Simon Calder: In aviation, it's survival of the richest
Saturday 07 June 2008
How we laughed: 18 months ago, Michael O'Leary, chief executive of Ryanair, was presenting the half-year financial results for Europe's biggest no-frills airline. Someone asked about the impact of rising fuel prices. "If oil goes to $70 a barrel," he responded, "we'll be the only profitable airline in Europe; if oil goes to $80 a barrel, we'll be the only break-even airline in Europe; if oil goes to $90 a barrel, we'll be the only airline in Europe."
Well, the price of a barrel of increasingly precious crude is now around 50 per cent higher than Mr O'Leary's "worst-case" scenario. Yet Ryanair is still immensely profitable (at least by the undemanding standards of aviation), and the number of airline failures in the past six months directly affecting UK passengers equals the number of digits on one foot of a three-toed sloth: Maxjet on Christmas Eve, Eos in April and Silverjet last month. If you do not happen to be a customer in the transatlantic business-class only market, you may not have noticed.
So: who's next? Well, British travellers benefit from an improbable combination of the most competitive aviation market in the world, and some of the most financially robust airlines. British Airways, however slipshod its performance, enjoys the assurance of commercial security thanks to its owning the largest number of slots at the world's most desirable international airport, Heathrow. The second-biggest UK airline, easyJet, is underpinned by the best aircraft-supply deal ever negotiated with Airbus, making its A319s far cheaper than those of any other carrier. Ryanair, whose main base is Stansted, can make the same claim about Boeing: its fuel-efficient 737s are still arriving once a fortnight from Seattle at prices that were negotiated shortly after 9/11, when no other airline was in the market for more than a handful of planes.
These carriers will weather the storm, as will Flybe (Europe's biggest regional airline), BMI (the second-largest slot-holder at Heathrow), and Thomsonfly (part of Europe's biggest holiday company). And Monarch and Virgin are both well-run, high-quality airlines owned by prodigiously wealthy individuals. Yet anyone thinking that this is a good time to set up an airline of their own should look at the example of Britain's last three such "start-ups": EUjet, Duo and Silverjet provided excellent service for only as long as their unfortunate investors' cash lasted.
Sir Richard Branson is fond of answering the question "How do you become a millionaire?" with the line "Begin as a billionaire, then start an airline." Remarkably, even in these troubled days there are still people optimistic enough to believe that aviation provides a flight path to a fortune rather than insolvency.
Appearing on the radar is Premjet, which promises "short-haul premium travel" from Luton and Manchester to Malaga, Faro, Palma and Alicante. Premjet's founder, Andy Mitchell, promises "to bring back that something special to air travel". He is following the example of Luton-based Silverjet, fitting a Boeing with fewer than half the maximum number of seats and offering a "completely new standard of service".
The product looks appealing: "Sumptuous leather reclining seats, with class-leading legroom... Relax as you enjoy a three-course gourmet meal with complementary [sic] fine wines and champagnes." That sounds rather like the Club Europe product that GB Airways offered on routes to the same destinations. When the airline was bought by easyJet earlier this year, the new owner's first move was to scrap business class on the grounds that there was insufficient demand. For anyone considering investing in Premjet, I respectfully suggest that placing your life savings on King of Rome in the Derby at Epsom this afternoon would constitute a wiser bet.
For the past 10 years, plenty of UK travellers have benefited from the no-frills revolution. As traditional airlines such as British Airways have slashed prices to compete with the upstarts on holiday routes, we have been able to enjoy cheap fares on full-service flights. Those days are numbered. BA's insistence that it has no plans to ditch free catering and to start charging for luggage may soon change. Short-haul flights are now commodities, and any remaining glamour will soon be stripped away. We are moving into the O'Leary era: get used to it.
www.premjet.com; 0870 803 1636
Wednesday on my mind
Last week, I questioned an assertion in Wanderlust magazine that the travel industry offers lower prices to people booking (as opposed to merely travelling) midweek.
But the magazine's deputy editor, Sarah Baxter, has offered some examples of how travellers can save by avoiding weekends:
"British Airways say that they tend to launch special offers and new flights mid-week. And Trailfinders say airlines release their deals and special offers on Wednesdays and Thursdays in readiness for the advertising pages in the weekend press.
"These deals are generally valid for a week or so, but there is more likely to be availability on the lowest fares if you book before the deals are widely advertised."
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