Low-cost airlines gaining ground on big carriers

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The widening gulf in the fortunes of low-cost airlines as opposed to the flag-carriers was dramatically underscored yesterday.

Ryanair announced that passenger numbers had broken through the one-million barrier for the first time last month while British Airways reported an 11 per cent decline in traffic for August.

BA blamed the sharp decline in passenger numbers on the global economic slowdown which has hit traffic levels particularly hard on its North Atlantic and Asian routes.

Business and first-class passenger numbers were down by 11.6 per cent compared with a 10.7 per cent decline in economy traffic. BA said load factors – the percentage of seats filled on each flight – also slipped by 1.8 points from the level a year earlier to 75.4 per cent.

Worryingly for BA, although it has reduced capacity by just under 9 per cent, the decline in passenger numbers in the last five months has been considerably higher.

Ryanair, by contrast, was jubilant. Michael O'Leary, chief executive of the Dublin-based carrier, said: "To be the first low-fares airline in Europe to carry one million passengers in a single month is a phenomenal achievement."

Total Ryanair passenger numbers in August reached 1.02 million – an increase of 35 per cent on the same month last year. Load factors were also up by five percentage points to 85 per cent. Mr O'Leary said the August traffic figures kept the airline on course to fly 9.3 million passengers this year.

Much of the growth this year at Ryanair has come from its new hub at Charleroi airport outside Brussels. But Mr O'Leary said Ryanair was also stimulating traffic growth across its entire network through the use of larger Boeing 737-800 aircraft.

Ryanair operates 55 routes around Europe and, in addition to Dublin, also has a major operation at Stansted airport.

The latest gloomy traffic figures from BA follow the announcement earlier this week that it is cutting 1,800 jobs by the end of the financial year and retiring an increased number of Boeing 747-200 jumbo jets in a bid to reduce costs.

The cutbacks at BA come amid fears that it could suffer a loss this year. BA's house broker, Merrill Lynch, has cut its current-year forecast from a profit of £150m to a loss of £65m. In a research report issued earlier this week, Dresdner Kleinwort Wasserstein warned that its was looking increasingly difficult for BA to justify holding the dividend.

Concern is being caused by the failure of passenger numbers to pick up during what is traditionally BA's strongest quarter of the year. BA cautioned last month that the outlook remained "challenging" after reporting a near halving of first-quarter profits to £50m.

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