Post on 21-Feb-2022
1Vueling Airlines S.A. 2009
European short haul2011-2015 - The Final Phase
European Aviation Club – Brussels, 16 June 2011
Agenda A. The Evolution of Short Haul
B. The Last Phase
C.
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C. Vueling: the Right Model
D. What is Needed for the Last Phase
o>700 LCC a/c in Europe
oEvery major has
oRyanair converts to an LCC
oMajors are created
oAll countries
The evolution of short-haulTHE PHASES
Deregulation/Privatization
Entry of LCCsShort-haul, converted
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oEvery major has a lower-cost strategy (at different stages of implementation)
oeasyJetlaunches with two planes
oother regional LCCs start
oAll countries with a national airline that goes to total or partial privatization
oPermanently lower fares and lower costs
oLower fares
oMore competition
oHigh fares
oMono or duo-polies
The evolution of short-haulTHE PHASES
Deregulation/Privatization
Entry of LCCsShort-haul, converted
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oContinued competition
competition
oLower costs
polies
oHigh costs
“When we privatise, we will be really successful!”
“We are pretty skeptical, but not worried”
“We’ve given up on short-haul; focus on long-haul”
And what were traditional airlines saying at each stage?
The last phase
B.
1. The last phase: short-haul, converted
2.What does it mean? Why is
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2.What does it mean? Why is this good?
3.What are signs that we may be already in this last phase?
What does it look like when it ends
o Majors operate short haul with business class only between own alliance hubs and major business trunk routes
THE LASTPHASEThe last phase: short-haul converted
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routes
o Everything else is lower operating cost subsidiaries or LCC alternative
o Become more sophisticated
o Evolve in product:
• Business passenger
• Connections
o Access to higher fares
o Disappearance of full business class
product in all but premium routes
o Connect and revenue share models
with leaner operators
o Finally control their short haul costs
Traditional airlines Low cost airlines
What does it mean? Why is this good?
++
THE LASTPHASE
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Airports Business activity
o Access to higher fares
o Growth through lower fares
o More choices
o More direct flights
o More growth (Flights, Pax, services…)
o Discretionary spending increases
o Drives more capital investment
+
+ +
+
+
� Assigned seat trial
� Acknowledged currently “bad customer service” (17-5-11, FT Deutschland)
Traditional airlines
What are the signs that we may be in this last phase?
Low cost airlines
� Germanwings: Cooperation
� Re-distribution of bases
� Access to Transavia
THE LASTPHASE
� Seat assignment
� Blocked middle seat
� Multi-frequency
� Main airports
� Oneworld FFP
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� Biz passenger focus
� Flexible fares
� GDS distribution
� Inflight WIFI
� Clickair, then Vueling
� LGW as an alternative
� Welcoming Air Berlin
� Connections / interline
� GDS sales
� Flexible fares
� Very high punctuality
� Lessons learned: Why did other airlines fail?
THE LASTPHASEWhat are the signs that we may be
in this last phase?
Consolidation till now Future consolidation?
�Do we expect more consolidation?
• High competition
• Higher costs
• Short-haul only
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� Closure
� Consolidation
…
YES
• Short-haul only
• Short-haul without prospects to grow
• State-aided airlines with limited government resources
Vueling in this phase
C.1. Vueling figures and history
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Some figures
2004 2005 2006 2007 2008 2009 2010 2011 2012
VUELING
o 12m annual pax, > 100 routes, >50 airports
o 47 A320s, 8 bases, €800m revenues
o LCC in Europe with more frequencies (10,4 weekly frequencies on average per route)
History
Only proven tool to profitably support the last phase of short haul substitution in Europe
CASK exfuel, 2010 (€c/ASK)
7,4210,07
4,443,865,104,07
Air FranceLufthansaNorwegianeasyJetAir BerlinVueling
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Vueling startsflying
Clickairstartsflying
Vueling’sIPO
$148/Barrel Oil
Vueling Clickairmerger
Profitability€ 8M
Profitability€ 28M
Profitability€ 46M
European expansion
-Full interline-Code-share-50/50 GDS/ internet sales
LCC Service New Model
Middle seat blocked FlexibilityInternet Sales only GDS Sales LCC Business
Transfer Pax
Interline
VUELINGOnly proven tool to profitably support the last phase of short haul substitution in Europe
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What does the market need for this last phase
D.No more market distorsions!!!
A fair competitive environment for everyone, in and out of the industry:
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industry:
• 261/2004 regulation: Urgent reforms
• Stop selected, politically-driven public subsidies
o Stop having to play the role
of an insurance company
• Cost sharing with
administration
• Cost sharing with
airports
•
o Poor drafting & referrals to
ECJ for interpretation has led
to confusion regarding its
objectives and reach
261/2004 regulation: Urgent reforms Cost sharing
NEEDS
What does the market need for this last phase?
o Under the current regulation,
Airlines are objectively
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• Objective limitations to
the duty of care, as in
ground and maritime
transport regulations
Airlines are objectively
responsible for events outside
the scope of their
responsibility
o Natural events: Volcanic ash,…
o Inappropriate Airport management
(London, Dec 2010) / Disruption
Events (Strikes…)
Subsidies create artificial demand Leveling the playing field
NEEDS
What does the market need for this last phase?
o “The aid may be granted only once (the ‘one time, last time’ principle)” (EC Competition Law)
o “The aid must not be
o Prolonging state-aid not only distorts the market but it slows down access to a better environment
o Local Spanish
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o “The aid must not be targeted on expansion” (EC Competition Law)
o Local Spanish example: More than €100M of public aid during 2 years
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