Low-Cost Airline Craze Hits Europe and Asia

Air Line Pilot, October 2004, p.34

European and Asian low-cost airlines are springing up at an impressive rate in a race to serve new and potentially lucrative markets. The current growth has come about in part because of the lifting of previously restrictive limitations on air carrier operations. That’s the good news. The bad news is that this growth spurt may come with a terrible price for European and Asian legacy airlines and their pilots.

"The airline industry in Europe and Asia is much the same now as it was in the United States during the early stages of airline deregulation," says Capt. Paul Rice, the Association’s vice-president-administration/secretary and ALPA’s director to the International Federation of Air Line Pilots Associations.

"Many of the growing pains that they are experiencing are very similar to what we went through after 1978. The situation is fraught with all sorts of potential problems for European and Asian airline pilots."

Until recently, Eastern European flag carriers were protected by long-standing regulations limiting flight frequencies and fares. However, with the European Union’s recent addition of 10 new member countries, including 8 formerly in the USSR, these markets are now open to any EU carrier.

The elimination of similarly restrictive policies in Asia has also opened new markets there as the governments of Malaysia, Thailand, Indonesia, and Singapore recently began granting landing rights to encourage tourism and business travel.

But while airlines may benefit from this expansion, the ability of the carriers to operate into these new markets may prove detrimental for pilots. In Europe, for instance, regulatory disparities existing between some countries have proven difficult to reconcile. A case in point is the recent, but so far unsuccessful, effort by the EU to liberalize flight-time limitations to standards that many pilots believe are unsafe.

Another issue for pilots is the possibility of airlines moving their headquarters to countries where they can operate at a lower cost—and under less restrictive regulations. The prospect threatens labor, social stability, safety, and security protections for many airline pilots.

Airlines on both continents have been working to decrease operational costs. But the chance to expand into fresh markets promises the possibility of economic growth, which has eluded many airlines that have been hit hard by fierce competition and the inability to raise fares.

Low-cost carriers have taken advantage of the downturn in the airline industry in recent years, which has produced a glut of aircraft and available pilots. And low-cost carriers have in the past faced a dearth of slots at many airports.

EasyJet, which already serves many Eastern European destinations including Ljubljana and Budapest, recently announced that it would add flights to Warsaw and Krakow. And Air Polonia, Wizz, and SkyEurope have begun operating into Gdansk and Bratislava.

Ryanair, which had earlier said that it had no immediate plans to expand into Eastern Europe, recently announced that it would introduce service to Riga. A one-way ticket from London to Riga on Ryanair is expected to cost approximately $7.35, plus about $30 in taxes.

The airline, headed by flamboyant chief executive Michael O’Leary, says that Ryanair hopes to sell 300,000 tickets on the Riga routes in the first year of service.

In Asia, Indonesia’s Lion Air has been expanding rapidly, adding to its fleet of Boeing 737-400s and MD-82s. Singapore’s Valuair, which flies to Bangkok, Hong Kong, and Jakarta, has developed campaigns designed to capture market share such as offering female-only shopping excursions. Recent-entrant Tiger Airways, a Singapore Airlines affiliate, is planning to serve as many as 5 to 10 destinations within 4 hours of Singapore. And Virgin Airways CEO Richard Branson hopes to join the fray with low-cost airlines in both India and China.

IFALPA and its member pilots unions will continue to monitor these European and Asian transformations to ensure that airline pilots are protected and that current carriers are not mauled by the growing herd of new-entrant, low-cost airlines.