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EU low cost airline

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Tashi Nyima

on 28 June 2012

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Transcript of EU low cost airline

European union has developed for single market with the euro as its common currency.
European Union Flag
Impact of deregulation and unification of European aviation to low-cast airlines
Low-cost Airline Sector
Market Overview
*Historically dominated by national ‘flag carriers’ (accounting for over 70% of civilian passenger traffic)
British Airways
Air France
*Dominance being eroded as the European airline market changed by free market forces
*Market share now migrating towards the LCAs sector
Economic Model
European Airline Sector: Market Overview
EU airline market has double in size since 1990
In the last 10 years, growth has been fueled by
low-cost carriers.
Early 2000, only 64 were still flying
Total number of 144 start-ups in the 1990s
European LCA Sector
Currently 40 key players in the market
(eg. Ryanair, esayjet, Air Berlin, FlyBE, BMI Baby etc)
Key players: by area
European Market share of low-cost carriers
In some European countries,
low-cost carriers even dominate the market.
The high market share of low-cost carriers,
allow them to access new market and generate
new traffic.
Source: European Aviation Analysis;Roland Berger (2010)
Source: European Aviation Analysis;Roland Berger (2010)
Ryanair and easyjet together is bigger that BA.
Leaders of the low-cost airline market in Europe.
Source: European Aviation Analysis;Roland Berger (2010)
Estimated number of Passengers – until 2014
Low-cost market segment might have a volume growth of 15%pa.
Porter’s Five Forces
Threats of New Entrants
Deregulation ↑↑
Aircraft/Airport slot /Crews
Brand Strategy
Buyer (customer) Power
Low Switching cost
Low Loyalty
Threats of Substitution
Price rival: Bus
Time rival: Train
New information technology
Supplier Power
Low concentration (Aircraft, Fuel, Airport)
Switching cost (Aircraft)
Regional airport
Competitive Rivalry
Many players
Easy to copy price strategy
High growth/Big market
Source: European Aviation Analysis;Roland Berger (2010)
Source: European Aviation Analysis;Roland Berger (2010)
Economic Model
Deregulation ↑↑
Aircraft/Airport slot /Crews
Scale economy
Bland economy
LCA Market: Benefits
The Single European Aviation Act
Underdeveloped air capacities
Open-skies agreements
The enlargement of the European Union
Innovative schemes should be adopted to attract the increasing number of passengers and build brand image
(Innovation in new sources of revenues like advertising and selling on flights, offering paid leisure entrainment on board)
Improvement in overall efficiencies
Offering a few additional customer services at a reasonable price could attract small and medium business travellers.
The UK remains one of the leading international
tourist destinations and the London Olympics 2012
should help to increase the appeal for
international tourist even more.
Further expansion opportunities
115 million passengers by 2014
Impact of European Union on the
Low-Cost airline sector

Understand the EU as a trading block
Understand the LCA market in the EU and identify its key players.
Identify the competitive forces within the LCA sectors.
Appreciate the recommendations made for continous improvement LCA sector.
Tashi Nyima
Renni Manman
Akihiko Niiho
Tashi Nyima
Renni Manman
Akihiko Niiho
Focus on different customers segment
-Stimulating existing market through frequency increases
-New markets by opening new destinations and linking airports already served.
Merger and acquisition to gain a competitive edge in the market
-Economic and political union of 27 countries

-500 million in which generates a nominal GDP of Euros 12. 3 trillion in 2010.

-40 key players in the market with an estimated 15 million passengers by 2014.

-LCA dominates some EU countries aviation market (example Spain 50% and Poland 52%)

-Ryanair and Easy jet are the leaders in LCA market based in England.

-Highly competitive market with low customer loyalty

-Hence substitution and new entrants to the market is open.

-Increase price for oil and airport charges pose the major threat for the sector.

Without the European Union and common market the LCA sector would have not been so successful.
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