EUROCONTROL Low-Cost Carrier Market Update September 2005

EUROCONTROL
Low-Cost Carrier
Market Update
September 2005

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EUROCONTROL/STATFOR/Doc149
v1.0
13/9/05
EUROCONTROL Low-Cost Carrier Market Update

Summary:

The first six months of 2005 have seen 33% more low-cost flight movements in Europe than 12 months
before. By July 2005, low-cost carriers were operating more than 3,500 movements per day (more than
13% of all flight movements). Through both re-branding and through organic growth, the low-cost carriers
added an extra 2.8% percentage points to their market share and contributed 70% of all new flights in the
first half of 2005.

Some individual States have seen low-cost market share jump by more than 5 percentage points but
others have lost market share. A 2 percentage point increase is the average.

Low-cost carriers increasingly use secondary airports. The United Kingdom airports have the largest
share of all low-cost movements, but this strength is decreasing.

In the top 10 total country-pair flows in Europe the low-cost carriers have the majority of flights in only one
flow between United Kingdom and Spain. Six of the top 10 low-cost country-pair flows involve the United
Kingdom, but Ireland and Slovakia are the national markets where low-cost carriers have the biggest
share of the local market.

The number of low-cost airlines is 51 up from 47 12 months ago.

16 %
8000
Low-cost market share
14 %
7000
(left-hand scale)
RA
12 %
6000
RA
S
S
E
n
in E
i
s
10 %
5000
ent
/
day
m
s
e
v
ent
o
8 %
4000
m
e
v
R m
o
F
Low-cost traffic
I
of
6 %
(right-hand scale)
3000
R m
e
F
t
I
har
os
c
t
s
4 %
2000
os
c
Low-
Low-
2 %
1000
0 % Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
0
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
-
9
-
9
-
9
-
9
-
9
-
9
-
9
-
9
-
9
-
0
-
0
-
0
-
0
-
0
-
0
1
2
3
4
5
6
7
8
9
0
1
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3
4
5
© EUROCONTROL 2005. Earlier years are estimated from data for a smaller geographical region.



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EUROCONTROL Low-Cost Carrier Market Update
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1. INTRODUCTION
The Statistics and Forecast (STATFOR) Service of EUROCONTROL provides routine and on-demand air
traffic statistics, forecasts and market analyses to internal and external EUROCONTROL stakeholders.
The market analyses cover a wide range of topics of common interest to the air traffic industry, and draw
on the EUROCONTROL archives of flight statistics.
This Low-cost Market Update is produced twice per year to present an overview of the situation and
evolution of the low-cost market.
2. TERMINOLOGY
There is no single best definition of “low-cost” (or “no frills”). The list of airlines considered in this update
as “low-cost” is detailed in the companion Low-cost Airlines Panel v3.01. The panel is revised each
semester. In this document “traditional” is used as the opposite of “low-cost”.
There are three dynamics influencing the growth of the low-cost market share
• Organic Growth: new low-cost flights created by existing or new low-cost airlines in routes where
the demand was higher than the previous offer.
o
Substitution: sometimes organic growth by low-cost carriers is coupled with reduction in
service by traditional carriers. This substitution effect can produce change in market share for
limited change in absolute number of flights.
• Re-branding: flights that were previously operated according to a traditional model but the airline
changed it to a low-cost model. This can produce substantial change in market share with little
change in the total number of flights.


1 Low-cost Panel V3, EUROCONTROL, STATFOR\Doc\150 Low-cost Panel Version 3, 13/09/05
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3.
MARKET SHARE IN EUROPE
The first six months of 2005 have seen 33% more low-cost flight movements in Europe than 12
months before. By July 2005, low-cost carriers were operating more than 3,500 movements per
day (more than 13% of all flight movements). Through both re-branding and through organic
growth, the low-cost carriers added an extra 2.8% percentage points to the low-cost market share
and contributed 70% of all new flights in the first half of 2005.
Since the last low-cost update, the market share of this sector has jumped, reaching an average of 13.1%
over the first six months of 2005. See Figure 1 and Figure 2. There are two reasons:
• Firstly there was a significant amount of re-branding in late 2004 as more airlines moved more of
their operations to a low-cost model. This was picked up in the new low-cost panel (v3) and shows
as a jump of 1.7% in the January 2005 low-cost market share which in fact occurred at various times
in the previous 6 months.2
• Since then, the sector has been growing strongly, with a 6 months gain of a further 1.1% percentage
points droved by organic growth. See Figure 1.
In fact, in terms of the absolute number of additional movements, the growth has been as strong in the
last 6 months as at any time. The difference between the average daily movements at the beginning and
at the end of the semester is a record increase of 1038 daily movements (see Figure 1). The highest
value of the low-cost market share was during May 2005 with 13.8%.
Figure 1. Low-cost in Europe is growing strongly again in 2005.
16 %
8000
Low-cost market share
14 %
7000
(left-hand scale)
RA
12 %
6000
RA
S
S
E
n
in E
i
s
10 %
5000
ent
/
day
m
s
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v
ent
o
8 %
4000
m
e
v
R m
o
F
Low-cost traffic
I
of
6 %
(right-hand scale)
3000
R m
e
F
t
I
har
os
c
t
s
4 %
2000
os
c
Low-
Low-
2 %
1000
0 % Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
Ja
0
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
-
9
-
9
-
9
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9
-
9
-
9
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9
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9
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9
-
0
-
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-
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-
0
-
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
© EUROCONTROL 2005. Earlier years are estimated from data for a smaller geographical region.

