Highlights in this Issue
SWOT Analysis of SkyEurope
The Low Cost Carriers Analysis Newsletter
EDITORIAL
Survival of the Fittest
M
ay 2007. Ryanair website crashed due to tech-
nical difficulties. There were too many people
booking “free” flights. Ryanair made an unpre-
cedented offer of 1 mln free seats hoping to raise money
from ancillary income. Sheer generosity? Scarcely. Most
likely it was a mass attempt to stimulate demand for the
dark cloud of overcapacity has appeared on the LCCs’ ho-
rizon.
Overcapacity, or in other words a situation when there
are more seats offered than passenger demand, shows that
LCCs’ growth simply cannot last for ever and ever. Pro-
bably, European LCCs have developed to maximum size
possible. There are now around 60 no-frills operators in
Europe which specialize on leisure destinations or casual
travelling. Except for Northern and Central and Eastern
Europe, there are too many rival carriers and too many
seats available. However, it is demand that basically bols-
ters LCCs’ development. One of the keys to LCC suc-
cess is quick turnaround which ensures high capacity, i.e.
a certain number of seats bought per km. Therefore, it is
hard to survive with demand going down when the whole
existence is staked on the load factor.
When the low-cost model was just being introduced, the
carriers did not have to fight for demand because it had
already existed, they opened routes to popular leisure
destination and major cities that simply lacked afforda-
ble tickets and had a plenty of willing travellers. There
have been countless attempts to establish successful LCC;
however, it was the pioneers (Ryanair and easyJet) that
came to rule the skies. Their example inspired prolifera-
tion of even more carriers seeking to capture the market.
Rush for the sky has created the situation when popular
destination are served by several carriers which operate
more than one flight per day. Reasonably, the amount of
people willing to travel had to reach its finite point. Hen-
ce, the percentage of unsold tickets has gradually begun to
grow as new offers appeared. The emergence of low-cost
service did generate new traffic especially amongst youn-
ger travellers but the initial boom is rapidly descending.
Air Scoop - November 2007
p. 7
SkyEurope in Trouble... p. 15
easyJet and Ryanair to Adapt to French Labor Laws p. 18
French Airports Uncomfortable With Subsidies p. 21
Safety and Security Worries for LCCs p. 23
As for the new entrants, all their marketing efforts and
advantageous offers look rather helpless and faded against
the backdrop of such monsters as Ryanair and easyJet.
Neither have they the fleet that could compete nor can
they negotiate favourable terms with airports that are
already in hands of Irish-UK team. In other words, it is
almost impossible for a smaller budget airline - with the
exception of those which already serve South-East and
Northern Europe - to succeed since there are no more
unexplored markets left.
The amount of LCCs killed in action or never even star-
ted operating is very close to the amount of extant ones.
One further thing is the example of the USA where the
LCC model failed. In other words, it is high time for new
LCCs to stop springing and for successful ones to recon-
sider their strategy. It is evident now that aggressive de-
velopment is almost over and leads nowhere. As regards
business travel the major shortcoming is that LCCs ope-
rate flights to secondary airports which are often far away
from the place of actual destination. Merging won’t solve
the problem either since merging airlines does not mean
reducing fleet; and, therefore, the amount of seats availa-
ble will remain the same. The conclusion suggests itself.
In the nearest future, only a few major LCCs will still be
operating flights in Europe. And perhaps two of them are
already known: Ryanair and easyJet.
www.air-scoop.com
 BIRD’S EYE VIEW
Interview of Joachim Hunold
(CEO of Air Berlin)
Could you please present Air Berlin to our readers?
What are your specificities compared to other European
LCCs? What do you do better than your competitors?
We never wanted to be a low-frills carrier and never wan-
ted to be like a flag carrier. Where we position ourselves is
as a hybrid carrier- in between the competitive European
scheduled aviation sector. A sector rife with competition
and generally low margins. We have greatly raised the
‘customer experience’ in this sector by creating its own
segment, and providing an industry leading high quality
service at significantly low fares.
The service aspect is at the core of Air Berlin’ strategy
as we believe there is a large market who appreciate the
value added benefits of our services. Air Berlin’s customer
management strategy is to provide the most attractive and
‘best in the market value’ scheduled air transportation ser-
vices.
From the most comfortable,modern fuel efficient aircraft,
to inflight menus created by the famous Sansibar restau-
rant, Air Berlin’s processes are driven with the customer
in mind. We firmly believe that quality produces efficien-
cy, by delivering the best product in the market sector
and achieving customer retention.
The market has understood our strategy and continues to
reward us with a consistent buying interest on the stock
market. After initial concerns, experts now consider the
“Air Berlin model” as exemplary for the sector. So far, we
are the only German hybrid carrier, namely a carrier that
uses all conceivable sales channels, thereby making itself
less dependent on seasonal fluctuations. In the future, we
also plan to grow faster than the market in which we do
business. For a long time, Air Berlin has considered this
market to embrace not only Germany but Europe as a
whole
How do you analyze the competition in Germany with
German carriers (TUI, Condor, Germanwings…)?
And especially with Ryanair, easyJet and other LCCs?
Which LCC is for you the main competitor?
Every airline to fly on the same routes as we do is a com-
petitor. Competition can be tough, but it has to be fair
2 Air Scoop - November 2007
Joachim Hunold
(CEO of Air Berlin)
– if so, it is good for the business, and can be furtherer of
innovation. In Germany, we are the second biggest airline,
in Europe the third biggest Low Cost Carrier – but all in
all: we differ from every other airline in Europe. We offer
much higher customer service levels than all other Euro-
pean Low Cost or Low fare carriers, and most of Europe’s
National or legacy carriers.
What is your position on environmental issues concer-
ning European LCCs?
Air Berlin is aware of its responsibility for environment-
friendly behaviour and adheres to policies designed to
keep emission levels as low as possible. One of the central
elements of Air Berlin’s environmental commitment is its
fleet policy. Our company operates one of the industry’s
youngest fleets. Almost all aircraft are fitted with Win-
glets or Wingtips, to improve the wings’ aerodynamics
and contribute to reduced fuel consumption up to 3%.
Moreover, the new Air Berlin aircraft also are considera-
bly quieter than comparable other aircraft.
Emissions trading in air transport can only be one com-
ponent of a comprehensive overall strategy to reach the
ultimate goal of a reduction in emissions. In particular,
this has to include the implementation of new techno-
logies and the creation of adequate infrastructure, both
parts of which must be carried out simultaneously. The
“Single European Sky” project alone, which has been in
political discussion for almost 15 years, would reduce the
CO2 emission by up to 12 %. Considerable potential is
available here, which should be made use of. The current
target date of 2020 is not ambitious enough. The German
air transport industry therefore continues to insist on a
coherent and well-balanced overall strategy.
The European Low cost carriers market has reached
a certain maturity which leads to its consolidation.
During this transition, what are, for you, the greatest
threats to the European Low cost carriers? Fuel rising?
Overcapacity? Evolution of airports? Regulation?...
The airline industry is highly competitive and this is true
especially for the low-cost segment. Moreover, aviation
competes with ground transportation options particularly
www.air-scoop.com
 BIRD’S EYE VIEW
with regards to short haul routes. We see these “risks” as
challenges that will be overcome with the successful hy-
brid business model. Its unique position clearly separates
us from other LCC and from the problems of overcapa-
city, where the battle for market share is carried out al-
most exclusively through pricing and, as a result, through
cost cutting, Air Berlin takes advantage of the opportu-
nity of the accelerating consolidation process. The acquisi-
tions of dba and LTU are examples of such participation.
Accounting for approximately 22 per cent of overall ope-
rating expenses, aviation fuel represents by far the most
significant cost for Air Berlin. Fuel prices are subject to
notoriously wide and poorly predictable fluctuations that
often enough are only minimally correlated with business
developments. Thus, in order to improve planning confi-
dence and to reduce the influence of price fluctuations on
profitability, Air Berlin systematically engages in hedging
transactions.
What are your expansion projects for the coming
year(s)?
We were never aiming to be big or not big, expansion pro-
jects must be profitable and must make sense. In light of
the quickly progressing concentration process of European
aviation, integrating Condor in 2010 into the Air Berlin
Group secures the future for both companies. Together,
we will achieve international competitiveness. This step
makes sense, especially following the takeover of LTU,
since it will enable us to offer our clients a more tightly-
meshed long-haul flight network.
3 Air Scoop - November 2007
Many LCCs look after extra-revenues to offset the low
price of their tickets. What are the projects of Air Berlin
in terms of Extra-revenues?
We successfully integrated additional meals and high-qua-
lity service, such as the on top gourmet “Sansibar” meal,
which has become very popular among our customers.
Additional in-flight products or tickets for ground trans-
portation and our premium partners for our frequentflyer
program Top Bonus are further examples from which we
and our customers will profit.
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 think there might be more consolidation, not only in
Germany, but also in Europe. There are a lot of low-cost
carriers and you don’t know how long they will last and
some flag carriers are in a very weak position. Look for
example to Austria or Italy.
Are you worried about the shortage of pilots and crew
hitting LCC market?
As we started this year with our own flightschool we can
secure our need of pilots.
What are the options for Air Berlin to transform its busi-
ness model in order to make more costs savings?
Our expansion and the thereby resulting joint market pre-
sence offers cost-cutting potentials and positive synergies.
www.air-scoop.com
 DOWN TO EARTH
‘‘IdeaWorks AISLE’’
Is airline branding a waste of money and
do airlines really care?

