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Newsletter on innovation from the European Commission's Enterprise DG





November 2003




Case Study
Creating new travellers

    The biggest innovation in European aviation in recent years has nothing to do with aerospace technology, but has created huge new markets using a radically different business model from the traditional airlines.


The no-frills carriers have established themselves as major players in a very short space of time.

The no-frills carriers have established themselves as major players in a very short space of time.

o-frills airlines are now major players at many British and Irish airports, just a few years after starting their first routes. According to research by Cranfield University( 1 ), around 40% of passengers on internal UK flights, and flights from the UK to and from other EU countries, use no-frills scheduled airlines, underlining the huge market share that they have built up from nothing since the mid-1990s. The researchers expect that no-frills travel will account for as much as 15% of air travel in the EU as a whole by 2006.

Although it is in the UK and Ireland that the no-frills carriers have first established themselves in Europe, the phenomenon is developing fast in other EU countries, with around 20 no-frills carriers flying over 500 scheduled services in Europe. "Greater regulatory freedom in the UK and Ireland was the catalyst for the development of the no-frills carriers there," according to George Williams of Cranfield University's Air Transport Group. "Also, there was a stronger tradition of low fares in the charter market than in other European countries." Since April 1997, any airline licensed in the Union has been, in principle, free to fly any route within the EU, which has been a vital element in the development of the no-frills carriers. New business model

Liberalisation of the US domestic market in the 1970s allowed no-frills carriers to be set up there. Indeed, Southwest Airlines has become the largest domestic carrier in the USA. Southwest has been the inspiration for the European no-frills carriers, but they have adapted the business model considerably. "Southwest was the starting point for the likes of Ryanair and EasyJet, but they have adopted ideas from different places," according to Keith Mason, Williams' colleague. "For example, EasyJet pioneered the use of the internet for bookings first, and Ryanair has since adopted it too. Indeed, Southwest is now picking up ideas from its European counterparts."

It is clear that one of the strongest characteristics of the no-frills business model is the ability to adapt rapidly to circumstances, to change what is not working and take advantage of new opportunities without delay. By stripping out the 'frills' of the traditional carriers, a wide range of cost savings can be made, through effectively supplying a single standard service on all routes. But the success of the no-frills business has been to cut costs in every area, for example by improving both labour and aircraft productivity. Different paths

The home markets of Europe's two biggest no-frills carriers, EasyJet and Ryanair, are close to maturity and so they are focusing on opening up new bases and routes in mainland Europe, in competition with smaller local carriers. Williams expects there will be consolidation in the European market, as there has already been in the UK, with Go taken over by EasyJet and Buzz by Ryanair. "Ultimately, there will only be two or three major no-frills carriers in Europe. There cannot be room for more with the high annual growth rates which they aim for. However, there are likely to be many small carriers, with perhaps ten aircraft, operating in smaller niche markets," he suggests.

The no-frills carriers have created new markets, and opened up air travel. A great proportion of their passengers are taking flights that they would not otherwise have made, although some of their business has come from passengers moving from traditional carriers. In fact, Ryanair and EasyJet are targeting different types of passengers. "Although they started from the same place, they have developed in different ways, and are now very different airlines," Mason emphasises. While Ryanair focuses on 'leisure' routes to small, uncongested airports, with little or no competition, EasyJet tends to operate higher-frequency services to major airports in competition with traditional carriers. At present, they compete with each other on very few routes, and they both clearly aim to be among the two or three carriers left from consolidation in the sector. (1) Market analysis of Europe's low-cost airlines, Cranfield University Air Transport Group, research report 9, August 2003, ISBN 1 8619409.


  • G. Williams, Cranfield University, Air Transport Group
    Tl. +44 1234 754 237
    (email removed)


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