Category Archives: Budget airlines

Why don’t no frills airlines offer more cheap flights to Greece?

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I was asked on twitter by @Korb0s why there aren’t any Ryanair flights to Greece. The question could of course be extended to why there aren’t more cheap flights to Greece from all of the budget airlines, with Easyjet and Jet2 perhaps being the main exceptions. I narrowed down the 140 characted twitter answer to two words (airport monopoly), and said I’d give a bit more explanation later. So here are the key reasons:

  1. Airports monopoly. Greek airports operate on a monopoly basis, and to paraphrase Ryanair’s route development manager, ‘they wouldn’t know a commercial deal if it came up to them and slapped them in the face’. One of Ryanair’s biggest driving factors in developing new routes is the ability to secure the best possible deals out of the airports it wants to fly to. This can make or break a route decision just as much as whether or not they actually forecast demand to be there. If they get their sums wrong about demand, they can quickly drop the route, if they can’t screw a good deal out of the airports, they are stuck with paying high handling fees forever – that is the crux of the matter.
  2. Seasonality - no-frills airlines prefer to operate routes which have demand throughout the year. The market for flights to Greece has traditionally been dominated by charter companies, who offer packages during the summer season. Greece is not typically seen as a winter sun destination, and unlike destinations like Barcelona (Girona) or Granada, there aren’t any Greek airports which are close to ski resorts.
  3. Dispersal - when no-frills airlines have competed well against charter operators, they have opened up routes where they can put on a reasonable frequency of flights, and where a good range of resorts can be accessed from the destination airports. Apart from the capital Athens, Greek destinations are scattered around a plethora of islands, making no-frills flight routes to any one island less likely to be viable.
  4. Distance – a flight from London to Alicante is 914 miles, whereas a flight to Athens is 1,485 miles. This extra flying distance doesn’t just burn up a lot more fuel, it also means more crewing time, and more usage of the aircraft. For example, Easyjet’s 6:20 flight from Gatwick to Athens doesn’t arrive back into Gatwick until 14:20 – effectively half the day gone to service just one route. Sure, passengers have a higher perception of value for the longer routes, but it is still easier to juggle slots around two shorter routes than one longer one. At a regional level, Flybe have opened up a number of routes into various regional airports in France, but Greece would simply be out of the range of the Bombardier Q400 aircraft that they use on these routes – although flights to Athens from Birmingham using their Embraer 195 jets would seem to make reasonable sense.
  5. Ancilliary revenue – this is just a theory, but I would guess that as many Greek island destinations are fairly small, a large proportion of passengers use transfer buses to get to and from the resorts they are staying at. There is less benefit from having a hire car, and people who do might be more likely to rent a car just for the day. If this is the case, it means less chance of earning extra money for the airlines – but they should at least sell a few more sandwiches onboard their flights.

As always, this is just my tuppence, but I hope it gives a few insights into why there aren’t more flights to Greece from the UK. James

What does Warren Buffett’s train investment say about airlines?

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So, Warren Buffett has invested some $26 billion buying American freight operator BNSF, with news commentators hailing this as an ‘all-in’ bet on the future of the US economy. But there’s more to it than that – it is, of course, a huge leap of faith into the future of railways, even if lumping coal isn’t exactly as glamarous as swish new high speed train sets. But Buffett has never been about style over substance, and trains in Europe are usually associated with massive subsidies.

In typical long-term Buffett style, he has talked about growth potential of rail in the USA over the next 3 decades, and even if this investment is in freight railways, there is no doubt that passenger rail networks will also see substantial development over this period.

Compare this to Buffett’s attitudes towards airlines, after he lost 75% of his $385 million investment in US Airways back in 1995. He pointed out that the he didn’t think the US airline business had ever made money – and this was in an industry without the kind of state carrier subsidies which were common elsewhere in the world. Buffett is quoted as saying, in respect of the Wright brothers’ first flight:

“If there had been a capitalist down there, the guy would have shot down Wilbur. One small step for mankind, and one huge step for capitalism.”