91% of airline executives in a worldwide survey say the

power of an airline’s brand can attract more customers, by Jay Sorensen
but 56% admit funding for branding initiatives is a pro- (President of IdeaWorks)
blem. www.IdeaWorksCompany.com

Michael O’Leary, the CEO of Ryanair, may have tried

to remove luxury and romance from the airline industry
with this comment, “Air transport is just a glorified bus
operation.” (1) The cost-cutting behavior of many air-
line executives tends to support Mr. O’Leary’s premise; The following pie chart displays the global representa-
travelers have witnessed the removal of niceties such as tion of survey participants. All regions of the world are
headrest covers, pillows, blankets and even that venerable represented with 80% of respondents outside the United
industry icon - - the peanut packet. But has this activity States and Canada. The large concentration of respon-
also removed the essence of what is a brand? dents from Europe and Russia is likely attributable to the
London location of the conference.
Recent advertising by Southwest Airlines mocks this un-
compromising attack on amenities by suggesting other
airlines might someday charge for use of a window shade.
Of course, the joke doesn’t apply to Ryanair - - which
long ago stripped their aircraft of window shades in a
campaign to reduce weight and save fuel. The “lowest
cost wins” mantra (another quote from Mr. O’Leary) (2)
may suggest to some marketers that brand building is a
luxury the airline industry can’t afford. Have low cost
carriers, along with the rest of the airline industry, tossed
the idea of brand building onto the scrapheap of history?
Or, has the concept of branding evolved with the growth
of the low cost carrier sector?

To answer these questions, IdeaWorks, in cooperation
with airline conference organizer Terrapinn, recently
distributed a survey on the topic of branding to airline
executives all over the globe. The survey was distributed
online and attracted participation by over 140 airline ma-
nagers. It was prepared in anticipation of the World Low
Cost Airlines Congress hold in London on September
17-19, 2007.
Representatives from more than 110 airlines will gather in
London, making it the largest event designed for the low
cost airline sector. Airlines sending representatives range
in size from major carriers such as JetBlue, Southwest
Airlines, easyJet and Japan Airlines, to smaller carriers
such as Air Baltic (Latvia), Nok Air (Thailand), and Sky
Express (Crete). Jay Sorensen, president of IdeaWorks,
will lead a panel of airline executives in a debate on the
topic of branding initiatives. Joining Mr. Sorensen on the
panel will be Brett Godfrey (CEO of Virgin Blue), Paul
Simmons (Head of Brand Marketing for easyJet), and An-
drea Spiegel (VP of Marketing at JetBlue).
The survey contained five questions on the topic of airline
branding, the response rate per survey item ranged from a
high of 142 respondents, to a low of 81 respondents.
Brands are created in the consumer’s mind
The discussion of branding is best begun with a few de-
finitions of a word that is understood by all, but difficult
to describe exactly. Walter Landor, the founder of Lan-
dor Associates, once said, «Products are created in the
factory, but brands are created in the mind.» (3) Jack
Trout, a leading marketer and originator of the concept of
product positioning, defined it this way, “So, dear reader,
if you want a simple definition of branding, here it is: It’s
all about establishing a name for your product and a diffe-
rentiating idea in the mind of your prospect.” (4)
David Ogilvy, the famous advertising copywriter and
ad agency founder, defined brand as: «The intangible sum
of a product’s attributes: its name, packaging, and price,
its history, its reputation, and the way it’s advertised.» 5

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

 DOWN TO EARTH
These definitions suggest that brands can be defined by factors other
than the inclusion of extra services and amenities.
Airline branding is alive and well
The public perception of airline quality, and by extension the repu-
tation of airline brands, remains the subject of jokes by comedians, a
hot topic in the media, and an easy target for politicians. Given this
“excess baggage” it may be surprising that airline executives believe
in the power of their brands. The results of the survey generally des-
cribe a marketing environment in which brand building is practiced
at airlines throughout the world.
The responses to Question 1 indicate 99% of respondents report
some level of branding activity occurs at their airline; only 1% indi-
cate branding is not relevant. The responses by 59% of the executi-
ves suggest branding has been integrated into the company culture
and the services provided to passengers.
Economics may suggest branding efforts are largely directed to busi-
ness travelers, who an airline’s most profitable passengers. Surprisin-
gly, 70% of the respondents to Question 2 placed equal importance
on “all” passengers. Only 28% said branding was of greatest impor-
tance to business travelers.
Contrarian marketers might identify an opportunity from the res-
ponses to Question 2. While measurable importance is placed on
branding for business travelers, the importance associated with a
pure leisure audience is virtually nil. It would appear airlines have
created brands that appeal to a broad audience, but also emphasize
higher yielding business travelers. It would be ironic if leisure trave-
lers, who represent the bedrock customer group of low cost carriers,
have become neglected.
The responses to Question 3 support the concept that branding is
beneficial to a broad spectrum of customers . . . and airlines. The
overwhelming majority of respondents indicate branding not only
offers benefits to their airline, but also to all types of carriers.
Question 3: Does the importance of a brand vary for different types
of airlines?
Branding is an important factor for all airlines, regardless of type.
83%
Branding is most important for full-service or legacy airlines, and
offers fewer benefits for other types. 11%
Branding is most important for new airlines or low cost carriers, and
offers few benefits for other types. 6%
Branding is not an important factor for any airline. 0%
As in Question 2, not a single respondent rated branding as unim-
portant from the perspectives of customers and management. This
is an important result, as it reveals branding can include the low cost
airline sector - - in which price is paramount, and amenities can be
non-existent.
5 Air Scoop - November 2007
Branding has the power to attract passengers
Marketing legends fervently believe in the effec-
tiveness of good branding. But CFOs are quick to
ask if branding-related expenditures generate addi-
tional revenue. The responses to Question 4 pro-
vide a resounding “yes” to this question. 91% of the
airline executives surveyed said branding conveys a
commercial advantage that delivers additional tic-
ket sales. Nearly half, or 45% of respondents, say
branding can prevail even when competitors offer
lower fares.
Question 4: Which response would best describe
the importance of the brand of an airline when
compared to ticket prices?
If the ticket price is the same for 2 airlines, the
airline with the stronger brand will attract more
passengers. 46%
The brand strength of an airline can attract passen-
gers from another airline, even if the ticket is more
expensive. 45%
Lowest price always wins regardless of brand
strength. 9%
Branding naysayers, or perhaps those who don’t
consider price leadership to represent a true bran-
ding attribute, subscribe to the notion that lowest
price always wins. These airline executives are
clearly in the minority and only comprise 9% of
survey respondents.
Question 5 merges the sometimes separate worlds
of marketing and finance. While the overwhelming
majority (95% of respondents) indicate branding
activities are included in their budget, the majority
of these executives say additional funding is unli-
kely, or express the concern that existing budgets
could be cut.
Question 5: Please describe the likelihood of in-
creased funding for branding initiatives at your air-
line.
Branding initiatives are an existing part of the mar-
keting budget, but additional funding is not likely.
45%
Branding initiatives are an existing part of the mar-
keting budget, and getting additional funding is li-
kely. 44%
Branding initiatives are always in danger of being
cut. 6%
Branding initiatives are not part of the budget, and
new expenditures are not likely. 5%
www.air-scoop.com
 DOWN TO EARTH
Conclusion and Observations
While practically all respondents expressed support for
branding initiatives, the perception of its effectiveness
varies among airline executives. The similarity of the
responses to Questions 4 and 5 is compelling. The 45%
of respondents that indicate “The brand strength of an
airline can attract passengers from another airline, even
if the ticket is more expensive” likely represent the 44%
that said they could get more money in their budget for
their branding activities.
The results from this global survey provide a strong
answer to the question posed by the title of this report:
“Is airline branding a waste of money?” Branding widely
practiced at airlines worldwide and is a valuable tool for
attracting more passengers and gaining revenue. Its allure
is not without limits, with approximately 45% of respon-
dents saying it can be more powerful than pricing, but a
nearly equal group saying it’s only a deciding factor when
prices are equal. Amazingly, not a single respondent said,
“Branding is not an important factor for any airline.”
Traditional airline branding may have assumed its pri-
mary purpose was to romanticize air travel and to ex-
tol the virtues of amenities and services. Today, many
consumers believe “travel and romance” is nothing more
than a quaint artifact from another era - - lowest fare is
most important to them. The definition of branding has
obviously changed for the majority of airline marketers;
the absence of amenities and services can be used as attri-
butes to define a company’s brand. Perhaps Mr. O’Leary’s
intent to define his brand as a “glorified bus operation”
may be one of the most successful branding statements in
the marketplace today.
Sources used in this Industry Analysis: Unless otherwise
noted, the survey results described in this analysis were
collated from the surveys completed by airline executives.
The survey was conducted during July 2007. Multiple
surveys (based upon IP address) from any one individual
were not accepted.
Disclosure: IdeaWorks makes every effort to ensure the
quality of the information in this report. Before relying
on the information, readers should obtain any appropriate
professional advice relevant to their particular circums-
tances. IdeaWorks cannot guarantee, and assumes no le-
gal liability or responsibility for the accuracy, currency or
completeness of the information.
World Low Cost Airlines Congress: More information is
available at this link: http://www.Terrapinn.com/2007/
wlca
Endnotes:
1: Michael O’Leary, Ryanair’s chief executive, quoted in
BusinessWeek Online, 12 September 2002.
2: Ryanair May 31, 2005 Press Release, “Ryanair Celebra-
tes 20 Years of Operations,”
Ryanair.com.
3: Tales From The Marketing Wars, ‘Branding’ Simplified
by Jack Trout, Forbes.com, April 19, 2007.
4: Tales From The Marketing Wars, ‘Branding’ Simplified
by Jack Trout, Forbes.com, April 19, 2007.
5: Ogilvy, D. (1983), Ogilvy on Advertising, John Wiley
and Sons, Toronto, 1983.

EVENTS
International IIR Conference
LCCs Evolving Business Models
November 6 and 7 2007 in Cologne

Low cost carriers are facing challenging times: they struggle with cut-throat competition, search frantically for promising
niches, seek the most compelling business model and agonize about the ideal strategy. Alexander Tamdjidi from PA
Consulting Group shows how to master the pitfalls of a strongly competitive and potentially saturated European low
cost market. He advises on different business models, presents a holistic picture of the European low cost market, points
to attractive niches and introduces a ground- breaking tool that rapidly evaluates options and possible strategies for a
sustainable, long term positioning against competitors.

