australia. “Feed me! Comfort me! Entertain
JetStar delivers on its promise to deliver a fresh and sim- me!” instantly conveys the consumer benefits of these

4 Air Scoop - April 2007 www.air-scoop.com

 BIRD’S EYE VIEW
services and focuses attention on a consumer’s natural desire
for self-gratification.
Clicking on the “What’s Available?” links displays the fol-
lowing information:
Feed me!
Include this option, and you’ll be served meals twice on your
flight. Your choice from an international menu designed to
appeal to all tastes. With a choice of freshly prepared Aus-
tralian and local cuisine to keep your hunger satisfied throu-
gh your journey. A drink will also be included to enjoy with
your meals.
Comfort me!
On board comfort, that you can take away and use again and
again. Packed with a stylish amenity kit, blanket and inflata-
ble neck support, it also includes an eyeshade and socks for
when you just choose to ‘switch off’.
Entertain me!
To stay entertained during your flight, select this option and
we’ll add the latest video on demand unit to your inflight
experience. With a range of new release movies, TV shows,
music videos and kids programmes. Headsets are also inclu-
ded in the price. Stop, start, rewind, fast forward. The choice
is yours.
The JetStar web site also displays a copy of its Inflight Menu.
Consumers realize savings when they pre-purchase items at
the time of booking. Pre-purchase savings are nearly US$2
for each of the Comfort me! and Entertain me! offers; the
Feed me! option yields even greater savings. And of course,
pre-purchase ensures the delivery of services, regardless of
demand on the flight.
All economy class passengers are provided a complimen-
tary bottle of water at the time of departure. In addition, a
water fountain and disposable cups are provided on board
for these passengers. All other items, to include a children’s
activity kit, are available for sale during the flight.
The online click and buy process continues with the presen-
tation of checked baggage options. JetStar provides a free
baggage allowance of 2 pieces per passenger on its Hawaii
services. Travelers may increase their allowance by one pie-
ce and save 20% on the fee assessed at the airport through
the pre-purchase option. The following offer is displayed
below the Inflight Extras section:
Ancillary Revenue Airline Conference 2007. Ideaworks
co-organizes the event with Airline Information. ARAC
2007 will be held November 14 and 15 in Frankfurt.
5 Air Scoop - April 2007
Pre-purchase extra luggage
While making your booking, you can pre-purchase addi-
tional baggage.
You can pre-purchase excess checked baggage (in addi-
tion to your checked baggage allowance) at up to a 20%
discount. Pre-purchased excess baggage is for checked
baggage only. For more information, regarding cabin,
checked and excess baggage, please click here. Purchase
of Excess Baggage is non-refundable and non-transfera-
ble.
Add an additional 1 item (+$60) to my booking.
JetStar may have developed the ideal long-haul expe-
rience that appeals to a wide variety of passenger expec-
tations and levels of affluence. Higher-income passengers
seeking maximum comfort can choose a fully bundled
premium product with more personal space and better
dining and beverages included in the ticket price. Budget-
minded travelers can choose the convenience of a JetFlex
fare and pre-purchase their food, beverages and enter-
tainment at the time of booking. Ultra-budget travelers
can lock in their travel dates with a JetSaver fare and
bring their own snacks on board.
The airline delivers these choices through a tasteful and
efficient online process. Simple and uncluttered branding
seems to be part of the airline’s DNA. However, JetStar
might consider adding more depth to its branding with
images to convey the attractiveness of its service offers.
But the airline has clearly designed a click and buy pro-
cess that likely delivers substantial ancillary revenues and
provides consumers with the freedom to design their
own travel experience.
Sources used in this article: Unless otherwise noted, the information
described in this analysis were gathered at JetStar.com during Februa-
ry and March 2007.
IdeaWorks cannot guarantee, and assumes no legal liability or res-
ponsibility for the accuracy, currency or completeness of the infor-
mation.
EVENTS
www.air-scoop.com
 BIRD’S EYE VIEW
Analysis of the Slovakian Low-Cost Air Transport Market
The break-up of former Czechoslovakia in 1993 left Slo-
vakia without a single national air transport company. This
gap was meant to be filled by Slovak Airlines, established
in 1998. However, one of the most successful Central Eu-
ropean low-cost air carriers, Sky Europe has claimed the
right for this title. Since 2002, when Sky Europe began its
operation, the company has been gradually growing and
nowadays is dominating the Slovakian air transport mar-
ket. In this respect, Sky Europe has become the Ryanair
of Slovakia. This is the reason why the analysis of the Slo-
vakian low-cost market is inseparable from the discussion
of this low-cost carrier.