Has anything changed in the airline industry since 1995? Well, there’s been plenty of deregulation across the pond, and plenty of former big names are no longer with us. In Europe, we have Ryanair’s Michael O’Leary echoing many of Buffett’s sentiments, describing the current situation facing European airlines as a ‘bloodbath’, and the ‘perfect storm’. Of course, Ryanair are one of the few airlines to buck the trend, whereas this morning’s announcement from Lufthansa that they can’t find a suitable bidder for bmi, and that consequently bmibaby are shedding jobs hardly comes as a surprise.

Despite all this, Warren hasn’t been put off from investing in flying alltogether, having ditched his own private jet, aka ‘The Indefensible’ back in 1998, in favour of buying private jet hire company NetJets.

7 Ways to Beat Air Passenger Duty Rises

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    Yesterday, Air Passenger Duty on short haul flights went up by £1, but much larger increases were imposed on long haul and premium service flights. These taxes are set to rise again in November 2010 – and even if a change of government looks likely, there is little to suggest that the Tories will reverse this policy.

    This list was due for a little bit more embellishment, which I’ll try and get round to later in the week, but in the meantime, here are the key suggestions:

    1. Take a Private Jet – you will pay no taxes at all this way.
    2. Let Michael O’Leary pay your taxes – can’t afford a private jet? Look out for Ryanair’s special offers when they pay the taxes for you.
    3. Island hop around Scotland – ‘public service obligation’ flights in the Scottish Highlands & Islands are exempt from duty – and the views are simply stunning.
    4. Take the ferry or Eurostar to Paris or Amsterdam, and fly long haul from there – or even hop over to any European hub on a budget flight, and then continue from there. APD stings you much harder on long haul flights.
    5. Offset the tax by saving on duty free, or not paying other airline hidden charges – ok, so the government sees air passengers as an easy target. Chill out, and enjoy some savings on duty free. The best deals might be at your destination – shop around to see, but even though there aren’t any duty free allowances on short haul flights to EU destinations, these aren’t the ones with the highest taxes. Why not get the best of both worlds and fly via Switzerland or Norway – short haul destinations which also have a duty free allowance. If you don’t have a Visa Electron card by now, then you really can’t whinge about air passenger duty if you are booking flights with a low cost carrier like Easyjet or Ryanair. The taxes aren’t usually avoidable, but the card handling fees always are.
    6. Go all the way by train- this is easier than you might think, and thanks to the new Eurostar links to the continent, you’d be amazed how far you can get in a day from London – and think how much more you see on the way. Don’t fancy a long journey home by train? At least the return flight won’t be taxed so badly, as APD is only levied on the outbound journey – Alistair hasn’t thought out a way of taxing people to come in to the UK yet, but don’t encourage him too much!
    7. Take the ferry to Morocco (from Gibraltar) – ok, so the ferry fare will cost you about as much as the tax you will save, but Gibraltar is a great place to land, and why not add a ferry trip to your African adventure?

    At last they admit it – flight taxes pay for bank bailouts

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    At long last, Chancellor Alistair Darling has said what we’ve known all along – that flight taxes (Air Passenger Duty) are used to sort out the dodgy banks, and nothing to do with the environment. Speaking to Northeast website The Journal last week, Darlin said:

    I am quite blunt about it, we need to raise money to pay for some of the things we have done. If unemployment goes up there is a cost obviously to the family, there is cost in increased benefits, Northern Rock has cost a lot of money.

    Now to be honest, no-one is going to step forward and offer their sympathy for the bankers, but many would still say that the bailouts had to be made in order to save the financial services industry. So, should airlines be made to suffer so another sector can survive?

    Well, Darling seems to think so:

    But if you think about it, what we are doing is putting a pound on to your average ticket, which about three quarters of people travel on. And you consider the cost of an air ticket, I don’t think a pound is that unreasonable.