Visit the website to view the agenda and register: www.aircraft-conferences.com/index_lowcost.htm

6 Air Scoop - November 2007 www.air-scoop.com

 BIRD’S EYE VIEW
SWOT Analysis of SkyEurope
Introduction
Central and Eastern Europe (CEE) is one of the most dy-
namic marketplaces in the world. Eight CEE countries joi-
ned the European Union in 2004 and at the beginning of
2007, Romania and Bulgaria joined. The key facts driving
passenger traffic in this region are EU enlargement, strong
economic activity and stability, the increase in leisure tou-
rism, and the ongoing liberalization of civil aviation in the
region.
Low cost air travel in CEE has blossomed primarily from
the new EU members, as their entry allowed carriers to
operate freely among all the member states without the
restriction of bilateral agreements limiting the number of
flights and favoring national airlines. The trend spread far-
ther east and into the bloc’s neighboring countries, with
several LCCs launching services into Croatia, Bulgaria and
Romania.
The citizens of Central and Eastern Europe, along with
the local and multinational businesses operating there now
have a dizzying array of airline choices available. Besides
the well-known state carriers like Poland’s LOT, CSA
Czech Airlines, and Malev Hungarian Airlines, low-cost
European airlines like Ryanair, SkyEurope, Centralwings,
Wizz Air, EasyJet, SmartWings etc have a significant pre-
sence in this region.
In the New EU member countries, current market share
stands at 80% traditional carriers, 20% LCCs, and by 2010
it is predicted that LCC market share will grow by 8% to
28%. This figure is similar to the UK (currently 79%:21%,
to increase to 72%:28% in 2010) where the LCC market is
the most developed in Europe.
SkyEurope airlines is the largest and first multi-based low
cost airline in Central Europe. It was established in 2001
and started operation in the following year. It had five ba-
ses in Czech Republic, Hungary, Poland and Slovakia. The
airline uses Bratislava’s Stefanik airport in Slovakia as its
home base.
The airlines principal activity is to provide international
air transport to passengers and cargo in Central and Eas-
tern Europe. Since 2002, the company has been gradually
growing and dominating the Slovakian air transport mar-
ket.
Currently, there are three international airports in the
Slovakia that are served by a low-cost carrier: Bratislava,
7 Air Scoop - November 2007
SWOT TEAM
Košice and Poprad-Tatry. Bratislava is by far the most si-
gnificant of these, since the bulk of the traffic is concen-
trated at this airport. Košice is served only by SkyEurope;
daily domestic flights connect the city with Bratislava. Si-
milarly, Poprad-Tatry, which is a popular tourist resort, is
served solely by SkyEurope and regular flights are offered
to London. Its other unique flight routes include: from all
hub cities to Catania on the island of Sicily, Italy; and a di-
rect route between Copenhagan and Budapest (this route
has currently been suspended).
In 2006, 1.93 million passengers landed or departed from
Bratislava, 94% of them traveled on international routes.
SkyEurope carried 48% of total passengers, Ryanair took
24%.
Their largest base, Bratislava, is located approximately 50
kilometers from Vienna, which is also their base, thereby
providing access to Austria, one of the most mature air
travel markets in Central and Eastern Europe. They ope-
rate a leased fleet of 14 aircraft, comprising of fourteen
149-seat Boeing 737-700 (Next Generation) aircraft. The
twelve Boeing 737-700 (Next Generation) aircraft delive-
red between March 2006 and May 2007 have been acqui-
red by GECAS and leased to the airline under operating
leases, each with a term of eight years.
Central and Eastern Europe is a high growth area, and a
host to several low airlines, sometimes operating the same
routes (SmartWings, Centralwings, Wizz Air, SkyEuro-
pe...) and a growing amount of Western companies. The
battle could become very intense as some of these carriers
have some financial weakness. Also high fuel prices and
tough competition have put pressure on low-cost carriers
around Europe, and analysts predict Central and Eastern
European LCCs need strong balance sheets to compete
with deeper-pocketed rivals such as Ryanair and easy-
Jet. Will SkyEurope, introduced on the Stock Exchange
in 2005, be able to defeat its local challengers and to resist
Ryanair and easyJet, in a « Centralers » Vs « Islanders »
fight?
The Firsts’ of SkyEurope: In 2002 SkyEurope became the
first LCC to start operations in the CEE region. It was also
the first to operate low-fare flights from London Stansted
directly to Budapest in November 2003.
In September 2005, SkyEurope became the first low-cost
airline to fly to Romania when it launched flights to Bu-
charest that winter. In the same month, SkyEurope beca-
me the first and only publicly listed airline in Central and
Eastern Europe, and one of the only five low-cost airlines,
together with easyJet and Ryanair, listed in Europe.
www.air-scoop.com
 BIRD’S EYE VIEW
In October 2006, SkyEurope became the first airline that
paid its passengers for flying for a stated period of time.
In October 2007 it also launched the first intra-Austrian
service to be operated by an LCC. On October 23rd,
SkyEurope Airlines engaged Seattle, Washington-based
Naverus to prepare required navigation performance
(RNP) approaches to airports in its network, making it the
first airline in Europe to do so.
Awards and Records
In December 2004, Christian Mandl (Chairman & CEO)
was awarded Entrepreneur of the Year in Austria. SkyEu-
rope was awarded best Low Cost Airline in Hungary in
February, 2005. It also won the Superbrand Award in the
same year in Hungary. In November, 2005, the airline was
awarded Bronze “Effie Award” in Poland. During the same
period it was also awarded the “Airline of the Year 2005”
by Austrian Business World Magazine.
On January 27, 2007 SkyEurope brought in first, its 2007
Boeing 737-700NG after record-breaking flyover of 8 382
miles without any fuel stop. Nonstop flight from Seatt-
le to Prague breaks the current world record in distance
flown of this type in commercial configuration. SkyEurope
brings its 10th Boeing 737-700NG and breaks world record
in distance flown when landed in Bratislava without any
fuel stop in 10 hours and 27 minutes on March 18, 2007.
Overview of SkyEurope
History: SkyEurope Airlines was established in Septem-
ber 2001, founded by two entrepreneurs in 2001: Chris-
tian Mandl and Alain Skowronek. The airline began
flying passengers on a single domestic route in the Slovak
Republic in February 2002 using a 30-seat Embraer 120ER
aircraft, becoming the first LCC to commence operations
in Central Europe.
The airline’s business development strategy initially sought
to serve unsatisfied demand and stimulate additional de-
mand in the Slovak Republic for air travel services and also
subsequently start flights to Central and Eastern Europe.
Gradually, it expanded its reach beyond the Slovak Re-
public and established additional bases in other countries
with the potential for additional demand stimulation.
In the early part of 2003, a consortium of investors con-
sisting of private equity funds funded the development of
SkyEurope Airlines. Investors in these funds include the
European Bank for Reconstruction and Development
(EBRD), the European Union and ABN AMRO Bank.
The airline then operated a fleet of 2 Boeing 737 and 4
Embraer 120 aircraft.
It later changed the composition of its fleet from the regio-
nal 30-seat Embraer aircraft through longer-range 133-seat
Boeing 737-500 (Classic) aircraft towards 149-seat Boeing
737-700 (Next Generation) aircraft.
8 Air Scoop - November 2007
SkyEurope and KLM E&M signed a Total Care package,
which would take care of all aspects of maintenance on
the SkyEurope fleet including heavy maintenance and
spare parts supply. SkyEurope has JAR145 certification for
its bases in Bratislava and Budapest, which means that its
own engineers take care of line maintenance at those two
airports. KLM E&M helped SkyEurope set up the entire
operation and trained most of their engineering staff.
Growth: In July, 2003, SkyEurope started flights from
London Stansted to Vienna Bratislava. Bratislava airport
is only 30 miles away from Vienna and a SkyShuttle bus
took travelers from the Bratislava airport to Vienna. Ser-
vices from Budapest to London-Stansted and Paris-Orly
started in November 2003, and to Milan-Bergamo and Zu-
rich from December 2003. Also in November it opened its
second base in Budapest.
SkyEurope launched services from June 2004 into and out
of Warsaw competing with Airpolonia. Austrian Airlines
and Lufthansa also announced services into Bratislava and
with SkyEurope adding more services out of Budapest,
the whole region was being awakened to a sudden change
from a drizzle to a shower of airlines. In September 2004,
it opened its base in Krakow, Poland.
SkyEurope Holding AG completed its initial public of-
fering in September 2005. It raised €60 million (gross) of
new equity capital and the shares were simultaneously lis-
ted on the Vienna and Warsaw Stock Exchanges, reflecting
the Central European focus of its operations. The founders
beneficially owned 8.8% of the company. The other major
shareholders included Endavour Holdings, East Capital,
Merrill Lynch and Griffin Capital. The free float amoun-
ted to 57.3% at that point in time.
SkyEurope became the first low-cost airline to fly to Ro-
mania when it launched flights to Bucharest from Bratis-
lava in December 2005. The airline operated three flights a
week from the Slovakian capital, Bratislava, to Bucharest.
On Feb. 14, 2006, SkyEurope Airlines became the third
air carrier to establish a base at Prague Ruzyně Interna-
tional Airport, in addition to flagship carrier Czech Air-
lines (ČSA) and Czech low-cost airline SmartWings,
which is operated by Travel Service. The airline based
two new Boeing 737-700 aircraft in Prague. During April
