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Evolution, not revolution

LCCs are increasingly offering more choice to passengers. But has this added complexity to the operation? Martin Roebuck investigates

Simplicity was once the mantra of all low-cost carriers (LCCs). They shunned seat selection and multi-tiered service because it meant complexity – and extra cost.


However, the business model is evolving as the market matures. Legacy carriers have removed the frills from their own services, or have moved directly into the low-cost arena through acquisition. Pure LCCs have responded by raising their own game or signing codeshare agreements with long-haul carriers.


Not all operators welcome the term ‘hybrid’. But however they choose to describe themselves – value-oriented, best cost, new generation, à la carte – it is clear that their customers can now choose from a slew of mid-market offerings.


The future shape of the low-cost model made for some lively exchanges during the recent Routes Europe conference in Budapest as rival panellists sought points of difference between Vueling, recently acquired by the British Airways-Iberia entity IAG, and Germanwings, the Lufthansa subsidiary that has taken over many of its parent’s short-haul services.


Fernando Estrada, strategy and alliance director at Vueling, dismissed suggestions that the carrier may have to rethink its operations under new ownership. “We won’t change anything, because we’re profitable and growing at 20% per year. We will be very independent,” he says.


“We are operating point-to-point, not feeding a hub, which can contaminate the mother [airline]. But it strengthens our position in the market. We fly to Madrid and London but we’re not hubbing from them. I see synergies, but I don’t see a big conflict.”


Dirk Kokott, director of business development at Germanwings, asks: “Will you be allowed to [operate your existing strategy] when you take over a route that was served by Iberia?”


Germanwings could have a problem maintaining its identity, Estrada suggests. “You will be a mini-Lufthansa.”


Germanwings now operates all the European services that do not fly to and from Lufthansa’s Frankfurt and Munich hubs, using a 90-strong fleet made up of its own aircraft as well as Lufthansa equipment which is gradually being rebranded.


Kokott explains Lufthansa had spent a long time looking for a “better solution” for those services not touching its main hubs. Lufthansa’s short-haul operations lost €200 million ($257 million) last year.


The challenge for Germanwings was “to keep our low-cost DNA while harvesting the advantages of the group in areas such as purchasing,” he says. The carrier is tasked with breaking even by 2015, and he reveals that some fares on former Lufthansa routes may be higher than Germanwings had historically charged. >>

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