CK
ScanFlyer Mile High Club
LCCenes fremtid ikke så rosenrød
http://www.atwonline.com/news/story.html?storyID=1497
Future not so rosy for Europe's LCCs, says McKinsey
Friday June 24, 2005
Declining growth rates will take a mounting toll on European low-cost carriers, according to an analysis by McKinsey & Co. presented Thursday in Frankfurt.Lucio Pompeo, author of the study, stated that the booming industry is at a crossroads; "Few will survive," he warned. The study cited three reasons for falling LCC profitability: Increasingly saturated markets, aircraft orders exceeding likely demand and the growing competition among scheduled airlines, charter companies and LCCs.
He predicted that only two or three LCCs will hold their own in the European market over the long term. "The days when LCCs used market stimulation to expand, with practically no competition, are over," he said.
According to Pompeo, the three largest European LCCs--easyJet, Ryanair, and Air Berlin--have on order a total of 300 medium-haul aircraft for delivery by 2012, with options for a further 350. By comparison, the scheduled European airlines have ordered only about 30 of this type with around 160 options, although their market share is currently 66% of overall European air traffic. Conversely, European LCCs have 16% of the market, a figure McKinsey estimates will rise to 24% by 2010.
Signs of market saturation are apparent in places such as Dublin, Cologne and Brussels, the report claims, "and some routes have already been discontinued as LCCs increasingly turn to routes already heavily plied by charter and scheduled airlines."
To add to the challenges facing the sector, LCCs and legacy carriers are competing for business travel customers while charters and LCCs battle over vacationers. Between 2000 and 2004, charter airlines nearly doubled their seat-only offers from 20% to 36%. At the same time, scheduled airlines are copying LCC concepts by offering cheaper tickets, expanding online sales and sometimes starting up their own low-fare clones, such as SAS's Snowflake and germanwings, a subsidiary of Eurowings, in which Lufthansa holds a 49.9% stake.
Pompeo's conclusion: "Despite cost advantages for LCCs, expected growth will not suffice to achieve profitability for many companies."
by Leonard Hill
http://www.atwonline.com/news/story.html?storyID=1497
Future not so rosy for Europe's LCCs, says McKinsey
Friday June 24, 2005
Declining growth rates will take a mounting toll on European low-cost carriers, according to an analysis by McKinsey & Co. presented Thursday in Frankfurt.Lucio Pompeo, author of the study, stated that the booming industry is at a crossroads; "Few will survive," he warned. The study cited three reasons for falling LCC profitability: Increasingly saturated markets, aircraft orders exceeding likely demand and the growing competition among scheduled airlines, charter companies and LCCs.
He predicted that only two or three LCCs will hold their own in the European market over the long term. "The days when LCCs used market stimulation to expand, with practically no competition, are over," he said.
According to Pompeo, the three largest European LCCs--easyJet, Ryanair, and Air Berlin--have on order a total of 300 medium-haul aircraft for delivery by 2012, with options for a further 350. By comparison, the scheduled European airlines have ordered only about 30 of this type with around 160 options, although their market share is currently 66% of overall European air traffic. Conversely, European LCCs have 16% of the market, a figure McKinsey estimates will rise to 24% by 2010.
Signs of market saturation are apparent in places such as Dublin, Cologne and Brussels, the report claims, "and some routes have already been discontinued as LCCs increasingly turn to routes already heavily plied by charter and scheduled airlines."
To add to the challenges facing the sector, LCCs and legacy carriers are competing for business travel customers while charters and LCCs battle over vacationers. Between 2000 and 2004, charter airlines nearly doubled their seat-only offers from 20% to 36%. At the same time, scheduled airlines are copying LCC concepts by offering cheaper tickets, expanding online sales and sometimes starting up their own low-fare clones, such as SAS's Snowflake and germanwings, a subsidiary of Eurowings, in which Lufthansa holds a 49.9% stake.
Pompeo's conclusion: "Despite cost advantages for LCCs, expected growth will not suffice to achieve profitability for many companies."
by Leonard Hill
