And then there were ... 2? LCCs in Europe

GB Airways surprise capture by easyJet caught BA knapping. The big network king has suffered several defections over the last year. First there was BMED (founded by Lord Hesketh for those of you who are trivia buffs). Sold to BMI from under the noses of Willy and Co. Who promptly sold back BA's slots to them for more than the cost of the airline they bought. Go figure!

The news this week of Franchise partner GB Airways selling to easyJet was followed within a day or so by Loganair - one of the smallest of the franchises - who has also terminated their agreement.

The loser is clearly BA - but who is the winner. Some pundits are opining that this will raise the bar even higher for other LCCs. As we have said many times we believe that the market has fragmented and led to a new HVC - Hybrid Value Carrier model. Either network carriers coming down into the LCC type model or LCCs going up.

For the European market we see very few sticking to the purist (or purest) model. Ryanair for sure is one of them. However we believe that the others will morph into the HVC middle ground. Already we see many - even BA charging for value added services. We see consolidation of the kind of models that has united many brands in Germany under the Air Berlin management. (LTU, Condor, Germania, DBA etc). The dominance of the LCCs in different markets is clearly having effect. With BA pulling back still from Gatwick - easyJet's acquisition of GB Airways will bring a lot more slots and traffic to its new best friend hub at LGW. Interestingly this could also mean over time an opportunity for EZ to expand into a long haul model or at the very least a partnership with Virgin Atlantic.

Stay tuned folks this is going to be interesting. With Sir Michael Bishop soon to retire (he is getting quite old now) BMI cannot hope to remain independent for much longer. Let's just see how things work themselves out.

Cheers

Timothy

Virgin Blue introduces premium economy seats

Morphing of LCCs continue....

Our prediction that LCCs would continue to morph and many more would move up the food chain seems to be coming true. Today Virgin Blue announced they were introducing a seperate premium cabin. Heaven forbid they would desert their pagan (LCC) roots, but here it comes.

The first 3 rows of both 737-700s and -800s will be configured with convertible seats that can change from 3 abreast each side of the aircraft to just 2 with 34 inch pitch.

This follows on the heals of the successful promotion of the "Blue Zone" seats (front of the bus and the exit rows).

With a new website more premium lounges and a higher yield getting the notice of the analysts - Virgin Blue is moving more into the Hybrid Carrier.

Now if only they could do something about the float....

Trouble at Skybus already?

Its only been in operation for a few months but already they are monkeying around with the schedule.

Skybus has cancelled flights to San Diego and Bellingham in favor of new direct nonstops from Portsmouth Boston. Clearly they are sticking rigidly to the Rynair playbook... maybe....

A Dreadful summer reverses trends on UK Emplanements

That depressing and awful UK Summer had a positive effect on UK Enplanements - particularly at LHR and LGW who both experienced growth in August and September against a backdrop of declines during the first half year.

We should however continue to see soft results from the two primary London Airports as carriers move capacity to mainland Europe.

Here is our top line analysis of the UK Results for September:

Manchester - continues to decline. Shift to the regions and growth of Liverpool are the primary reasons.

Stansted - slow growth only 2.5% compared to high single and double digit growth we are used to seeing. With Air Berlin pulling back moderately and the new terminal not yet available for use - the summer rush was clearly about all that the facility could handle. We are seeing Ryanair pulling back some capacity planned for the fall and winter months. Stansted is poised to overtake MAN as the UK's 3rd largest airport.

London City - another spectacular growth for LCY up nearly 30%.

Upcoming

The opening this month (or next) of the new Eurostar terminal at St Pancras will have some impact most likely on Stansted. It should be remembered that every time a Eurostar train leaves the station it is the same as watching 2 fully loaded 747s take off.

Comment on BAA and raising of rates. The UK regulator seems to be taking a leaf out of the German regulators book and RAISING rates. While this comes as much relief to the Spanish owners of BAA it can only serve to drive more traffic away. We believe that separating all the airports in BAA's portfolio would be counterproductive. However separating STN from the other two would be beneficial allowing for more competition on one of the most scarce of resources - slots and tarmac.

Air Berlin starts retreat at Stansted

Air Berlin has thrown in the towel on its much publicized attempt to challenge Ryanair and Easyjet at Stansted. With only 2 remaning point beyond flights at STN from the original 4 - AB will now only offer flights from STN to Germany and its hub at Palma de Majorca.

Stansted will continue to be a major hub for AB generating over 1.2 million pax at STN, its second largest hub outside of Germany.