To those who are critical of AC starting a LCC

Discussion in 'Other Airlines | Europe' started by guinnessxyz, May 20, 2013.  |  Print Topic

  1. http://www.bbc.co.uk/news/business-22593246

    Chief executive Michael O'Leary said: "Delivering a 13% increase in profits and 5% traffic growth despite high oil prices during a European recession is testimony to the strength of Ryanair's ultra-low cost model."
    But he warned that growth would be slower in the 2013-14 financial year at Europe's largest budget airline, thanks to rising oil prices and "unjustified higher Eurocontrol and Spanish airport charges".
    The company is forecasting net profits in the range of 570m to 600m euros for the coming year.
    In March, Ryanair placed an order with Boeing for 175 planes worth £10.3bn ($15.6bn) to be delivered between 2014 and 2018.
    The deal will increase its fleet by a third to 400 planes.
     
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  2. avflyer
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    avflyer Silver Member

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    The Ryan Air market and opportunity are completely different from Rouge. An LCC is fine, but an airline within an airline rarely works (with the noted exception of some Asian operations). Top it off, Calvin isn't nearly the manager or the publicity machine that O'Leary is.

    Further I think AC has already made it's first error. Instead of marketing Rouge as a completely separate entity, it is being trotted out alongside AC on their website etc. Marketing 101 says, if you are going to do product differentiation, then emphasize those differences. If you don't do that, then why do it at all?

    I'm not critical, I just am of the opinion it won't work.

    Tick...tock.
     
  3. milchap
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    milchap Gold Member

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    Agree with your logic.
     
  4. avflyer
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    Thank you!
     
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  5. Wandering Aramean
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    Wandering Aramean Gold Member

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    DItto.

    It would also be interesting to recount the stories of all the successful long-haul LCCs. Actually, it would be incredibly quick as there aren't any. Pretending that ~1500 mile hops around Europe are the same as ~4000+ mile flights across the Atlantic is going to lead to unfortunate results, I'd say.
     
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  6. canucklehead
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    +1
     
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  7. Seacarl
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    Seacarl Gold Member

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    Agreed. On long-haul it seems proven that tranporting a mix of cargo, cost-sensitive leisure travelers, and higher yield premium pax is the most profitable. Not only is the history of long-haul LCCs short, the history of premium-only flights is equally short. Perhaps it is because the three revenue streams have uncorrelated cycles means that the average revenue is better with the mix than just one revenue stream.

    Then why do LCCs work on shorter trips? Perhaps because there you need to be focused on one mission, and adjust your routes by season?
     
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  8. His name is Calin not Clavin and I'm sure they spent a air amount on market studies to see where Rouge fits in the constellation. Don't forget operational and maintenance costs come into view when designing a new venture like that. I would suggest. This will get more legs than your tick tock timing assumes.
     
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  9. They are also focusing on the Caribbean with this product as well as certain European.

    let me ask another question. Why are others successful being charter/LCC transatl carriers. Air transat has been around for years. Sunwing is another succesful charter/LCC.
    Why is WJA getting into the same market?

    Another thing that people don't really understand about all this separation within large airlines. AC already operates AC express which is run by Chorus aviation. Their Toronto Island flights are operated by another carrier. this is all about separation of union agreements and getting another product out there.
     
  10. tcook052
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    tcook052 Silver Member

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    Yeah, AC has spent lots of time studying this therefore it can't fail. After all they studied a new res. system with ITA for years and look how well that turned out. (AC wrote off $67M in '09 after the system never made it off the drawing board.)

    Exactly and it's folly to compare the two.
     
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  11. Wandering Aramean
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    Wandering Aramean Gold Member

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    Because that's all they do. They rarely operate with daily service on routes (something Rouge is trying to do) and they are generally focused on package deals (something Rouge does not appear as focused on), not individual ticket-only flight sales.

    Separating the operating costs - the Unions, as you note - is different from offering a separate product. Just getting the costs lower doesn't solve the problems if you're treating the flights as a different product but not really marketing them differently.

    And even the Caribbean markets involved are >1500 miles from YYZ.
     
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  12. JetsettingEric
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    JetsettingEric Silver Member

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    Now that tango fares are gone? can we just dedicate a fare class as rouge and get on with it?

    Even delta was on the music bandwagon with Song.
     
  13. HaveMilesWillTravel
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    I assume United did a fair amount of market studies before rolling out Ted. And Delta with Song. I am sure Branson's people did a lot of research before launching VX. If I had a penny for every time a company launched a new initiative after a lot of market studies just to see it then fail, I could probably launch my own airline by now :)

    That said, I am not an arm chair CEO (or at least trying to). We'll sooner or later see how it turns out for AC.
     
  14. downhillcrasher

    downhillcrasher Gold Member

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    I don't know, Air Asia X comes to mind. But yeah, AC's offering is not Air Asia X.
     
  15. The very fact both major players in Canada are going with separate LCC divisions suggests there is a market. How they differentiate these from their mainline remains to be seen.

    As for WA's comment about daily flights, that's not quite true. Some are seasonally daily and some will be weekend bumps in capacity for snow birds.
     
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  16. slalom

    slalom Silver Member

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    Rouge is only targeting leisure travel though isn't it? I though all the initial destinations are Europe and the Caribbean.
     
  17. avflyer
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    To answer the "shorter trip question" I would say the secret sauce there is turnaround times. Getting a fresh batch of paying customers on board and taking them where they want to go and turning the aircraft in less than 30 minutes (as Southwest brags they can do) maximizes ASMs for the LCCs. I expect to hear from Seth on this one.
     

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