MEETING IN THE MIDDLE

Budget and legacy carriers form an innovative interlining strategy

Not so long ago, the idea that a full-service carrier would rely on a no-frills airline to provide it with passengers would have been laughable. The difference in service standards between, say, British Airways on the one hand and Ryanair on the other are as different as chalk and cheese.

However, over the past few years the service gap between carriers such as BA and Lufthansa compared with the likes of Ryanair and Easyjet has narrowed. All airlines are anxious to keep cutting costs while continuing to attract passengers.

As a result, and with a fair amount of secrecy, discussions are taking place between a number of full-service airlines and their lowcost counterparts as to how they can benefit one another. That’s because Ryanair and its ilk offer a cheaper way to feed short-haul passengers on to the conventional carriers’ long-haul networks.

Traditional carriers either lose money on European feeders or break even, if lucky. At the same time, the more efficient low-cost airlines not only make money but also manage profitably to serve many secondary points in mainland Europe, Scandinavia and the Nordic countries. Taken together, these smaller airports can feed many thousands of new passengers to the hubs of long-haul airlines.

Both parties need each other. The low-cost carriers’ business carriers’ business models are built on continual growth, while legacy carriers such as BA, Lufthansa and Air France seek to protect their market share from rivals such as Turkish Airlines and those based in the Gulf, which are all moving into Europe’s secondary points.

Ryanair and Aer Lingus have been the most open about discussions. Aer Lingus chief operating officer Mike Rutter confirmed to the Irish Independent that his carrier and Ryanair had talked about operating a codeshare arrangement. This would feed Ryanair passengers on to Aer Lingus’s transatlantic flights.

Aer Lingus will need more transfer passengers to fill seats on the many new transatlantic routes it intends to operate in the coming years. Three routes alone – from Dublin to Newark, Los Angeles and Hartford in Connecticut – will start next year.

Rutter said: “I think it would be a good deal for both airlines, providing the economics are right. It opens up the places that from an Aer Lingus perspective we wouldn’t get to serve in the long run. So, for example, another airline might have a great network in Poland [or] in the Baltic states – [where] we don’t have an extensive network.”

Aer Lingus chief executive Stephen Kavanagh told Reuters: “We are looking at opportunities to extend our reach. There are markets that Ryanair serves but we don’t. So we are having those discussions about what is currently happening on an ad hoc basis. If we get the right price in terms of the capacity from Ryanair, then we would be very interested in doing business. If the commercial agreements are reached in time, then summer 2016 is a possibility.”

Ryanair chief executive Michael O’Leary has also been in talks with his Lufthansa counterpart, Carsten Spohr, about feeding short-haul passengers on to Lufthansa’s long-haul routes, as reported by Berlin’s Der Tagesspigel. According to reports, O’Leary has also spoken with TAP Portugal, Norwegian’s long-haul

division and Virgin Atlantic. The last of these is disadvantaged by having no European feeder flights of its own.

To this end, Ryanair has begun extending its presence into main airports while maintaining its secondary ones. Already established at Milan Malpensa, Rome Fiumicino and Brussels, it has just moved into Amsterdam Schiphol and wants to expand into Paris CDG, Dusseldorf and Munich next year.

The budget carrier has ambitious expansion plans for Germany, where it wants to increase its market share from 4 per cent to 20 per cent by 2020, and replace Air Berlin as Germany’s second airline, hence the interest in feeding Lufthansa.

Norwegian is another carrier, albeit a low-cost one, attempting to link its schedules with those of Ryanair at its bases around Europe. That was confirmed by its chief executive, Bjorn Kjos, and doubtless relates to Norwegian’s expansion at Cork in 2016 – it plans to launch flights to Boston in May and New York in 2017.

Easyjet has also been in discussions about providing feeder flights. The airline’s chief executive, Carolyn McCall, said: “We’ve been looking at it for some time and we are in discussion with other airlines. The thing that has happened here is that for legacy [carriers] to do short-haul Europe it is prohibitively expensive. They are losing a lot of money in Europe and that is why they are interested in talking to us.”

In September, news emerged from Germany that Lufthansa’s Spohr had been talking to Easyjet about feeding passengers from one carrier to the other. At the time, Easyjet would not comment, but a month later it told Business Traveller: “We are always looking at new opportunities to build [our] network, but without adding cost or complexity to our business.”

Whatever they might say, budget carriers are already interlining passengers, either between themselves or other carriers, in a limited way. Take the new flight transfer scheme at Gatwick promoted under “Gatwick Connects”. Here, Easyjet works with Wow Air and Norwegian. The programme is promoted by Gatwick and bookings are made through Skyscanner.

The main advantage is the peace of mind that passengers will be looked after if a connection is lost. But this comes at a price. Unlike proper interlining procedures, passengers using Gatwick Connects have to pay a fee of £27.50 for a one-way trip.

Eurowings (formerly Germanwings) has flight transfer facilities for passengers passing through its main German airports. Now it has emerged that ANA (an exacting airline, like all Japanese carriers) has agreed to interline with the carrier for flights between Tokyo and Dusseldorf via hubs such as London Heathrow.

In future, conventional carriers will likely continue to operate key feeder flights, but it will be the low-cost ones that may end up carrying passengers to and from secondary airports. Whatever happens, do not expect changes overnight.