Budget Air Travel Blossoms in Europe

Just about the only thing that’s cheap in London nowadays is flying out.

But no-frills jetsetting may not take off as easily in mainland Europe even when budget carriers set up base there.

Helped by geography and high British prices, airlines such as Ryanair, Easyjet and Go are cashing in by shuttling travelers from Britain and Ireland to the continent for as little as 25 pounds ($35.48) return.

With traffic expected to grow 15 percent annually over the next five years, they now want to take their business to the mainland, where duopolies on most routes mean travelers pay top dollar to fly just about anywhere.

“Continental Europe is ripe for the picking. There are still very high air fares and there are only two carriers on most routes,” says Damien Horth, airline analyst at ABN Amro.

“And while there is unlikely to be a market as big as London, you can envisage that the market from Europe to Europe is bigger than the market from the UK to Europe.”

Ryanair and Go are looking for a new base in mainland Europe and Easyjet, which already flies to France and Spain from Switzerland, plans to start services from Amsterdam in January.

Mainline operators have reason to be nervous about budget airlines landing on their patch. The bargain carriers poached so much of British Airways’ short-haul business last year that its European operations lost 439 million dollars.

And while the airlines used to focus on leisure traffic, about 30 percent of their tickets go to business travelers who have warmed to the idea of paying for their meals and scrambling for their preferred seat in return for low fares.

But experts say high-speed rail links, less-developed secondary airports and influential national carriers may make it harder for the no-frills business to soar on the continent.

“Budget airlines have been so successful in the UK and Ireland because these countries have not had direct links into the continent so they’ve had no competition,” says Keith Mason, a lecturer in air transport at Cranfield University.

“But in continental Europe, there’s a lot of competition on the surface...and you also have to question whether there is the same kind of appetite for budget travel.”

Minibar in Your Tent?

Last year, the Swiss government refused Easyjet boss Stelios Haji-Ioannou’s application to fly scheduled services from Geneva to Barcelona on the grounds that a national law guaranteed Swissair a monopoly on the route until 2008.

Only tour operators offering ground transportation and accomodation could fly the route, so — not to be outdone — the defiant Easyjet boss now offers passengers landing in the Spanish city a bus service...and a tent.

The Swiss case is an exception, as the country is not yet part of the European Union’s deregulated airline market. But budget airline executives say virtual monopolies still exist on many routes and at airports.

“The two main problems are lack of slots at major airports and ground handling, which despite liberalization still remains in the hands of mainline carriers or the airports authorities themselves,” said Easyjet spokesman Toby Nicoll.

It will also be difficult to lure passengers from trains even for journeys of more than three hours — the threshold under which people prefer to travel by rail rather than by air.

The only service linking UK travelers to the mainland is Eurostar, which runs services from London to Paris and Brussels at prices often higher than those offered by low-cost airlines.

Moreover, continental Europe’s secondary airports — those several budget airlines use in order to save costs — are often not well connected.

British airport operator BAA Plc has spent heavily on rail links to London’s Stansted airport — the biggest budget airline hub. In contrast, Ryanair and Go often provide their own minibus service for passengers landing in secondary airports.

Paris, Stockholm Landings

Rail competition is a drawback to Paris, which analysts say is the only continental European city that matches London in terms of its appeal as a leisure and business destination, catchment area and number of airports.

Ryanair is considering Brussels, Frankfurt, Stockholm and Pisa for its mainland hub, according to industry sources, and analysts say the Swedish capital could be its best bet.

“You’ll never get as many people out of Stockholm as out of London, but you can still get a sizeable market that is profitable,” says Horth.

Continental European airlines are also likely to launch their own counterattack. In response to Easyjet’s plans to start services from Amsterdam, KLM — which already operates budget airline Buzz from Britain — is launching another discount service from the Dutch airport.

Brussels-based Virgin Express, which runs upper-end budget services in Europe, will also stiffen competition. The carrier has said it plans to capitalize on the largely untapped continental European market by focusing on six cities, including Brussels, Rome and Berlin, and shuttling between them.

Spreading the Budget Credo

Some experts also question whether continental European travelers are ready for discounts in a business where quality and safety have traditionally been associated with high costs.

Penetration of the Internet — budget airlines rely heavily on selling tickets online as they don’t use travel agents — in continental Europe is lower than in Britain and Ireland.

And, as Niccoll points out, Britain has lived for years with three national carriers—British Airways, Virgin Atlantic and British Midland — while most continental European countries only have one.

“All the airlines have come across problems of branding and credibilty because in many countries in continental Europe people are still loyal to national carriers,” Nicoll says.

“You still need to build a low-cost ethos.”