    The problem of course is that it isn’t “just a pound” on the average flight ticket. Last year, air passenger duty was doubled overnight in a move which saw one of the few taxes to have been reduced under the Labour government get re-stealthed. To make matters worse and add insult to injury, taxes had to be collected on flights which were already paid for – as if the chancellor (and former transport minister) was more interested in act of vengeance than a fair tax. Of course, Mr Darling, as MP for Edinburgh Central, is a fully paid-up member of the “you shouldn’t fly but I will” brigade, and that’s long before we bring up the issue of MP’s expenses.

    Unlike some airlines and passengers, I don’t have a problem with air passengers paying their way through a ‘reasonable’ level of taxation – and I fully accept that the aviation industry must pay for its environmental costs. But let’s not forget that whereas motoring taxes are supposed to pay for the upkeep of the roads, usage of airports is already covered by separate airport handling fees levied by the (predominantly) private companies who run Britain’s airports.

    Environmental costs should be covered by a global carbon trading agreement, due to be discussed in Copenhagen next month. Of course there’s loads of other arguments about the benefits of switching passengers from short hop flights to high speed rail, but that’s for another time. Or maybe, if that’s where APD funds were being directed, the travelling public wouldn’t mind so much. Mr Darling, if you are reading this, that isn’t an excuse to double APD again on you’re next whim!

     

     

     

     

    Airlines put Heathrow’s Third Runway in the Dragon’s Den

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    And so to the final ‘dragon’ in my review of the arguments for and against Heathrow’s Third runway.

    If we just looked at the airlines serving Heathrow, then support for a third runway would be overwhelmingly positive. But no frills airlines such as Easyjet and Ryanair, who are being asked to pay increased landing charges at Gatwick and Stansted in order to help fund Heathrow’s infrastructure improvements, are less keen. As I haven’t yet mentioned the alternative High Speed Rail, perhaps this is the place to consider what ‘rail based airlines’ might think.

    Heathrow’s existing Tennants

    British Airways are unsurprisingly the most vocal in favour of a third runway at Heathrow, as they already benefit from having a massive hub operation in Terminal 5, which they want to expand by having extra runway capacity. In terms of the environmental damage caused by airlines, BA boss Willie Walsh was in New York recently, arguing that airlines across the world could achieve a 50% reduction in CO2 emmissions by 2050 – but many environmentalists are cynical about the industry’s ability to meet such targets, and even those that believe they are achievable do not consider that a 50% reduction is enough. So how does this relate to Heathrow, which is after all, just one airport out of several thousands worldwide which operate passenger flights, albeit the busiest one in terms of international passengers? The current government have made reductions in CO2 emmissions part of the conditions which would have to be met in order for Heathrow to gain approval. Obviously, this is all immaterial if the Conservatives stick with their policy to block an additional runway at Heathrow, but as Willie Walsh argued on Questiontime back in January, politicians in opposition can always play a completely different role once the enter government. At last week’s CIMTIG meeting, BAA’s director for Runway 3 said that “Conservative policy is about going after easy votes. As a transport policy, it is indefensible.”

    Virgin meanwhile are pinning their environmental credentials on a massive investment of ‘all Virgin profits for the next 10 years’ in alternative fuels. Clearly both of these airlines believe that the aviation industry can still grow and cut emmissions at the same time. BMI also support a third runway, although speculation is that they will have been snapped up by one of their larger rivals by the time it gets built!

    Non Heathrow based airlines

    Ryanair in particular have launched legal challenges against BAA over the fees they are charged at Stansted, and have repeatedly refused to pay passenger handling bills, as they claim they are being forced to payin advance for infrastructure which they will never actually use.

    High Speed Rail as an Alternative

    The Conservatives have said that they will spend £20 billion on a high speed rail line between London and Manchester, and that they will encourage more people to travel to Continental Europe by train, in order to reduce the demand for a third runway at Heathrow. However, as BAA management have pointed out, offering easier rail access to Heathrow will only end up making it far more attractive for customers from the North of England. Meanwhile, Eurostar already have a 75% market share for point to point travel between London and Paris and Brussels, so there is little that government policy could do to switch more people onto the trains, apart from ban these flights entirely – a move which would be very un-Conservative! Although there is potential to see Eurostar services extended to cities such as Cologne and Amsterdam, this is a commercial matter for Eurostar to decide, and there is very little that a UK government could do to influence this, when the track and station access needed to make this happen is in other EU countries.