2006, SkyEurope started scheduled services from Prague
to airports serving seven European cities: Amsterdam, the
Netherlands; Barcelona, Spain; Naples, Milan’s Bergamo
airport and Rome’s Fiumicino in Italy; and Nice and Paris’
Orly in France.
SkyEurope`s load factor reached 84.2% in July 2006 and
achieved highest monthly passenger volume in the airline’s
history. The load factor for the 12 months ended July 2006
reached 75.3%.
www.air-scoop.com
 BIRD’S EYE VIEW
In August 2006, SkyEurope sold €56.3 million worth of
shares and bonds to fund growth. The stock was down
56% that year, giving the Bratislava, Slovakia-based car-
rier a market value of €43 million. The airline raised €38.8
million from an investment by York Global Finance and
€17.5 million from a public offering of shares. London-
based York bought around 9 million new shares at €1.75 a
share. York also bought about €6.7 million worth of bonds
“mandatory” convertible into 3.8 million new shares. If
such conversion takes place, York’s pro forma equity stake
in SkyEurope will rise to 29.9 percent. It also purchased
€17 million worth of bonds that need not be converted
into shares.
The share sale follows an agreement on August 24th for a
long-term loan from the Bank of Scotland to buy four new
Boeing Co. 737-700 airplanes for delivery in 2007. This
would expand its current fleet of 12 Boeing 737 aircraft to
16 by 2007.
In October 2006 at Prague, SkyEurope Airline cut ticket
prices to minus 10 koruna (US$0.44; €0.35), claiming to
become the first airline that paid people to fly with them.
The cuts applied to tickets for flights between Nov.1-
Dec.15 and Jan.9-March24 and these tickets were to be
booked between Oct. 17, and Oct 22 midnight.
In December, the airline announced that it would fly from
Vienna to 16 cities in Europe starting on March 25th, 2007.
The cities include Amsterdam, Brussels, London and Paris.
The move was aimed at boosting efficiency and profitabi-
lity. It was also cutting spending and eliminating unprofi-
table routes after posting a euro57.3 million (US$75.6 mil-
lion) loss in the last fiscal year.
The Year 2007: Erhard Schmidt, SkyEurope’s Chief Finan-
cial Officer left SkyEurope as of 31.12.2006. Effective with
January 2007, the position of the Chief Financial Officer
was held on an interim basis by Lane Zirnhelt, the com-
pany’s current Finance Manager.
At the beginning of 2007, two Austrian businessmen, Ron-
ny Pecik and his partner George Stump, took over 16.5%
of the Bratislava-based company, quoted on the Vienna
Stock Exchange.
SkyEurope launched its SkyCorporate initiative in early
Feb-07, offering a range of services aimed at encouraging
business travelers to use the carrier, as well as extending
the service options that the carrier offers to corporate cus-
tomers.
SkyEurope secured aircraft financing in February 2007
9 Air Scoop - November 2007
from Bank of Scotland Corporate. It extended its support
to SkyEurope Airline with the conclusion of a committed
pre-delivery payment loan facility for five new 737-700
aircraft to be delivered in 2008.
In February 2007, Avis Europe signed an exclusive three-
year partnership with SkyEurope. As per the deal, SkyEu-
rope customers booking through the airline’s website can
reserve a rental car with Avis.
On March 25, 2007 SkyEurope started to serves 16 destina-
tions from International Airport Schwechat in Vienna to
Hol¬land, Greece, Spain, Belgium, Italy, France, Romania,
Bulgaria, Cyprus and Croatia, and became the second big-
gest airline in terms of flight network right after Austrian
Airlines. In Vienna, SkyEurope competes with the local
low-cost leader, the German-Austrian alliance Air Berlin
- Niki.
In April, Nick Manoudakis, a founding member of easy-
Jet, was appointed as SkyEurope’s Chief Financial Officer.
Alain Skowronek, SkyEurope’s co-founder and Chairman,
stepped down from his executive functions with the Com-
pany. Christian Mandl became the Chairman and CEO of
SkyEurope Holdings AG and Jason Bitter became CEO of
SkyEurope airlines.
In the 12 months ended May 2007, the load factor increased
by 4.9 percentage points and reached 81.0%.
On 25th July 2007 SkyEurope Airlines introduced the first
directly-purchased Boeing 737-700NG into service. This
brand-new aircraft registered as OM-NGN landed at Bra-
tislava Airport on 19th July 2007 and was being financed
by Halifax Bank of Scotland.
In July 2007 SkyEurope announced that it would start
operating flights into London Luton Airport from later
this year. The airline also announced that it would leave
Stansted and operate flights from Luton to Košice, Poprad
Tatry and Bratislava, in Slovakia, as well as to Vienna. A
new service between Dublin and Košice would be added
to the airline’s network alongside a route between Cork
and Bratislava.
In August, SkyEurope shares plummeted on news that
private investor Ronny Pecik had reduced his stake in the
airline, putting an end to takeover speculation. It crashed
12.94 pct to close at 4.60 euros.
In August, the discount airline reported third-quarter los-
ses of 5.24 million euros (7.18 million dollars), a reduction
compared with 16.54 million euros net loss in the same pe-
riod last year. Losses for the first 9 months of the 2006/07
business year fell from 50.2 million euros to 37.6 million
euros in the year-on-year comparison. The company’s de-
bts however increased from 79.5 to 121.6 million euros.
SkyEurope remains heavily affected by high leasing costs
for its 12 aircraft.
www.air-scoop.com
 BIRD’S EYE VIEW
Operative earnings before interest, taxes, depreciation,
amortization, share profits of associates and lease pay-
ments (EBITDAR) were 3.23 million euros, up from a
negative EBITDAR of 7.09 million euros. EBIT improved
from minus 14.5 million euros of last year 3rd quarter to
minus 5.2 euros in the corresponding 3rd quarter this year.
The losses of the first nine months of the year reduced
from 48.8 million euros in 2006 to 35.2 million euros this
year. Revenues increased by 26 per cent to 66.6 million
euros. SkyEurope said it expected to report a positive
EBIT for the fourth quarter.
In early September, SkyEurope Airlines announced that it
would cease flights from Budapest, Hungary, and Krakow,
Poland, at the end of October. Besides all routes from Bu-
dapest and Krakow it would also give up its routes from
Bratislava to Amsterdam, Barcelona, Basle/Mulhouse and
Copenhagen, from Bucharest Baneasa to Rome Fiumi-
cino, from Prague to Barcelona and from Warsaw to Paris
Orly. They also planned to sell their airport handling unit
at Budapest Ferihegy International airport, for about USD
3.5 million. SkyEurope currently flew to 39 destinations in
19 countries.
SkyEurope would have its bases only in Prague, Bratislava
and Vienna. SkyEurope also stopped flying to Turin, Italy,
due to low seat occupancy and in the winter season there
would be no flights between Prague and Barcelona, Spain.
The idle aircraft would be used for expansion in Prague,
Vienna and Bratislava. SkyEurope would continue to
fly to Krakow from Vienna. The reasons quoted for wi-
thdrawal were high taxes, drop in demand and seasonality
of the markets.
On September 14 Analysts at CAIB Research downgra-
de SkyEurope Holding AG (ticker: S8E) from «buy» to
«sell.» The target price has been reduced from €4.6 to
€2.6. In a research note published the analysts mentioned
that the company continued to face liquidity issues, des-
pite its successful restructuring initiatives. Although the
company’s EBIT was in-line with the estimates, its capital
expenditure was high and the company’s operating cash
flows continued to be negative. SkyEurope Holding AG
said that its passenger traffic in September 2007 increased
by 18.9 pct year-on-year, while its load factor reached 86.1
pct, up 5.4 percentage points from a year earlier.
In September 2007, SkyEurope Holding AG (Vienna:
SKY.VI - news) stated that its largest shareholder York
Global Finance II had boosted its shareholding in the
low-cost airline to 29.9 pct from 23.06. York converted all
its Tranche B convertible bonds into just over 3.8 million
common bearer shares at a price of 1.75 euro a share.
Low-cost airline SkyEurope launched new direct flights
from Bulgaria to 11 European capitals and major cities
10 Air Scoop - November 2007
in October 2007.These are daily flights to Amsterdam,
Brussels, Paris, Innsbruck, Warsaw, Thessalonica, Venice
and Nice. It also has flights to Krakow and Athens and
between Sofia and Vienna. SkyEurope also connected
Bergamo Orio al Serio Airport with Vienna.
In October the airline became the most convenient car-
rier between London and Prague after Czech Airlines and
Thomsonfly announced their withdrawal from the routes
between Prague and London during this month. SkyEu-
rope planned to attract more business travelers in Central
and Eastern Europe by making Vienna its principle base.
SkyEurope would increase it’s VIE fleet from two 737-
700s to four and add flights to 12 destinations while boos-
ting frequencies on existing routes like Amsterdam and
Sofia. It also would launch the first intra-Austrian service
to be operated by an LCC, a twice-daily VIE-Innsbruck
flight.
SkyEurope also became the first airline in Europe to
operate satellite navigation-guided precision approaches,
when it engaged Seattle, Washington-based Naverus in
October to prepare required navigation performance
(RNP) approaches to airports in its network. This would
ensure more efficient operations under any weather con-
ditions, reducing flight times and fuel consumption but
enhancing safety.
On 5th October, shares of SkyEurope surged 9.76 pct to
2.25 euros, which was helped by the improved liquidity
outlook through the sale of its two jets. In the following
week SkyEurope shares jumped 8.89 pct to 2.45 euros
on the news that the low-cost carrier has been upgraded
to ‘hold’ from “sell” at UniCredit with a new target pri-
ce reduced to 2.45 euros from 2.60 euros. Although the
conversion of York Capital’s convertibles had improved