Currently, there are three international airports in the
country that are served by a low-cost carrier: Bratislava,
Košice and Poprad-Tatry. Bratislava is by far the most signi-
ficant of these, since the bulk of the traffic is concentrated
at this airport. Košice is served only by Sky Europe, daily
domestic flights connect the city with Bratislava. Similarly,
Poprad-Tatry, which is a popular tourist resort, is served
solely by Sky Europe, regular flights are offered to London-
Stansted.
As a consequence, the capital of Slovakia with approxima-
tely 430 thousand inhabitants almost exclusively attracts
the whole air traffic to the country. The annual number
of total passengers at Bratislava airport shows a dynamic
growth and as Figure 1 suggests, the multiplication of pas-
senger turnover after 2002 is mainly due to the entry of
the low-cost carriers (1). In 2006, 1.93 million passengers
landed or departed from Bratislava, 94% of them travel-
led on international routes. The share of low-cost carriers
from the passengers is very high, Sky Europe carried 48%
of total passengers, Ryanair took 24% and lastly, easyJet
reached a mere 3.28%. The low-cost carriers, therefore, are
dominating the Slovakian market, and especially Sky Eu-
rope has taken the lead.
However, in spite of the dynamic growth, the size of the
market is still small and its potentials are not particularly
6 Air Scoop - April 2007
ANALYST PORTHOLE
convincing, too. Given the relatively small population of
Slovakia (5.44 million), domestic demand for international
flights is limited while international demand may also be
relatively restricted. It is not a coincidence therefore, that
Sky Europe, which gained first-mover advantage and has
established reputation for being a low-cost carrier, is able
to be a quasi- monopol player in this market. Based on
the winter timetable of 2006 and the summer timetable
of 2007, 26 destinations are served from Bratislava by low-
cost carriers, and Sky Europe is not present on only two
of them (Frankfurt-Hahn and Nottingham, served just by
Ryanair)! Moreover, there are only three routes on which
Sky Europe has to face competition from its single rival in
Slovakia, Ryanair (Milan, Dublin and London-Stansted).
A look at the passenger numbers of the top destinations
in 2006 (Figure 2) clearly shows that there is not much
opportunities left for new entrants on already established
routes (2).
London proved to be the most popular destination with
almost 400 thousand passengers, however, on October 1st,
2006, easyjet had to withdraw its flight on the London-Lu-
ton route, as it was financially not viable, according to the
spokesperson of the company. In other words, easyJet was
not able to bear the fierce competition on this route posed
by Sky Europe and Ryanair even though the 9 months of
serving this route in 2006 were enough for the 8th posi-
tion in terms of passenger turnover. In this list of top 15
destinations, Prague and Munich are those cities which are
not served by low-cost carriers, although they show quite
substantial traffic.
These routes might be potentially viable for low-cost car-
riers to serve in the future but only if they are able to un-
dercut the prices of the incumbents.
Nevertheless, entry to new routes or expansion by the
already present low-cost carriers is still possible. Only 13
European countries are served from Bratislava (25 destina-
tions in total) by the two low-cost carriers and out of these
www.air-scoop.com
 BIRD’S EYE VIEW
some are surprisingly underrepresented (Figure 3), while
the number of connections to Central and Eastern Europe
are also very limited. Especially Germany, the Scandinavian
states and Poland are those markets which could be consi-
dered as possible new destinations.
to increase the catchment area of Bratislava airport and the
domestic flights from Košice to Bratislava are scheduled
in a way that all destinations from Bratislava are possible
to reach from Košice as well. Another issue is the proxi-
mity of Vienna airport (Austria) to Bratislava, which in-
duces rivalry between the two airports. In this respect, it is
a remarkable development that on 19th December, 2006,
Sky Europe opened its fifth operation base in Vienna. The
company will soon offer 16 destinations from the new base.
The big overlap between these destinations and those ser-
ved from Bratislava suggests that a „division of labour” mi-
ght be introduced and certain destinations may be served
only from one of the airports in the future.