    Verdict: Just as it goes without saying that most of Heathrow’s neighbours will be against further expansion, it can also be taken for granted that the main airlines using Heathrow would want to see it expand. But this misses out on the wider picture, especially as it is the no-frills airlines who are investing most heavily in new aircraft and new routes. It is therefore not a foregone conclusion to assume that the airline industry as a whole would say ‘we’re in’.

    Final score – some of the referee’s decisions may be controversial, but my verdict is 2-3 against.

    I’m waiting for my Electron Platinum Card

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    Reading through another airline forum, I have just seen another poster describe the Electron Debit Card, the budget flyer’s most flexible friend, as being ‘hard to get’.

    Nothing could be further from the truth! The Electron card was designed for people with little or no credit history, and as such can only be used in electronic terminals where authorisation is included with every transaction, so that the user does not become overdrawn. Naturally, this includes the online booking systems of the low cost airlines, who appreciate the lower handling charges this card attracts. Or, they just appreciate the opportunity to apply extra charges to everyone who doesn’t use an electron card – it doesn’t really matter which way you look at it, the fact is simple – if you want really cheap flights, you must have an Electron Card.

    A few years ago, I signed up to the American Express Platinum card, which claimed to offer all kinds of rewards to the frequent traveller. I found that I used very few of them, and when it came to claiming on their insurance, they were a total nightmare to deal with – but that piece of plastic certainly shined nicely in my wallet (and it stayed in good condition too, as so many retailers don’t take Amex).  The reality for me is that even though I do travel quite a bit through running this website, most of my flights are within Europe, and as I want to use my local airports as much as possible, most of my flights are from Birmingham or East Midlands, and they therefore tend to be with airlines which don’t reward loyalty with air miles or fancy points.

    With the new breed of no frills airline, who needs loyalty points anyway? Why should I need to fly around the world three times to collect enough points for a return trip to Scotland, when I’ve just got back from a wonderful trip to Italy which set me back a mere £9 for the flight, all-in?

    As I’ve said before, anyone can get an Electron Card, and you don’t need an MP’s expense account to qualify. Banks aren’t particularly keen to push the basic accounts which come with Electron cards as they aren’t going to make much profit from them, but they won’t stop you from opening the account. I use a Cashminder account from the Co-op bank, which can be topped up in any Post Office. I might not be able to get an Electron Platinum Card just yet, but when it comes to the no frills airlines, putting snobbery to one side is the way forward.

    How to avoid airline credit card charge rip offs

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    Have you been annoyed by airlines charging you up to £9.50 per person for a return flight booking, just for the privilege of handing over your own money to them? Do you know that if you fly with Aer Lingus, they add an £8 handling fee towards the end of the booking fee, but that there is a way of not having to pay this?

    Avoiding card charge rip offs

    The answer is simple – you just have to have the right piece of plastic:

    The Visa Electron Card

    Ironically, this card was previously associated with basic current accounts for people with a poor credit history. Most current accounts come with Visa Debit of Maestro Cards, and these can still attract the same high fees as paying by credit card. Although Easyjet charges more to pay by credit card, both Ryanair and Aer Lingus charge the same rate, regardless of how you pay – except if you use a Visa Electron card.

    Fortunately, you don’t need to go round destroying your credit history in order to get a Visa Electron card. All you need to do is have an account with a bank which will issue you one. Ask you current account provider if they can do this. If not, we would recommend opening up a simple Cashminder account with the Co-operative bank. This can be topped up at any post office, so you don’t need to worry about whether or not you have a Co-op branch close to you. The account is even marketed as coming with no frills (just like the airlines) and no fuss (not like any airline we know!).

    Once you have opened up one of these accounts, you just need to top it up each time you want to book a no frills flight – in much the same way that you might do for a pay as you go mobile. So we now have pay as you fly – it might be a bit more hassle than using your regular credit card, but it will cost you much less in the long run.