SkyEurope Holding’s equity situation, the analyst of CAIB
Research said that the company’s capital position conti-
nued to be tight.
Commencing 28 October 2007, SkyEurope Airlines fur-
ther expanded the London Luton Airport route network
into Central Europe with 3 destinations in Slovakia and
also flights to Prague in the Czech Republic.
Challenges:
1. Would SkyEurope survive the winter credibly?
2. Will it show a positive EBIT in the last quarter?
3. How can it improve its overall load factor?
4. What is the game plan for progress once it survives this
winter?
www.air-scoop.com
 BIRD’S EYE VIEW
Business Model of SkyEurope
SkyEurope, operating one of Europe’s fastest growing low-
cost low-fare passenger airlines is focused on services to and
from Central and Eastern Europe. They offer short-haul
“point-to-point” scheduled services currently to around 35
destinations in approximately16 countries and operates on
95 routes. The Group’s operations are carried out through
two segments: Scheduled flights and Charter flights. Its
hubs are: M.R. Stefanik Airport (Bratislava); Ruzyne In-
ternational Airport; Vienna International Airport. Some of
its major destinations are: Amsterdam, Athens, Barcelona,
Brussels, Dublin, London, Milan, Paris, Rome, Vienna etc.
The Top Management team comprises of : Christian
Mandl – Chairman and CEO of SkyEurope Holding AG;
Jason Bitter – CEO of SkyEurope Airlines; Nick Manou-
dakis – Chief Financial Officer; Karim Makhlouf – Chief
Commercial Officer; Klaus Niedl – Chief People Officer.
Strategy: SkyEurope targets both leisure and business tra-
velers, as well as travelers visiting friends and relatives
(“VFRs”). Their network comprises routes that connect
cities within Central Europe as well as between Central
Europe and Western Europe. The network has been de-
veloped using a business model that first seeks to stimu-
late “point-to-point” local market demand for flights to
other destinations already served by existing bases in our
network which is referred to as “joining-the-dots” in the
network. As this local market demand increases, additio-
nal destinations are introduced from a base to satisfy the
increased demand.
SkyEurope has three strategic priorities: increase fre-
quencies on existing routes, join the dots within the exis-
ting SkyEurope network (reducing of marketing invest-
ments…), and open new destinations to satisfy the local
needs of the respective bases. The choice of new destina-
tions is based on destinations which are under-serviced,
which are in the optimal range of two hours flight time
(because of the rhythm of two or three rotations a day),
and which may be served from more SkyEurope bases.
SkyEurope management focuses on profitability and not
just passenger volumes. Its flight schedules reflect seasonal
changes in customer demand whereby flights are operated
to attractive ski resorts in winter and increasingly to war-
mer destinations like France, Italy, Spain and Croatia.
Features: SkyEurope unlike few of its counterparts be-
lieves in providing service with a smile. Operating the
youngest fleet in the world consisting purely of Boeing
737-700NG with an average age of 8 months per aircraft,
SkyEurope is the first lifestyle and business airline with
an innovative and stylish product. Besides flying modern
11 Air Scoop - November 2007
aircrafts with leather seats, to convenient major airports
and having outstanding on time performance, SkyEurope
has added some specials on board. The major features of
its business model are presented below:
1. Online Booking: SkyEurope.com is a travel portal that
offers a one stop shop as solution to all travel needs: car
rental, hotels, hostels, travel insurance, access to airport
lounges, downloadable city guides, audio travel guides, in
winter ski equipment rentals etc. These services can be
booked together with your flight on our website www2.
SkyEurope.com. The purchase of airport lounge access,
trip insurance, and seat assignments has been seamlessly
inte¬grated into the booking process. The site also allows
customers to arrange airport transfers, hotel accommoda-
tions, car rentals, and even ski rentals. Customers can add
fee-based baggage services for pet kennels and sporting
equipment. SkyEurope does not charge for regular pieces
of checked baggage.
2. Pre-Assigned Seating: SkyEurope introduced seat se-
lection on all its services. Passengers can book their seats
when the reservation is made. Price for the new service
will be E5 per pre-assigned and will be charged if selec-
ted together with the flight. Customers are presented a
seat map that is color coded with 3 zones. Assigned seats
in the first row are priced at 10 Euros, window and aisle
seats are 5 Euros, and the dreaded middle seat is priced at
2 Euros. SkyEurope charges a 5 Euro fee per passenger for
payments made by credit card. Infants under the age of 2
years (on the date of travel) are carried for £8 when not
occupying a seat - that means they sit on an adult’s lap. A
separate seat if needed for an infant, the passenger must
purchase a ticket similar to that for a child. Children over
the age of two years are charged the same fare as an adult.
3. Confirmation of ticket on the mobile: SkyEurope star-
ted the SMS booking confirmation service for the custo-
mer while booking a flight. It comes as an option during
the ticket booking process with a charge of €1 plus VAT
per booking. If chosen, all the relevant information will be
(reservation number, flight details) sent directly to the cus-
tomer’s mobile handset. Customers may also choose to re-
ceive confirmation via facsimile for an additional one Euro
fee. SkyEurope is a ticket less airline so all one needs to fly
is your passport for international flights, or photo identity
card for domestic flights, your confirmation number, and a
visa, if applicable.
4. Changes in reservations: Change of destination and time
of departure can be made until up to 2 hours before the
scheduled departure of the flight against payment of a fee
specified on its website and payment of the difference
between the original fare and the lowest possible fare
available at the time of reservation change. This service can
be availed only at its reservation center and is not available
online. The change in name of the passenger can be made
www.air-scoop.com
 BIRD’S EYE VIEW
until up to 2 hours before the scheduled departure against Sources of Ancillary Revenue: Ancillary revenue includes
payment of a fee. The change of name is only possible if fees and charges (including credit card surcharges, excess
no part of the journey has been made. The change fee per baggage charges, seat assignment fees, sporting equipment
passenger per flight is 25 euros. charges, infant fees, change fees), profit share from in-fli-
5. Variable modes for ticket booking: The airline offers ght sales (including food, beverages, and boutique items),
different modes for booking the ticket for its passengers. cargo, and commissions received from products and servi-
He or she can book the flight ticket online, through call ces sold (such as hotel bookings, car rental bookings and
centers or via a cash deposit system with some of the lar- travel insurance).
gest local retail banks as well as through travel agents. Its
website is available in seven languages while it operates an SWOT Analysis
eight-language call center in Bratislava with local access
numbers in each country. SkyEurope claims to be the first lifestyle and business air-
6. SkyCorporate: SkyEurope launched its SkyCorporate line with an innovative and stylish product. In the words
initiative in early Feb-07, offering a range of services aimed of their CCO “We guarantee lowest fares, the most inno-
at encouraging business travelers to use the carrier, as well vative quality product and the most stylish way to fly at
as extending the service options that the carrier offers to convenient airports.
corporate customers. The program offers improved re-
servation options, including a new option via its website,
through a business-to-business ID number and password,
as well as through its existing phone reservation system.
7. SkyShuttle: The Vienna and Bratislava hubs of SkyEuro-
pe are supported by its SkyShuttle airport bus connection. Conclusion
The sale of bus tickets has been integrated into the reser-
vation system as a code share operation. Passengers trave- SkyEurope seems to have a long and harsh winter ahead of
ling to Vienna can choose direct flights to Vienna Schwe- it. The major obstacles to its survival are its critical cash re-
chat Airport, or fly to Bratislava and connect to Vienna on serve position and the fragile share value levels. The major
a one-hour bus trip. Similar airport bus service is offered reasons for being in this situation are its initial over-rapid
between Bratislava Airport and Vienna’s city center. The growth and its policy of using leased new aircraft over an
SkyShuttle is a key component in SkyEurope’s dual-hub extended period of time. Whether SkyEurope will come
strategy to tap into a regional population of 6 million peo- out of this winter with minor scratches or with fractures
ple. remains to be seen.
8. SkyDelights: SkyEurope differentiates itself by offering
high quality products and services onboard. Buy-on-board
services, branded as SkyDelights, include an extensive
menu of hot and cold snacks, and a full selection of alco-
holic and non-alcoholic beverages. The airline has introdu-
ced authentic Italian espresso and cappuccino drinks on
all its flights. The espresso (3 Euros) and cappuccino (4
Euros) drinks are served individually in Illy branded porce-
lain cups, accompanied with a little chocolate square and
a glass of water on a personal tray adding consumer allure
and generating higher onboard sales activity. The SkyDeli-
ghts menu also features “Fly to Win” scratch cards that are
sold on international flights for 3 Euros. Prizes include cre-
dit vouchers for onboard purchases and SkyEurope tickets.
The airline promotes a 1 in 5 chance of winning a prize.