At first sight, it seems that Sky Europe is cannibalising its

All in all, the relatively small potentials of the Slovakian
market in terms of domestic and international demand pose
a limit to all planned expansions. It is enough to compare
the passenger turnover data with nearby Budapest: concer-
ning all flights, the airport of the Hungarian capital served
8.27 million passengers last year, while, as already mentio-
ned, Bratislava served only 1.93 million passengers. Howe-
ver, regarding passengers flying with low-cost carriers, the
difference is not so enormous. This figure for Bratislava in
2006 was approximately 1.46 million passengers, while for
Budapest it was 2.2 million. This also clearly demonstrates
how significant role the low-cost carriers play in the Slova-
kian market.
In spite of this, even for Sky Europe, which is truly the do-
minant player in Slovakia, the home market would not be
large enough to grow. The airline carried roughly 2.74 mil-
lion passengers in 2006 and out of these only about every
third passenger flew to or from Slovakia (based on market
share data). This suggests that the home market may not
be the major source of growth for Sky Europe in the long
run. This is underpinned by the fact that Sky Europe tries
business by serving the same destinations from rival airports,
thus posing a potential threat of competing away passen-
gers. However, it is also a sensible business decision since
with this strategic movement, the company will be able
to control traffic from Vienna thereby securing the home
market, and at the same time with the shuttle bus service
already operating between the airports, the catchment area
of both airports can be increased or even joined.
What seems to be a conclusion from this analyis is that
given the highly concentrated nature and limited demand
of the Slovakian air transport market, the first-mover Sky
Europe may be the dominant player in the long run and
new low-cost carriers may not find the country attractive
enough to enter unless they open up new routes and serve
new destinations.
1. Source: www.airportbratislava.sk/flashContent/default3.html
2. Source: www.letiskobratislava.sk/flashContent/prilozene_subo-
ry/2007-18-01_Prev_vykony_rok-2006.doc
Read our analysis of the
Hungarian Market in Air Scoop March 2007 and
Tcheck Republic LCCs market : Air Scoop May 2007.

Low-Cost Carriers and Websites Awards

Wanderlust Magazine has honored FlyBe with its 2007 Travel Awards. The
award is based on both readers’ votes and customer satisfaction, and places Fly-
Be above other carriers making it the best airline website in the UK. Mike
Rutter, CCO of FlyBe, commented: «For FlyBe.com to be recognized as the best
airline website is a great honor for us, especially as the awards take customer
satisfaction into account. (…) We look forward to building on this success and
hopefully featuring again in next years awards.»
However, according to Hitwise, a market research firm, easyJet.com website is the most po-
pular travel website in the UK. Hitwise has gathered data from more than 8 million British
Internet users and found easyJet.com to be the 5th most searched-for brand online. In 2006,
more than 98 per cent of total sales of easyJet came through its website. Andrew Berks, Band
communication manager, pointed out that “easyJet is committed to further developing its on-
line products in the future.”
7 Air Scoop - April 2007 www.air-scoop.com
 BIRD’S EYE VIEW
SWOT Analysis of Low Cost Carrier Industry
Air Scoop launches a new range of articles called ‘SWOT Team’. Each month, we will publish a SWOT analysis of an
European low-cost carrier. In this issue, we start with a global SWOT of the market.
Air travel in the 21st century is becoming an economic
necessity and not a luxury. It has been predicted that by
2010, business and leisure passengers will increase to 2.3
billion worldwide (from 1.6 billion today) of which a ma-
jor share will be enjoyed by the Low Cost Carriers. LCCs
had a share of 17% of the total number of scheduled seats
on offer worldwide in 2006. It was 24% within Europe.
The low-cost model, based on Southwest Airlines’ succes-
sful formula in the US, has been adopted by leading LCC
players in Europe. The key components of their model
are ticket-less travel, Internet booking, usage of secondary
airports, no commission for travel agents, no seat alloca-
tion or connecting flights, and «no frills» such as in-flight
catering (customers pay extra for what they require), no
business class and lounges. The most profitable routes for
LCCs are less than two hours in duration, allowing maxi-
mum utilization of aircrafts. They started by flying city-
to-city routes but are now increasingly targeting resorts,
although many tend to ignore routes of three hours or lon-
ger. They often out perform the legacy airlines in operating
performance.
Overview of the European LCC market:
Growth: Demand for low cost air services was up 9% in
the last quarter of 2006 and the number of LCC flights in-
creased by 18%. In a single decade, low-cost carriers (LCCs)
have transformed the European aviation scene beyond re-
cognition. The UK is the largest and most mature market
for low cost carriers in Europe, followed by Germany and
Spain, which is now seeing the fastest growth.
