Outlook: Low-cost travel

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The Independent Online
BARBARA CASSANI, the effervescent chief executive of Go, is approaching the end of her honeymoon period. The time to launch an airline is just before the summer peak season begins and the time to launch a low-cost airline is just at the moment passengers begin to trade down from business class.

In both respects Go's timing has been impeccable. Since British Airways sent Go down the runway in May, load factors have been strong thanks to the summer holiday market. Then, just as the skies began to darken with the threat of a world downturn, along came a sudden jump in business traffic. Based on the rise in passengers travelling for work rather than pleasure during September, Ms Cassani has stuck her thumb in the air and reckons as many as three in every 10 seats could be filled with business passengers this winter. That is not far short of the ratio its parent company achieves. One can only speculate how many of Go's passengers would otherwise be flying BA.

In its fledgling state, Go has also cleverly avoided going head-to-head in competition with the likes of Ryanair and EasyJet from the start. This has allowed it to pick off routes where it can undercut the incumbents by a big enough margin to grow the market without getting tied up in ruinous price wars.

But nothing lasts for ever. If the downturn deepens into something worse, there is no guarantee that it will continue to work to the advantage of the low-cost operators. At some point soon, Go will also have to move into markets already inhabited by its competitors, since these are, by nature, the ones where there is greatest scope to grow traffic.

That is the point at which the Cassani business plan and Go's projections of break-even in year two will be put to a real test. There is, of course, a sugar daddy in the wings. BA gave Go a dowry of pounds 25m to see if it could fly on its own, and has solemnly vowed there will be no more money. If it goes back on that, then Go's rivals will be the first to complain. The regulators and the courts may not be far behind.

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