12 Air Scoop - November 2007 www.air-scoop.com

 BIRD’S EYE VIEW

13 Air Scoop - November 2007 www.air-scoop.com

 BIRD’S EYE VIEW

14 Air Scoop - November 2007 www.air-scoop.com

 BIRD’S EYE VIEW
SkyEurope in Trouble – Can the Repositioning of its Business Save the Company?
This spring major changes took place in the management of
SkyEurope Airlines. When Christian Mandl, founder and
CEO stepped down from his position, while co-founder
and CFO Alain Skowronek also left the management to
be replaced by Nick Manoudakis, former CFO of easyJet,
it was a clear sign that sooner or later significant strategic
changes of the company’s business model would follow.
Even though both Mandl and Skowronek were assigned
a new position as Mandl kept the leadership role at the
Austrian branch of the company, while Skowronek have
become an advisor, they are no longer involved in day to
day operations and decision-making.
Jason Bitter, the newly appointed CEO and Nick Manou-
dakis did not hesitate long to take far-reaching decisions.
On 31 August, the first low-cost/low-fare airline of Central
Europe announced in a press conference that at the end
of October it would close its bases and entire operation
in Krakow, Poland and Budapest, Hungary. Even though
rumours had already been spreading about this in the mar-
ket, SkyEurope consistently declined them until the end of
the summer. The company explained to the press that the
decision was motivated by the circumstances that became
unfavourable in these markets as taxes were high while
effective demand was substantially exposed to seasonality
and overall, it kept decreasing.
Indeed, SkyEurope was flying a total of 2.7 million pas-
sengers in the first 9 month of 2007, but the Hungarian
market represented only 380 thousand of them. In other
words, a rough 20 percent of the routes contributed to a
mere 14 percent of the passenger turnover. This is indeed
a bad performance, however, last year SkyEurope was able
to achieve much better results (approximately 500 thou-
sand passengers flown in the Hungarian market) on less
routes offered from Budapest. Does the decline in passen-
ger numbers simply reflect that unlike the other new EU
members’ states, the Hungarian economy has been in a se-
rious recession for years? Although the real GDP growth
in Hungary this year is estimated to be just slightly over a
sluggish 1 percent, which might translate into less demand
for air transport, it does not explain why SkyEurope deci-
ded to abandon the fast-growing Polish market (5.5 percent
growth estimated for 2007) where there are still a lot of
potentials. The question is then, what did go wrong?
The answer lies in SkyEurope’s cost base, which, compared
to the major regional rival, Wizz Air, is highly unfavoura-
ble. According to estimates, Wizz Air’s cost per passenger
is around €3.7 (only Ryanair is able to perform better with
an average expense of €3.4 per passenger), while SkyEuro-
pe’s is approximately €5.5. This significant contrast is due
to the differences in the business models: similarly to ea-
15 Air Scoop - November 2007
syJet, SkyEurope tends to fly to main airports and until
recently a large part of its destinations were Mediterranean
holiday resorts, therefore the obvious consequence arose
that demand was showing great fluctuation due to seaso-
nality. SkyEurope has not been able to take advantage of
the relatively constant demand posed by Central European
migrant workers to Western European countries, whereas
Wizz Air has successfully built its strategy on targeting this
niche market. In addition, customers of the Central Euro-
pean region are more price sensitive than in Western Euro-
pe, and many of them might choose their holiday destina-
tions based solely on ticket prices. Therefore, SkyEurope
may have been losing out on this as well, as on average its
prices have been higher than that of the major low cost
rivals.
The problem is that what easyJet has been able to achieve
by taking advantage of economies of scale, SkyEurope has
failed to do so with a similar business model due to a much
smaller scale of operation in a very different market. One
of the most urgent tasks of the new management there-
fore was to bring under control the cost explosion and im-
prove overall performance by increasing productivity and
cutting costs. The withdrawal from Hungary and Poland
nearly halved the number of routes offered: while during
the summer SkyEurope was flying to 39 destinations on 97
routes, the winter timetable contains only 30 destinations
and 52 routes. This has resulted in an approximate cost
reduction of 2 million Euros. A further 1.25 million Euros
of annual savings is attributed to the move from Stansted
to Luton as the company is using this airport since the end
of October. Compared to 2006, Sky also decreased staff by
a significant 13.3 %. As a consequence, the average staff per
aircraft is down to 61 from last year’s 64, which has also
translated to cost savings and a higher efficiency.
The newly introduced measures by the management
have delivered results also in terms of productivity. In the
first half of 2007 load factor reached a relatively satisfac-
tory 79.7 %, which further increased in the third quarter
of 2007 to 80.7 %. Just to compare with, in the first half
of 2006 SkyEurope’s load factor reached a mere 68.4 %,
which would be a low performance even for a legacy car-
rier. Daily aircraft utilisation has also gradually increased
from last year’s 8:08 hours to 11:25 hours in the third quar-
ter of 2007. This has contributed significantly to the rise in
productivity. All in all, the loss per share decreased from
a shocking 0.83€ to 0.13€ but it seems that profitability is
still a long way ahead.
The new concept introduced by Jason Bitter and Nick
Manoudakis is to concentrate on the Czech (Prague),
Slovakian (Bratislava and Košice) and Austrian (Vienna)
www.air-scoop.com
 BIRD’S EYE VIEW
market only and offer higher frequencies to fewer desti-
nations. In other words, the company is trying to expand
capacity on the most profitable routes to create a denser
network. They also attempt to strengthen the Vienna hub
by offering flight connections to passengers, which is rather
unusual for a low cost carrier. However, the route portfolio
is still lacking a clear focus as the routes from Prague and
Vienna seem to lead to destinations in the entire continent
and it is only Bratislava which is potentially more clearly
targeted to business travellers and migrant workers from
France and the UK. Nevertheless, Slovakia has the highest
car production per capita in the world and the large pro-
duction facilities of Volkswagen, Audi, Porsche, Peugeot,
Citroen and KIA around Bratislava clearly pose a constant
demand for air transport.
Further good news for SkyEurope is that in mid-Novem-
ber a motorway will open between Bratislava and Vienna,
thereby making the connection between the two bases of
the airline faster and easier. Regarding the mid-term pros-
pects, the increasing labour migration and the blossoming
property market of Bratislava may translate into higher de-
mands for air transport while the planned introduction of
the euro in Slovakia by 2009 may also generate additional
demand for flights especially by business people.
However, the immediate and most threatening problem
is the liquidity of the airline. The already planned entry
to the Russian and the Ukrainian market requires a lot of
cash as even the purchase of flight licences to these coun-
tries amounts to a great sum. In order to obtain cash, the
company may have to consider selling an airplane or the
Hungarian ground-handling unit. A further threat is that
passenger demand may not keep up with capacity expan-
sion and seasonality will continue to characterise passenger
turnover. One of the greatest potential threats to SkyEu-
rope is an entry of a stronger player that is able to offer
lower prices that SkyEurope would be unable to compete
with in its current situation. Ryanair has introduced a
scheduled flight from Bristol to Bratislava and already ad-
ded destinations such as Stockholm, Barcelona and Dublin
that are served from the Slovakian capital. If further ex-
pansion takes place in the Slovakian market, the already
defensive position of SkyEurope might result in a com-
plete withdrawal of operations.
The new business strategy of the carrier does not allow for
extending the route portfolio as it is aimed at increasing
the market share on the existing routes and in the home
market. However, a stronger position is only possible to
achieve by further reduction of unit costs and a potential
move towards Wizz Air’s business model. This is unlikely
to happen in the short run especially since the fleet is being
reduced, which does not enable the airline to take advanta-
ge of economies of scale. In case price competition increases
in the market where SkyEurope is present, it is questiona-
ble whether the company will be able to incur more losses.
It might be the unfortunate case that SkyEurope is in a
stuck-in-the-middle position as it is not a genuine no-frills
low cost/low fare carrier but at the same time its service
levels are far from that of traditional carriers. Unless the
company finds an appropriate market niche that can be
sustained in the long run, it is doubtful whether it will
survive the forthcoming years.
Source of data: Financial Reports of SkyEurope

AIR SCOOP ANNOUNCEMENTS

French Connect 2008
April 9 to 11 in Courchevel

Air Scoop is proud to be part of the 5th French Connect in Courchevel.

For the 5th consecutive year, CEOs of French airports and European low cost airlines will gather for 3 days of debates
and networking.
French Connect, the only professional forum dedicated to low cost air traffic development in France, will take place in
Courchevel, French Alps from 9th to 11th April 2008. Created in 2004 to respond to the specific needs of French airports,
French Connect has become, in just a few years, a must-attend meeting and debating forum for French airports and low
cost airlines.
For 3 days, decision-makers will gather from over 20 low cost airlines and 50 French airports together with representa-
tives from regional, national and European political institutions. French Connect 2008 is hosted by Grenoble-Isère and
Chambéry-Savoie Airports, two airports managed by VINCI Airports and Keolis Airports on behalf of the Conseils Gé-
néraux (County Councils) of Isère and Savoie. Innovation and dynamism are the key words for next year’s event, which
will be an exceptional opportunity to understand the issues of low cost air traffic development in France.

To have more informations about last edition of French Connect in La Baule, read the full coverage in Air Scoop May
2007.
For more information on French Connect 2008, visit www.frenchconnect.net