The enlargement of the EU to include more nations has
given LCCs renewed impetus, with many new services
starting in Central and Eastern Europe as a result of the
deregulation that EU membership brings. Central and Eas-
tern Europe is a key growth area.
Impact: LCCs have opened up direct services between EU
cities that were not available through the legacy airlines
and popularized regional airports by breathing life into the
otherwise under utilized airports.
They have forced established airlines and tour operators to
8 Air Scoop - April 2007
SWOT TEAM
change their business models. The most significant achieve-
ment for the LCCs, especially in the EU, is that they have
brought air travel within easy reach of everyone across Eu-
rope and changed people’s leisure and travel habits.
Issues: But the story has not been of continued success.
Some LCCs suffer from low employee morale. This in
turn leads to poor customer service. LCCs are often ac-
cused of misleading advertisements, resulting in low cre-
dibility & image.
The distinction between LCC and charter services is also
becoming blurred. Some of them have copied the low
cost airlines by making accommodation, car hire and other
ground services available online through their website, and
effectively unpackaging their own product.
SWOT Analysis:
The SWOT analysis given below will help LCCs to achie-
ve their goals by capitalizing on potential opportunities
using their strengths and eliminating their weaknesses &
threats.
The goals of a low cost airline can be:
� Expansion and diversification
� Long-term growth planning
� Competitive combats
� Development of the most suited business model
Target audiences for this analysis are members of the avia-
tion industry, such as:
� boards of airlines
� airports
� aviation suppliers
� air navigation providers
� investment companies, and
� government agencies
www.air-scoop.com
 BIRD’S EYE VIEW

9 Air Scoop - April 2007 www.air-scoop.com

 BIRD’S EYE VIEW
Some of the factors mentioned above may not be applica-
ble to all members of the LCC industry. The relevance of
these factors will depend on the business models and goals
of the players.
Recommendations for Low Cost Carriers:
1. Some innovative schemes should be adopted to attract
the increasing number of small & medium business trave-
lers. This would definitely enhance the market share and
build brand image.
2. The LCCs should expand into medium haul routes, with
the same “no-frills” formula, thus adopting an offensive
strategy rather than a defensive one. This will keep the
traditional players busy protecting their turf and restrict
their encroachment into the LCC market.
3. The European markets are expected to saturate after
How to Get to Go from Edinburgh Now?
When BA Connect is finally disconnected from BA and
is acquired by FlyBe fellow, Scots are really puzzled with
the future of air travel in their home town, Edinburgh. So
are the townsfolk of Glasgow, Manchester, Birmingham,
and Bristol.
The acquisition project was announced first in Novem-
ber 2006 but due to certain legal difficulties and prepara-
tion and legalization of all documentation needed it was
completed in the beginning of March this year. Difficulties
meant not only legal process and money issue but future
of personnel affected as well as passengers. That’s why the
final date for the acquisition was moved several times.
Initiated as a measure of cutting losses on regional routes,
BA Connect appeared to be a greater loss itself. BA re-
ported to lose approximately £100,000 a day. Offloading
the subsidiary to FlyBe has both positive and negative im-
pact on BA. Undoubtedly, such a deal is just a weight off
BA’s mind and pocket. On the other hand, BA is now wi-
thdrawn from regional market and is likely to evolve into a
pure business/first-class long-haul airline. Though expres-
sing aggressive expansion strategy, FlyBe decided not re-
open some of the routes to smaller UK airports cancelled
by BA Connect which means not only passengers affected
by also huge job losses, especially amongst managers and
ground handling personnel. Staff members are offered re-
employment with BA or FlyBe but there is no guarantee
that everyone will get a job. The merge affected about
700 positions which found a critical respond from Trade
Unions. There is a real threat of strike during the Easter.
10 Air Scoop - April 2007
a decade, as it has happened in the US & UK. Hence, the
LCC players should plan to enter the fast growing markets
of Middle-East and Asia, at the earliest.
4. High employee morale is key to customer retention.
The business philosophy of LCCs should be ‘smile, charge
and serve’. Employee satisfaction and customer loyalty are
invaluable for any business to succeed in the long term.
5. Cost cutting may be further achieved by applying lean
operating techniques and standardized processes.
It seems inevitable that the growth rates of recent years
will slow down, except in Central and Eastern Europe
where there is still untapped potential. The larger LCCs
have an opportunity to expand into new markets and eat
into the market share of legacy airlines and tour operators.
