LONDON – EasyJet said its ready to take on a low-cost challenge from Europes former flag carriers, predicting theyll struggle to embrace the no-frills approach thats lured travelers to discount operators.
A potential 86 million short-haul passengers flying from Europes top 20 airports each year could be surrendered to EasyJet by network carriers because they dont feed lucrative long-haul services, Chief Executive Officer Carolyn McCall said, predicting that airlines including Air France may be left with as few as 21 million transfer customers.
EasyJet is attracting corporate fliers with allocated seating, flexible tickets and higher frequencies. While the approach differs from Ryanair Holdings ultra-low-cost service that often depends on small and regional airports, both agree in their prediction that efforts by established airlines to maintain their intra-European routes are ultimately doomed.
There are some clear winners in European short-haul, McCall said at Bloombergs European headquarters in London. I dont see why any legacy carrier would want to continue losing money on short-haul when it can be done better by other carriers, except to feed their long-haul.
EasyJet has sought to capture more corporate connections, winning a bid to fly between Rome Fiumicino and Milan Linate airports in October to break into a market dominated by Alitalia.
The airline also trumped Virgin Atlantic Airways to be one of two British carriers linking London and Moscow, a service McCall said is being well received by customers.
Ryanair said Sept. 4 that it may miss its profit target this year after a heat wave prompted people to vacation at home and increased competition depressed ticket prices, in a surprise announcement that caught investors off guard.
McCall said her own company is on track and that forward bookings are fine.
Cuts at network airlines helped lure 10 million business travelers to EasyJet in 2012, and rivals pared capacity on overlapping routes by 500,000 seats in the third quarter. McCall said she expects competition to intensify over the next five years as European airlines fight to keep market share.
The purchase of Spanish discounter Vueling Airlines by British Airways-parent IAG and Deutsche Lufthansas plan to rebuild domestic flights around its low-cost Germanwings unit are signs that rivals are learning from EasyJet, McCall said.
Air France is also responding with a discount subsidiary called Hop as the carriers seek to slash short-haul losses.
Our main competitive set is legacy carriers who are inefficient, have very high cost bases, very grand buildings, are not used to working in a lean environment and are not used to negotiating with airports on paying for what they use rather than the whole airport experience, McCall said. It is very difficult to think like EasyJet every day of the week.
McCall took over in July 2010, having joined as an aviation novice from Guardian Media Group. She runs EasyJet out of a large orange hangar at the Luton headquarters on the outskirts of London, an industrial building that remains true to the airlines frugal approach to doing business.
From two planes in 1995, EasyJet has grown to more than 200 Airbus SAS aircraft carrying more than 59 million people annually, 20 million fewer than Ryanair. McCall said her airline competes directly with its Dublin-based rival on just 5 percent of EasyJets 637 routes.
EasyJet shareholders in July approved an order for 135 more jets, putting the carrier on track to grow seat capacity by between 3 percent and 5 percent annually.