16 Air Scoop - November 2007 www.air-scoop.com

 DOWN TO EARTH

17 Air Scoop - November 2007 www.air-scoop.com

 BIRD’S EYE VIEW
easyJet and Ryanair are Forced to Adapt to the French Labor Law
easyJet will finally pay social charges in France on 100
of its 170 employees based at the Parisian Orly airport.
The company made this decision at the end of February,
after several months of juridical struggle with the French
administration.
Until now, easyJet’s employees in France, benefiting from
a British employment contract, were not submitted to the
French social security contributions. But since November
2006, an executive order from the French government has
forced foreign airlines whose employees (including the na-
vigation crew) are based and live in France to pay those
contributions. They also have to respect the French labor
law, as regards for instance employee’s representation and
unions.
With its important base in Orly, easyJet is particularly
impacted by this new measure. And the firm has been
quickly called to order by the authorities. In last Decem-
ber, French factory inspectors and officers from the Natio-
nal Health Service made a snap inspection at the airline’s
Orly headquarter. They established that the company did
not respect the new executive order, and charged it with
« hidden labor ».
easyJet tried to protest against the law, by asking the
Council of State to suspend it. The airline claims for free
competition, and argues that its Orly premises are just a
restroom for the employees, whose true workplace is the
planes. But the request was rejected. A final decision of
the Council will occur in the following months. For now,
easyJet decided to respect the French law and to pay
charges for 100 out of its 170 Orly employees (the rest are
members of the navigation crew living abroad).
The other company really concerned by the French
measure is Ryanair, which opened its new base in the
southern city of Marseille, with 70 employees. The Irish
airline reacted even stronger than EasyJet, seizing not only
the Council of State, but also the European commission,
and refusing to pay any social security charges until a final
decision would be given by these institutions.
French taxes on labor are said to be quite high, and the la-
bor law more binding than in other countries. For EasyJet
and Ryanair, employing their French staff with British or
Irish employment contracts is a way to reduce their costs
and to gain flexibility. And adapting to the French rules
could mean, in the worst-case scenario, a small increase in
fares for passengers. A very small one, indeed (about one
or two Euros), but still too much for these LCC’s, espe-
cially for Ryanair’s very aggressive fare policy.
18 Air Scoop - November 2007
However, the French executive order is unlikely to change
radically the plans of the two European low-cost leaders
in France. Representing only 17% of the air traffic, compa-
red to more than 30% in Europe, the LCC market is still
underdeveloped in this country.
The potential is huge, and easyJet and Ryanair cannot
neglect it. In spite of the new juridical situation, easy-
Jet plans to open six new routes from France in 2007,
for example Paris-Athens, Lyon-Madrid and Lyon-Rome.
The company expects 6 million passengers in France (5.4
millions in 2006), and even thinks about opening a new
French base in Lyon. After settling down in Marseille,
Ryanair also could open new bases in the next years.
According to the two LCCs, the French measure to force
foreign airlines to adapt to its labor law is a new attempt
from the state to protect national leader Air France from
foreign low-cost challengers. Air France, which just laun-
ched its own LCC Transavia.com, is well-known for its
juridical battles to keep LCCs away from the national
market. In contrary, from the French state’s point of view,
the airlines which do not pay their employees at French
conditions are guilty of « social dumping ».
French TV Investigations about LCCs
in Europe
For French speakers, TF1 has released a documentary
about Low-Cost Carriers in Europe. Journalists have in-
vestigated to understand how LCCs can offer such low
prices. Ryanair “business model” is analyzed in details,
especially concerning connections with airports that pay
indirect “subsidies” through marketing subsidiaries of Rya-
nair.
Low cost : l’avion pas cher, Droit de Savoir, TF1, No-
vember 30th 2007
http://videos.tf1.fr/video/emissions/droitdesa-
voir/0,,3604403,00-tf1-video-droit-savoir-low-cost-avi-
on-pas-cher-.html
www.air-scoop.com
 BIRD’S EYE VIEW
Coming Soon: Cheap Trans-Atlantic Flights?
March next year the airspace between Europe and the
USA will be liberalised in accordance with the Open Sky
Programme. Any airline of any member-state of the EU
will be able to get flight permission and operate flights
to the USA. Perhaps, it will be then that the American
airline market will be shattered by low-cost invaders from
Europe.
Ryanair CEO Michael O’Leary has recently told trade
magazine Flight International about his plans to connect
the Old World with the New World by launching new
low-cost long haul airline affiliated with Ryanair. The ser-
vice will have been set up by 2010 with flights operating
from three main bases in London-Stansted, Dublin and
Frankfurt-Hahn to New York, Florida, Dallas, San Fran-
cisco, San Diego and some other secondary American air-
ports. The fare ranges from $12 to $280 and the airline will
fly fleet of approximately 50 aircraft.
Money is the least problematic thing for this project, be-
lieves O’Leary. Not only are there many sponsors who are
willing to invest their money in the airline, but also there
are plenty of ways of raising money on board. Passengers
will be offered some additional facilities for extra money.
Airline is planning to sell tickets for business-like-class.
Selling food, duty-free goods and in flight entertainment
programmes promises to be profitable as well. However,
there are certain disadvantages in being transatlantic low-
19 Air Scoop - November 2007
cost. Fast turnarounds that are peculiar to LCCs are not
efficient on long-distance routes since the plane can only
be used twice a day.
Ryanair’s new airline is coming to incredibly tense market
and will compete against serious network airlines, both in
Europe and America. It would probably engender back
reaction and foster American LCCs to open trans-Atlantic
destination as well.
History knows several attempts of budget carriers flying
long-haul. Oasis HongKong airline flies from HongKong
to London; Australian Virgin Blue plans to carry passen-
gers from Sidney to the western coast of the USA in 2008.
Canadian Zoom Airlines will open trans-Atlantic destina-
tion from London to New York JFK two years ahead of
Ryanair. BMI is also rumored to set up USA flights. As far
back as 1982 budget Laker Airways operating Skytrain
flights between London and New York went bankrupt
because of low income and insufficient passenger flow.
Apparently, the project airline will have to fight for load
factors as well.
Michael O’Leary himself does not make any secret of his
direct involvement in the project. He is planning to leave
Ryanair in three of four years when the daughter com-
pany would be on its feet to live independently from the
parent.
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 DOWN TO EARTH
LCCs: Friends or Foes to Malta?
While some believe low-cost carriers are the saviors to
Malta’s tourism, more believe it is a double-edged sword
stabbing at the heart of the country’s economy. Ger-
manwings landed at the Malta International Airport
(MIA) as the third low-cost carrier serving the Malta rou-
te, following Ryanair, which flies to and from London Lu-
ton, Pisa and Dublin, and Italian carrier Meridiana, which
operates between Malta and Bologna.
In November 2006, the European Commission gave the
green light to a scheme launched by the government last
July subsidizing a number of new air routes to and from
Malta. MIA chief executive officer Peter Bolech said in
October last year that LCCs are expected to carry around
230,000 passengers to and from Malta in 2007. Ryanair
alone is expected to carry 183,000 passengers on the Malta
route.
Such start-up aids granted to LCC aim to boost the num-
ber of new routes flying to MIA are under criticism that
whether it worth risking the survival of Air Malta, which
may lead to job slashes, to subsidize foreign LCCs to do-
minate Malta’s aviation. In an answer to a parliamentary
question earlier this year Malta Minister for Tourism and
Culture Francis Zammit Dimech said that seats aboard
flights to Malta this year are expected to increase by 18%.
He defended state initiatives to offer start-up aids to LCC
on the ground that the access to Malta via air is considered
to be fundamental to the tourist industry.
According to the Economic Impact of Tourism in Malta
published by Malta Tourism Authority in 2000, the tou-
rism sector is an important generator of sustainable em-
ployment. It is estimated that around 20,000 full-time
equivalent jobs are registered within sectors directly invol-
ved in tourism. Official figures released in February 2005
show that expenditure on package tours was estimated at
Lm15.6 million, down 1.1% year-on-year. Thereby, a de-
crease in total expenditure on non-package travel was re-
corded over 2004; this amounted to approximately Lm1.4
million or 19.2%.
The decline in visitors drive Malta tourism operators to
push for incentives to attract LCC in the scrutiny that a
UK tour operator was going to withdraw the island from
their 2007 brochures, and a survey in the island’s biggest
market showed that Malta would be more expensive for
British tourists than the Canary and Balearic Islands for
equivalent holidays. A July 2006 report by the Malta Ho-
tels and Restaurants Association (MHRA), the industry
arm that has been actively pushing for lucrative LCC po-
20 Air Scoop - November 2007
licies, said 2,000 jobs stand to be lost in a scenario where
nothing is done.
It is under such circumstances that both Malta govern-
ment and MIA roll out the red carpets to lure LCC. Ne-
vertheless, Air Malta remains a major employer and some
in the tourist sector feel upswing in new visitors would
disturb Malta’s cultural and natural landscapes. The above
MHRA report presented by Deloitte read the LCC traf-
fic would generate Lm29 million more revenue annually,
with a possible one to 1.5% growth for the economy and
Lm3.6 million more towards the VAT coffers. The price is
Lm4 million less in the public coffers from the abolition
of the departure tax, a condition for Ryanair to start its
operations from Malta.
A confidential report dated 15 June 2006 requested by go-
vernment and commissioned by Air Malta on the impact
of LCC on Malta was leaked to Malta Today in which
Air Malta claims that a 50 per cent increase in visitors in
one year is a “high risk” strategy for a self-contained and
small destination like Malta, with the advent of the “inde-
pendently minded” low-cost traveler bringing new strains
upon the Maltese infrastructure.
According to the report, Air Malta stands to lose Lm23.6
million if Ryanair and easyJet achieve a traffic of 1,540,000
passengers. Among these high risk strains would be the
need for hotels to organize more coach transfers for the
arrival of 2 million passengers, and for government to in-
crease public transport routes, and get tourist venues such
as the Malta Experience, prehistoric temples and other
museums to absorb higher volumes of travelers.
Conflicting claims unsurprisingly characterize the two
reports released by MHRA and Air Malta. When the
Maltese wind seems to favor LCC, opposition led by Air
Malta is unlikely to fly against it. As Minister Dimech
opened stated last year, Malta needs to re-adopt to the
new aviation reality of LCC. While trade group include
GRTU urges the island not to miss a great opportunity to
generate the stagnant economy and find suitable vacancies
for the 11,000 registering for work, Malta should work on
attracting more high net-worth tourists who may wish to
invest in time share or even buy quality residential homes.
Some say it is working already-- According to Tribune
Properties, a UK based company who specialize in Malta
property for sale, property inflation could be in double
digits this year.
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 DOWN TO EARTH
French Airports Feel Uncomfortable With Ryanair Subsidies
The French cities of Poitiers and Angouleme are just a
hundred kilometers distant. Even though, both of them
could soon have their Ryanair flight to London. The Poi-
tiers-Stansted route has already been running for several
years, and Angouleme-London is expected to be put into
service in 2008. With many other cities of this area (Li-
moges, Bergerac, La Rochelle) also connected to Great
Britain with Ryanair flights, the competition among air-
ports is becoming very harsh in the south-west of France.
Consequently, Ryanair can easily impose its rules to tho-
se small local airports, most of them being dependent on
the Irish LCC, and ask them for important subsidies. They
usually do not really have the choice to refuse.
Recently, however, premises of a protest against Rya-
nair’s subsidies appeared in French airports. In June, ac-
cording to the economic newspaper Les Echos, Ryanair
convoked all its French airports to a meeting in Dublin,
to ask them to increase their subsidies by 15% to 30%.
Some of them rejected the demand. Poitiers, for example,
refused to add 60 000 euros to the 500 000 it pays an-
nually. In other cities - Carcassonne, Rodez - , audits by
local authorities put into question the subsidies’ efficacy
and relevancy. They sometimes describe quite confused
situations, with Ryanair being suspected of not fulfilling
all the commitments linked to the subsidies: in Rodez,
for instance, an audit report wonders if the LCC really
spends 350 000 euros per year to promote the city’s region
abroad.
Is it just a coincidence? In Poitiers and Rodez, two cities
where the subsidies are put into question, Ryanair deci-
ded to suppress its 2007-2008 winter program. No plane
will fly from those cities to London during this period. The
official reason: those routes are not profitable enough.
Indeed, without subsidies, a Ryanair route could hardly
be profitable. Everywhere in Europe, those subsidies paid
to the LCC by airports and local institutions to “help”
the carrier operating its routes, in return of several con-
ditions (promotion, amount of passengers…), are part of
the LCCs business model. The reason why Ryanair re-
cently asked French airports to pay more subsides could
be to compensate for the rise of other costs – kerosene for
example – and a certain slowdown of the British market.
In France, where almost every small Ryanair airports is
run by local authorities, and not by a private company,
paying subsidies to an airline with public funds can some-
times lead to harsh debates and even become a political
21 Air Scoop - November 2007
issue. Not mentioning the fact that public subsidies have
to be approved by the European Commission to be legal
and not suspected to lead to unfair competition.
On the basis of this argument, several subsidies from
French airports were declared illegal, after other airlines
instituted legal proceedings against Ryanair. In Strasbourg,
following an Air France complaint, the several hundred
thousand euros offered every year to the Irish airline were
rejected by the French justice. The marketing counter-
parts the company proposed to promote the Strasbourg
area were judged insignificant. In Pau, the 80 000 euros
Ryanair was supposed to receive for the opening of a
route to London - plus 11 € per passenger were also can-
celed. In both cases, the company finally renounced to
operate flights from those cities.
In 2005, a judgment passed by the European Commis-
sion concerning subsidies received by Ryanair from the
Belgian airport of Charleroi, just a few kilometers from
France, enabled the European Union to establish precise
rules for subsidies to airlines. Those subsidies are now res-
tricted to new routes or new frequencies. They also have
to be limited to five years, and proportionate to the costs
of the opening of the route. In addition, they cannot be
proposed to a single airline.
These rules give the subsidies a legal frame that was mis-
sing previously. Thus, the subsidies paid to Ryanair for
the opening of a Toulon-London route in 2006 – 500 000
euros per year maximum – received an agreement from
the European authorities. For small airports, however, the
“blackmail” is still the same: legally or not, no subsidies
means no planes. Airports which refuse to pay those sub-
sidies risk having their Ryanair flights transferred to the
closest rival platform, like Angouleme for Poitiers. Many
of those financially fragile airports therefore want to at-
tract other LCCs, in order to reduce their dependency to
the Irish giant - in some airports, like Carcassonne, more
than 99% of the passengers are Ryanair customers.
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 DOWN TO EARTH