Figure 1 also shows how the rapid rate of growth in movements in 2002 and 2003 meant there was little
seasonality: January had a similar number of movements to the previous July. This is far from true for
traditional carriers. If 2005 follows this pattern then the market share will climb further in the second
semester.
Figure 2 compares the first semester of 2005 with the same period in 2004, showing how average market
share has jumped from 10.3% to 13.1%. Figure 3 expands on Figure 2 to show the same information for
a number of semesters, compared to 12 months before. So for example, in the first half of 2003,
traditional carriers operated 328 movements/day fewer than in the first semester of 2002.

2 This jump occurs because it is difficult to date exactly the continuous process of re-branding. It has the distinct advantage that the
contribution of re-branding to overall growth is clearer.
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It is clear from Figure 3 how the low-cost carriers continue to provide a significant part of the growth of
total traffic.




Figure 2. Compared with the 1st semester 2004, the 1st semester of 2005 registers an increase of
2.8 percentage points in low-cost market share


Average Daily Movements


LCC
Other
Total
LCC Market Share
Jan-Jun 2004
2,386 20,704
23,089
10.3%
Jan-Jun 2005
3,182 21,069
24,251
13.1%
Movements Added
796
366
1,162

(+33%)
(+2%)
(+5%)



Figure 3. The low-cost airlines were responsible for two thirds of all movements added during the
1st semester 2005.
2000
14%
y
12%
1500
r da
A
10%
A pe
i
n

ESR
1000
e
8%
ar
s
in ESR
Sh
e
nt
et
500
6%
a
rk
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m

m
o
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t
M
4%
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R
0
L
o
w
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w
N
2%
2003H1
2003H2
2004H1
2004H2
2005H1
-500
0%
Semester
LC mv ts
Traditional mv ts
LC Market Share

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4.
NATIONAL MARKET SHARES
Some individual States have seen low-cost market share jump by more than 5% points but others
have lost market share. A 2 percentage point increase is the average.
Annex 1 gives the market share by State or region, both in terms of total IFR movements in the airspace
and excluding overflights (so just showing locally-generated traffic). These are also illustrated in maps in
Figure 5 and Figure 6, respectively.
Figure 4. Almost half of States are seeing significant growth3.
High Growth
Average Growth
Maintain Share
Lose Share
[share growth > 5%]
[share growth between 1% and 5%]
[share growth between 0% and 1%]
[share growth < 0%]
Hungary, Latvia, Poland,
Canary Islands, Slovakia,
Norway, Italy, Finland,
Denmark,
Turkey, FYROM, Spain,
Slovenia, United Kingdom,
France, Switzerland, Serbia
Belgium/Luxembourg
Germany, Estonia and
Croatia, Austria, Greece,
and Montenegro, Romania
Netherlands
Ireland, Malta, Czech
Republic, Lisbon FIR and
Sweden

Reviewing briefly some representative examples of local market share (Figure 6)
• High
Growth
o
Spain, Germany, Netherlands and Turkey caused by re-branded Low-cost carriers.
o
Latvia jumped from a 0% share to a 13%. Both Ryanair and Easyjet start operating to Latvia.
o Hungary and Poland continue the trend already observed in the previous semesters mainly
driven by organic growth.
• Average
Growth
o
Slovakia has now the second highest low-cost market share of all States (37% immediately
after the 39% of Ireland).
o
Lisbon FIR reached the 10% threshold.

The median growth of all States and regions is around 2% points which corroborates the expectations of
the base scenario of the STATFOR Medium-Term Forecast 2005-20114.

3 Excluding overflights. States with less than 2 movements/day are not shown.
4 Medium-Term Forecast Flight Movements 2005-2011 Volume 1, EUROCONTROL, STATFOR\Doc\110 MTF Report Feb05,
28/02/05
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Figure 5. The number of countries with low-cost share above 15% of the total IFR movements
increased from 2 to 10 (compared to 12 months before)

Figure 6. Ireland and Slovakia remain the two States with highest local share of local low-cost
movements.

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5. AIRPORTS
Low-cost carriers increasingly use secondary airports. The United Kingdom airports have
significant share of all low-cost movements, but this strength is decreasing.
Figure 7 compares the distribution of the low-cost movements amongst airports during the 1st semesters
of 2004 and 2005. The comparison shows that between these two periods the proportion of low-cost
movements using the major hubs5 reduced by 2% points. In the first half of 2005 the only two hubs that
have a significant low-cost activity (> 50 daily low-cost arrivals) are Amsterdam and Munich.



Figure 7. Major hubs5 are losing their share of low-cost movements
1st Semester 2004
1st Semester 2005
Hubs
Hubs
10%
12%
Others
Others
88%
90%







5 The list of hubs is based on percentage of passengers transiting in 1997. The list comprises: Brussels International, Frankfurt
Main, Munich, London Heathrow, Amsterdam, Copenhagen Kastrup, Madrid, Paris Charles de Gaulle, Milano Malpensa, Milano
Linate, Roma Fiumicino, Vienna and Zurich.
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