Some consolidation is likely to happen in the LCC market,
at the expense of smaller operators.
Passengers on the cancelled flights were offered alterna-
tive flights (some of which will take much longer now)
or full refund. Anyhow there will be certain destinations
affected a lot, like Birmingham – Barcelona or Manchester
– Madrid, as well as some domestic flights such as from/to
Edinburgh, for example.
BA had cancelled more than 1000 flights before the ac-
tual acquisition was completed to reduce severe losses as
soon as possible. However, FlyBe estimates the economic
capacity of the newly merged airline rather high looking
forward to taking over the regional market in two years.
With the acquisition FlyBe got in toto 152 routes which
brings the airline on the top of the list of European regio-
nal airlines. The future would be really bright save for two
things: Ryanair and easyJet. Those are the biggest and
triumphant LCCs operating in the region that serve about
200 destinations all over Europe. Needless to say it makes
really hard for FlyBe to be “original” in this case and open
a competitive route for a competitive price.
BA Connect is not the first regional project that was ter-
minated. GO once shared the same fate and was sold off
by BA to 3i company in June 2001.
www.air-scoop.com
 DOWN TO EARTH
Airports Growth with LCCs?
Airports roll out no-frills red carpets to lure low-cost car-
riers. What can LCCs do for them?
European aviation sector was struck by yet another Euro-
pean Union queries over suggested illegal state aid. Irish
Independent reported British and Derry governments
would be questioned over its deals with Ryanair con-
cerning an agreement inked in 1999 guaranteed Ryanair
GBP250,000 a year from a consortium of four state-fun-
ded authorities on both sides of the Irish border to pro-
mote its Derry to London route.
A range of other taxpayer-subsidiesed benefits included
free landing, navigation, air control, security, baggage and
passenger charges. All legal issues aside, what ushers in the
scene is to what extent LCC is important to an airport’s
operation, status and finances that European airports are
striving to meet the hard-line low-cost tactics.
September 11 changed the equation in civil aviation lands-
cape even in Europe. Many airports lose a significant
amount of traffic since then. Since traditional aviation seg-
ment of full services for major airlines was under pressure,
airports started to shift their attention to grow revenues
from no-frills segment. In 2003 which was merely two
years after the trauma, it was estimated LCC represented
a 12% year-on-year increase to 20% of the European air
travel market. To be LCC friendly is not only desirable
and, in many ways, necessary for airports’ survival.
Since the trend of traveling with LCC is growing among
domestic travelers in Europe, LCC do not only fly on the
wings of operational profit and retail revenue to the air-
ports but also tourism to the city and the neighboring re-
gion. Sweden’s Stockholm Skavsta Airport is one of the
early bloomers capturing the growth of LCC on the conti-
nent. According to Invest in Sweden Agency, Ryanair’s se-
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11 Air Scoop - April 2007
lection of Skavsta as its ninth Scandinavian base has bene-
fited the airport to share the growth of LCC. When civil
aviation was still overshadowed in 2003 by September 11,
Skavsta already reported positive growth: “it is expected
that passenger numbers would jump from 300,000 to 1.5
million in 2003. The airport handled 96,000 passengers in
May, up from 86,000 the month before, and expected the
number to rise to 106,000 in June.”
Tourism was the first to feel the difference from Skavsta
receiving Ryanair. The nearby city of Nyköping began to
reap the economic benefits of Ryanair’s expansion. This is
further confirmed by a report released by Jones LaSalle
Hotels in November last year. The report said that since
the introduction of budget airlines in Stockholm in 1997,
figures have shown an upsurge in overnight stays from 5.8
million in 1997 to 7.4 million in 2005. Growth in tourism
was especially strong after the announcement by Ryanair
to open Skavsta airport as their Scandinavian base. Since
then, international over night stays have shown an average
growth of almost 10% per annum.
Although the emergence of LCC does usher in strong
growth in revenues and tourism to the airport and res-
pective city, it should be noted that LCC’s blatant cost
controls can also threaten airport’s growth. Dispute broke
between Ryanair and Skavsta when the airport planned
to levy a new safety charge in 2005. The Jones LaSalle
report also detailed the Swedish Government’s proposal
to introduce a new airport tax could possibly slow growth
in tourist numbers and affect the hotel industry which
already has several new hotels currently in the pipeline
and expected to open in the next 3 years, as new airport
tax means higher cost for the passenger but less profit for
LCC.
www.air-scoop.com
 BIRD’S EYE VIEW
(R)evolution of Ryanair’s Business Model (part 1)
Ryanair has projected ambitious growth targets for the
next five years. By 2012, the airline plans to carry 85 million
passengers a year, up from 42.5 million in 2006. However,
in order to meet this target, Ryanair will have to change
its business model to meet the needs of more travelers.
