Beware, the LCCs are coming
19 / 11 / 2009
AFTER what has happened to the dynamics of the passenger airline business, the announcement by easyJet that it is launching a pilot air cargo project should be enough to send shivers down the spines of legacy airline cargo directors.The biggest European low-cost carriers (LCCs), Ryanair and easyJet, have traditionally shied away from any involvement in cargo. They perceived the risk to their tight turn-around schedules as too great and adding complexity to their product offering is anathema to them.However, after a period of long consideration, easyJet has broken rank and announced a pilot project that, if successful, will be rapidly expanded across its route network.
easyJet’s move follows the aggressive cargo expansion policy followed by Asia’s principle LCC Air Asia and its long-haul brand Air Asia X.Air Asia believes it has opened a new battlefront on the cargo market with bold plans to create a pricing strategy that mirrors or even exceeds its campaign to offer the cheapest passenger fares to the market.Air Asia X is aggressively marketing its long-haul capacity and claims it has the ability and dynamism to create a real impact in general cargo by introducing a raft of innovative products and processes.It has been reported that freight rates from Kuala Lumpur to Europe would be priced at a 30 per cent discount to the average market price and the airline expects to be able to eventually undercut traditional airlines by similar amounts on other trade lanes.Air Asia now has ambitious plans to double the cargo revenue contribution from the two airlines to around eight per cent of total revenue within three years. With passenger revenue to rise dramatically during this period, this represents a massive increase in tonnage.Although not a long-haul carrier, the threat posed by easyJet to European legacy carriers’ vital express, postal and newspaper contracts, is obvious. If expanded across its 100-strong destination network, easyJet would have a formidable product at what would undoubtedly be market-leading prices.A third-party cargo company has been contracted to run the cargo pilot that was due to commence as Air Cargo News went to press.The airline’s chief operating officer, Cor Vrieswijk, told local press at the Dubai Airshow that: “The airline will carry cargo on several routes out of Gatwick, London. It’s going to be a pilot. It’s going to be for small cargo and we don’t know whether it’s going to be successful.”He added that at the end of the trial period the airline would assess cargo’s contribution to the revenue and see if the passenger operations were affected.Air Cargo News has learned that the third party company has developed a range of unique products and technology to meet easyJet’s requirements and is confident of success.As in its passenger business pricing will be key to the easyJet product. “Of course prices are competitive. The other competitive aspect is that easyJet has a very dense network in Europe,” said Vrieswijk.Legacy airlines were very slow in reacting to the threat of LCCs in the passenger market and of the integrators in the US. Time will tell whether heads of cargo have the strategy or foresight to fight off the LCCs in the cargo sector.