Opinion: Ryanair and Monarch show the era of cheap short-haul flights is coming to an end
A customer proposition that has served short-haul European airlines well for over two decades may be coming to an end. It is 22 years since easyJet first offered passengers European flights for the price of a pair of jeans; back then just £29.99. And this generation of British travellers has grown to expect trans-continental hops for prices more akin to everyday clothes. The real costs of all these low-cost flights are becoming apparent, and there are doubt whether this is sustainable. Ryanair pilots are now rebelling over their pay and workload. Perhaps people will have to pay more for hopping across Europe, and that premium should go to creating a better experience for passengers and minimising environmental damage. The rock bottom fare prices were the death of Monarch. And even easyJet, whose marketing and PR have been good, is facing a crisis over the forecast impact of Brexit on its operations. More expensive flights is a very difficult proposition for any single airline, with the intense competition and minimal profit margins of their business model. But future air passenger numbers forecasts are increasingly likely to now be inaccurate – not the sort of thing to base massively expensive airport infrastructure investment on.
Ryanair and Monarch show the era of cheap short-haul flights is coming to an end
Ryanair is the continent’s biggest airline by passenger numbers
By Danny Rogers (The i)
October 8th 2017
It has been a terrible couple of weeks for the reputation of British and Irish airlines. The previously “Teflon” Ryanair now feels grubby and tarnished after a damaging saga of flight cancellations culminating in the departure of its chief operations officer on Friday.
Even worse, Monarch – a British airline with a reputation for having a friendlier culture – went bust, stranding more than 100,000 passengers.
A customer proposition that has served well short-haul European airlines for more than two decades may be coming to an end.
It is now 22 years since easyJet famously offered passengers European flights for the price of a pair of jeans; back then just £29.99.
And this generation of British travellers has grown to expect trans-continental hops for prices more akin to everyday clothes. The real costs of all these low-cost flights are becoming apparent One wonders whether this is sustainable.
Ryanair, which pretty much invented low-cost flights in Europe, is now the continent’s biggest airline by passenger numbers. The Irish carrier’s expansion has been relentless since the mid-90s.
And yet its marketing and PR has been as minimal as its costs, the nub being: “we will get you there on time. As for experience, well, what do you really expect for thirty quid?”
But the real costs of all these low-cost flights are only now becoming apparent. Pilots are rebelling over their pay and workload, a key part of Ryanair’s problems.
As we know, the airport experience has become pretty dreadful. Delays are rife. And that’s before we even get into the environmental aspect of all these planes and road traffic around airports.
Perhaps we should pay more for hopping across Europe In Monarch’s case the marketing and pricing model proved fatal, particularly after it had to switch capacity from the Eastern Mediterranean (Turkey, Egypt) to the already overcrowded, competitive Western Mediterranean (Spain) following passenger safety fears.
And even easyJet, whose marketing and PR has long been exemplary, is facing a crisis over the forecast impact of Brexit on its operations. Perhaps we should pay more for hopping across Europe; and that premium should go to creating a better experience for all and minimising environmental damage. Alas, that is a very difficult proposition for any single brand.
What has gone wrong?
Monarch reported a loss of £291m for the year to October 2016, compared with a profit of £27m for the previous 12 months, after revenues slumped.
It had been in last-ditch talks with the CAA about renewing its licence to sell package holidays, but failed to reach a deal.
Blair Nimmo, from administrator KPMG, said its collapse was a result of “depressed prices” in the short-haul travel market, alongside increased fuel costs and handling charges as a result of a weak pound.
Monarch’s owner, Greybull Capital, had been trying to sell part or all of its short-haul operation so it could focus on more profitable long-haul routes, and said it was “very sorry” it had not been able to turn around its fortunes.
Moody’s: Pound drop from Brexit will shake UK airlines; Airports can withstand short term impact
Global Credit Research – 3 Feb 2017 (Moodys)
People’s revised travel choices and operating dollar costs could see UK airlines’ revenues take a hit, with airports’ passenger growth likely to halve over the next two years due to the resulting macroeconomic landscape following the Brexit vote, says Moody’s Investors Service in a report published today.
Moody’s expects that demand for air travel will be driven by weaker economic sentiment as a result of uncertainty over the shape of the UK’s future trading arrangements with the EU, as well as with other major economies with which the UK has trade arrangements in place by virtue of its current membership of the EU.
Moody’s report, titled “Impact of Brexit vote on UK airports and airlines: Airports to Withstand Short Term Impacts but Airlines Weakened by Fall in Sterling”, is available on www.moodys.com. Moody’s subscribers can access this report via the link provided at the end of this press release.
Overall, in the short term, passenger numbers will continue to grow, albeit at a slower rate, enabling UK airports to withstand the immediate impact of the Brexit vote. This benefit will however not be felt evenly across the UK. Manchester, Luton and Birmingham airports which are dominated by outbound traffic are more exposed to weaker domestic economic prospects and sterling’s depreciation, while others like Heathrow, and to a certain extent Stansted airport, are better insulated from UK economic conditions because of their higher proportion of inbound traffic. The last two also serve London, a major tourist destination so a weaker pound benefits tourists.
UK airlines will be weakened by the sterling’s depreciation against the dollar, as a significant proportion of their costs are denominated in US dollars while sterling revenue is a high percentage of the total.
UK airlines will continue to suffer in 2017 on the back of a slowdown in outbound leisure travel, particularly to the US, as UK residents’ put travel plans on hold as the pound’s depreciation makes the cost of holidaying abroad more expensive. Also, weaker economic prospects and concerns over terrorism threats in Europe will continue to put off many US tourists from flying to the UK to benefit from the weaker pound. Long-haul carriers, such as British Airways, Plc (Baa3 stable) and Virgin Atlantic (unrated), which traditionally carry British-based leisure passengers to the US will be particularly impacted.
……. and there is much more ………