Some have speculated that Ryanair will offer long-haul
flights, possibly in conjunction with its Aer Lingus bid,
as well as flights to larger airports closer to city centers.
While Ryanair will probably not fly transatlantic flights,
it will need to target longer routes, as well as flights to lar-
ger airports closer to city centers if it wants to meet those
growth targets.
Many observers believe that Ryanair’s bid for Aer Lingus
is a maneuver to get the company into the long-haul avia-
tion market. However, Ryanair CEO Michael O’Leary
recently said in the German newspaper Sueddeutsche
Zeitung that the bid is “rather unlikely” to succeed. Rya-
nair is unlikely to deviate from its no-frills business model
in the coming years, because that enables the carrier to
maintain the lowest costs of any airline in Europe. Expan-
sion into long-haul markets complicates Ryanair’s simple
business model, and it would almost certainly increase
costs. Ryanair’s available seat mile costs would increase
because it would have to add a new aircraft type to its
fleet, it would likely have to increase seat pitch on long-
haul planes, it might have to facilitate connections at bases
such as London Stansted, and it would run into more com-
petition, particularly if it opened routes already operated
by charter carriers such as Monarch or First Choice.
But if Ryanair chose not to operate long-haul flights, and
instead focus on medium-haul flights, between 4 and 6
hours in length, the airline could operate them with its
737-800 aircraft. While longer flights deviates from Rya-
nair’s established business model to operate quick 1-3
hour flights, operating medium-haul flights could allow
Ryanair to increase its aircraft utilization. This could be
accomplished if Ryanair operates many of the flights as
red-eyes, provided the airline leaves enough time in the
schedule to make up for any delays or maintenance. This
model opens up many opportunities for Ryanair to serve
markets that badly need competition. Ryanair succeeded
beautifully in Poland where the airline significantly lowed
fares and expanded service to many smaller markets that
Sam Sellers provides analysis and commentary on the airline industry at his website,
www.airlinebulletin.com, and is the author of Take Control of Booking a Cheap Air-
line Ticket, an ebook for travelers in the United States who are interested in purchasing
cheap airline tickets.
12 Air Scoop - April 2007
Exclusive Analysis for Air Scoop
www.airlinebulletin.com
lacked nonstop service to Western Europe. If Ryanair
expanded service in Western Russia, it would likely have
a similar effect on many smaller airports in the country.
Ryanair has already adopted some medium-haul routes.
For example, Ryanair started service to Morocco last
year, where it committed to serving up to 20 routes within
five years. While flights between Marseille and Morocco
weren’t successful, flights between the UK and Morocco
have been. Ryanair also has medium-haul opportunities in
North and West Africa, the Middle East, including Israel,
and other former Russian non-EU states, such as Ukraine
or Georgia.
But, while medium-haul flights would give Ryanair many
opportunities to expand its services, it could also lead to
problems. If Ryanair’s planes were flying fewer passengers
per day, then ancillary revenues may decrease. On a ten-
and-a-half-hour round-trip (approximately five hours each
way with 25-30 minutes turnaround time), Ryanair only
has a potential market of 378 customers for its ancillary
products (up to 189 passengers each way), while Ryanair
could fly more than two two-hour round-trips in the same
amount of time, doubling the number of potential custo-
mers who could utilize ancillary revenue products. Conse-
quently, this may decrease Ryanair’s revenues per available
seat mile, because although longer segments could generate
higher fares, they would decrease the importance one of
Ryanair’s most profitable revenue source. Also, if Ryanair
flew more medium-haul routes, it would be flying fewer
segments and it would need more planes to increase its
passenger loads to 85 million a year, than if it were just to
focus on shorter segments. But another lingering difficulty
that Ryanair may have in adopting a medium-haul stra-
tegy is regulatory issues. Ryanair has been able to expand
quickly within EU states because it faces few regulatory
hurdles when opening a new route. But Ryanair encoun-
tered much greater hurdles when entering Morocco, whe-
re it took the airline six months of negotiations to reach
an agreement with the Moroccan government. If Ryanair
expands further into non-EU states, then it could delay the
opening of new routes while terms are negotiated. That
could enable competitors to wield their influence with
foreign governments to deny Ryanair’s application, or to
at least stall Ryanair’s arrival, enabling foreign carriers to
adapt to changing passenger needs.