22 Air Scoop - November 2007 www.air-scoop.com

 BIRD’S EYE VIEW
Safety and Security Worries Remerge for European LCCs
Some FlyBe cabin crew and pilots recently reported being
sickened by fumes on the company’s BAE-146 aircraft. On
ten flights over the past fifteen months, noxious air leaked
from the engines into the cabin, causing at least one fli-
ght to be aborted. Some crewmembers are so furious that
they are boycotting the aircraft. While these incidents in-
volve an older aircraft type that is quickly being phased
out of FlyBe’s fleet (FlyBe plans to remove all BAE-146
aircraft from its fleet by February 2008), the problems
revive past questions about how much LCCs are doing to
protect the safety and security of passengers.
Critics charge that the LCC business model that aims
to keep costs to a minimum has led to inadequate pilot
and cabin crew training, more aircraft breakdowns, and
increased pilot and cabin crew fatigue. All these factors
have contributed to a number of close calls over recent
years. For instance, in 2002, the Number 2 engine of Rya-
nair flight 296 caught fire upon landing at London Stans-
ted. While the fire was put out, and the plane evacuated
within 90 seconds, confusion and chaos during the eva-
cuation prompted an investigation by air safety authori-
ties. Ryanair was criticized for having inexperienced ca-
bin crew, many of whom trained in Eastern Europe with
questionable quality control.
Overall, European LCCs have a very good safety record,
but because LCCs want to cut costs, they are seen as
more willing to sacrifice passenger safety for the bottom
line. Already, public concern for the environment, anger
over a swath of new baggage charges, and frustration over
variable service standards has made the European public
rethink LCCs. A single accident could significantly dama-
ge the reputation of an LCC and the entire sector.
If a major accident by an LCC occurs, it could lead to a
tremendous amount of pressure from regulators and the
public. The harshness of the reaction will likely depend
on the severity of the accident, the carrier’s problems that
led to the accident, and the response of the carrier to the
accident. The carrier has to appear sympathetic and take
responsibility for its mistakes. And if it is discovered that
23 Air Scoop - November 2007
Exclusive Analysis for Air Scoop
www.airlinebulletin.com
the carrier has preexisting problems that led to the acci-
dent, then its reputation could suffer tremendously.
For example, in the year 2000, an MD-80 aircraft owned
by US LCC Alaska Airlines crashed into the Pacific
Ocean, killing all on board. In subsequent investigations,
it was discovered that there were serious oversight lapses
in Alaska’s maintenance operations. As a result, Alaska’s
reputation for safety suffered, which will likely continue
until Alaska removes the MD-80 type from its fleet, which
it plans to do in 2008, eight years after the tragedy.
The nuance that carriers need to remember is that the
public will make assumptions about why the airline was
involved in the accident. If an LCC is involved, often the
first explanation will be that the root of the problem is
excessive cost cutting, leading to maintenance and safety
lapses. If a legacy carrier is involved, the likely explanation
will be human or mechanical error. LCCs need to combat
this misperception by communicating that maintenance
is done in accordance with Part 145 and other EU main-
tenance regulations. LCCs have done a very good job of
making safety and security their number one priority in
the past ten years. But if LCCs start de-emphasizing safety
for cost or business reasons, then the industry is at risk.
Concerns about how an accident would affect a carrier’s
reputation aren’t limited to LCCs. SAS has taken drama-
tic action after the third gear collapse on one of its Q400
aircraft in less than two months. After a landing incident
with SAS flight 2867 on October 27, SAS decided to per-
manently ground their entire 24-aircraft Q400 fleet. SAS’s
dramatic action, while potentially very costly, emphasizes
to the public that they’re not taking any chances when it
comes to safety. Even if the accident were the fault of the
aircraft manufacturer, it is the airline that is seen as liable
in the public’s eye.
Q400 aircraft make up the bulk of FlyBe’s fleet and will
comprise even more once their BAE-146 planes have been
removed. With a low-cost business model that necessita-
tes high aircraft utilization, would FlyBe be as willing as
www.air-scoop.com
 BIRD’S EYE VIEW
SAS to ground its Q400s if it discovered a technical pro-
blem with the plane?
Part of the problem LCCs have in making such a decision
is that they typically only operate one or two aircraft ty-
pes, whereas legacy carriers like SAS operate many. Q400s
comprise almost half of FlyBe’s fleet; so such a grounding
could be devastating to the company. Moreover, if a
grounding occurred with 737- or A320-type aircraft, low-
cost carriers around the world could suffer, and legacy
carriers could use their advantage to take market share.
However, other safety lapses, including pilot and crew fa-
tigue could jeopardize a LCCs reputation. On Channel
Four’s Dispatches program about Ryanair, one pilot sta-
ted that the airline flies him just under or exactly 100
hours a month, the EU maximum. Flying this way for
many months straight left him exhausted. While Ryanair
argues that rosters are manually set to minimize the risk
of fatigue, it appears that in at least some cases, rosters
are set to maximize the utility of pilots, which also maxi-
mizes the risk of fatigue. Moreover, cabin crews are not
subject to such strict work limits, so they are at an even
greater risk of fatigue. For example, one of the Dispatches
undercover reporters discovered a cabin crew member as-
leep on the job, making it difficult for her to respond in
an emergency.
But perhaps more pervasive throughout European LCCs
have been security concerns. The Ryanair Dispatches
program uncovered some serious lapses in Ryanair’s secu-
rity practices and argued that these lapses were a result of
cost cutting on the part of Ryanair, particularly its policy
of 25-minute turnarounds.
In one instance, one of the undercover reporters was chas-
tised by supervisors for taking too long to board passen-
gers, because she followed procedures and verified that
the name of the passenger in the passport matched that
on the ticket, and that the passenger’s face matched the
passport photo. Her actions prevented Ryanair from
making a 25-minute turnaround on that flight. Moreover,
many Ryanair employees used temporary security passes
without following the stipulation that they be accompa-
nied by a permanent pass holder, a security flaw, that if
exploited could let a dangerous person on the tarmac or
on the aircraft.
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24 Air Scoop - November 2007
Fortunately for LCCs, if they are laxer in complying with
these requirements, the effects of doing so aren’t as si-
gnificant. Security incidents are rare and typically aren’t
as dangerous as safety problems. Moreover, most security
incidents don’t create the same levels of negative publicity
for LCCs that accidents do. However, that doesn’t mean
LCCs shouldn’t do more to improve security. It can be
argued that LCCs face a greater risk than legacy carriers of
a security threat, because they often operate from small,
rural airports with laxer security.
If a major publicized security incident occurs involving
LCCs, it could threaten not only their reputations, but
it could threaten the way LCCs do business as security
would be ramped up in the resulting weeks and months.
If airports or governments are unable or unwilling to pay
for tighter security at airports with only a few commercial
flights a day, then LCCs could be forced to move opera-
tions to other, larger facilities, adding additional costs from
higher airport charges and a greater likelihood of delays.
Even if LCCs don’t have to move operations, they could
be inhibited from doing 25-minute turnarounds if they are
forced to do stricter passport checks, leading to greater
boarding delays and lower aircraft utilization.
LCCs have had a remarkable safety record over the past
decade, with a very low rate of accidents. However, as the
Dispatches expose demonstrates, many LCCs operate in
ways that are not as safe as their legacy counterparts, and
are running a significant risk of an accident. It is uncertain
what the effects of a major accident would be on the Eu-
ropean LCC sector, but suffice it to say that the failure of
one LCC has the potential to damage the entire sector.
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
Airline Ticket, an ebook for travelers in the United States
who are interested in purchasing cheap airline tickets.
www.air-scoop.com