www.air-scoop.com
 DOWN TO EARTH
The Great Carve-Up in the Nordic Sky
Friday night, 2 March, Swedish mobile network operators
were probably heavily loaded as Swedish low-cost carrier
FlyMe was sending more than 2500 SMS to its passen-
gers reporting of bankruptcy. The airline flights to three
domestic and 15 international destinations were cancelled
though the staff was not aware of it until the first check-
in.
As explained by the company’s board, FlyMe does not
have enough money to continue operating flights. The
whole question is about a considerable sum of money that
was to be paid by the LCC to its bank. The airline’s par-
tner bank, Handesbank, decided not to continue transac-
tions as it had 60 MSEK on blocked accounts as insurance
claims from passengers. In case FlyMe had demonstrated
payments and closed all the right issues, the bank would
have resumed operations. Unfortunately, at that moment
FlyMe did not have enough means to pay off. Finn Thau-
low said to Swedish Aftonbladet that the company lacked
33,7 mln SEK. Before the deadline set by Handesbank
there were some hopes for certain investments but the
company did not receive any. Though it was rather pro-
fitable it had experienced some economic difficulties for
a long time. Its strategy was to expand as fast as possible.
Obviously, those 11 new routes opened in a short period
of time did not bring expected profit. That makes us to
recall that sometimes less is more. The matter of FlyMe
collapse is now handled by Rickard Ström, an attorney
at Lindahl KB law firm, and is investigated by Swedish
National Economic Crimes Bureau.
2nd Air Transport Conference for CSEE
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Following the success of our Inaugural event last year, this year we are continuing in dealing with the issues Air Transport
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13 Air Scoop - April 2007
This lack of money has been a hotly debated issue in Swe-
den. Some Swedish periodicals assumed other reasons for
the unexpected economic failure than just red flights. In
September 2005 Christen Ager-Hanssen, FlyMe finan-
cier and the owner of Cognition, bought out shares in the
company from Iceland’s Fons and basically took over the
carrier. He is known as a financial scam artist who has 60
mln SEK of tax liability. And he was that very person who
did not comment on FlyMe bankruptcy.
Interestingly, the airline who announced to replace FlyMe
flights was Sterling, the one FlyMe wanted to buy once.
Sterling promised to take care of passengers and to carry
them free of charge within Sweden and at a cut rate of 200
SEK within other Europe. The airline did not charge those
who just needed to travel back home.
Obviously, rivals are not that sorry for the company as
passengers are. Some of them have already expressed
their happy feelings. As reported by Finnish Kauppale-
hti Online, Maunu von Lueders, FlyNordic CEO, hopes
to benefit from FlyMe collapse and replace some of its
flights. Apparently, Mr. von Lueders looks forward to
Stockholm-Gothenburg route that was literally in FlyMe
hands. He also expects improvement in the overall situa-
tion as the cutthroat competition in the region might get
less tense after one of the major players left the field.
Read our Exclusive Interview of Finn Thaulow, CEO of
FlyMe, in Air Scoop March 2007.
EVENTS
www.air-scoop.com
 BIRD’S EYE VIEW
Air Travelers’ Habits Evolve Due to Climate Changes
John Valentine, an environmental campaigner founded the site www.fli-
ghtpledge.org.uk which invites travelers to take a pledge to stop flying al-
together or restrict themselves to one long-haul or two short-haul flights a
year. So far 1.240 people have given the undertaking, with nearly two-thirds
(776) giving the «gold» pledge not to fly anywhere for a year. John Valentine
said:”There is a need among people to be able to do something positive to
cut their carbon emissions and reducing flying is the most obvious and signi-
ficant way of doing it.” The popularity of this website combined with global
environmental concerns has an impact on air travelers’ habits.

A research for the aviation industry estimates that up to 3% of regular flyers

in Britain have stopped boarding flights because of concerns about the en-
vironmental impact. A previous unpublicized a survey for the British Air
Transport Association (BATA), found that a further 10% of flyers had
decided to reduce their travelling by air because of climate change concerns,
and 35% had changed their flying habits.

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