Inside Europe’s Low-Cost Airline Competition

Low-cost airlines are part of the aviation market on every continent. The model of large flag carriers dominating connections is long gone. In Europe, Ryanair is now the largest airline (by passenger number), and low-cost carriers make up several more of the top 10. This article takes a short look at the growth of low-cost in Europe, the current top competitors, and whether there is room for more.

Wizz Air, Ryanair, Easyjet
Ryanair, easyJet, and WizzAir are the three largest European low-cost airlines. Photo: Getty Images

The start of low-cost

There have been many defining moments and significant changes, as aviation has grown over the years since the first flights. The transoceanic crossing was an early milestone, the introduction of the jet engine changed aircraft forever, and larger and later more efficient aircraft have shifted the possibilities and economics of flying. The introduction of new, low-cost airlines certainly belongs in this list of changing events.

Low-cost entered the US market in 1971 with Southwest Airlines, but it was not until deregulation in 1978 that competition really picked up. New airlines could compete on legacy airline routes, using a budget-friendly fare policy to attract customers. The collapse of several legacy carriers (such as Pan Am and Eastern Air Lines) was due in part to this rising competition.

Low-cost did not really enter Europe until the mid-1980s, with Ryanair the first airline. Many more followed, with European Union deregulation allowing airlines to operate more easily across countries.

Ryanair ATR-42
An early Ryanair ATR-42 aircraft (seen here in 1991). Photo: Torsten Maiwald via Wikimedia

Taking around 30% of the market

The model of low-cost carriers has been very much to compete on price. Point to point fares with limited inclusions changed the market as the ‘no frills’ concept gained acceptance and market share. Of course, as well as bringing in low-cost fares for passengers, these airlines also introduced passengers to the idea of paying extra for all services, from seats and bags to changes and cancellations. This reliance on ancillary revenues has continued to grow and remains a key focus for low-cost airlines.

Some interesting analysis by Statista (using data from CAPA and others) shows the market share achieved by low-cost carriers in Europe. Between 2009 and 2019, it has risen from 23.9% to 33.1% (peaking in 2017 at 35.5%).

Legacy airlines continue to compete

This shows that despite the significant expansion of some airlines, it is difficult for low-cost carriers to compete against the ‘legacy’ airlines. Most of the market is dominated by three European airline group (IAG, Air France-KLM, Lufthansa Group), and data from IATA supports them having around a 70% market share.

Lufthansa group tails
The Lufthansa Group is the largest in Europe. Photo: Lufthansa Group

Legacy airlines have been quick to adapt to the growing competition. While they cannot match the extensive network and point to point operations of airlines such as Ryanair, they have changed marketing and pricing strategies. Most of these airlines, for example, also offer options for ‘no frills’ fares, with unbundled fares becoming more common.  And with more of their revenue coming in from long-haul flights, they can experiment with short-haul routes.

The largest airlines in Europe

So, which are the main airlines competing for this 30% of the European market. The largest airlines in Europe as of the end of 2019, based on data from CAPA Center for Aviation are as follows (the low-cost airlines are highlighted):

  1. Ryanair (152 million passengers)
  2. Lufthansa Group (145 million)
  3. IAG (118.3 million)
  4. Air France-KLM Group (104 million)
  5. easyJet (97 million)
  6. Turkish Airlines (74 million)
  7. Aeroflot (61 million)
  8. Wizz Air (40 million)
  9. Norwegian (36 million)
  10. Pegasus (30 million)

Ryanair is the largest airline in Europe

In the top place is Ryanair, carrying 152 million passengers. Ryanair started in 1985 offering flights from Ireland to London (using Luton airport to avoid the congestion and fees of the main airports, a strategy soon followed by most low-cost airlines). It soon expanded across Ireland and the UK and into Europe from 1997.

Getty Ryanair desk
Ryanair has built an impressive route network from multiple bases. Photo: Getty Images

Today, the airline operates across Europe, with (according to Ryanair) an impressive 82 bases covering 200 cities in 40 countries. It competes with pretty much every other major airline in Europe (both low-cost and full-service). It also dropped its single airline strategy in 2017 and has introduced several subsidiaries and different brands as it has expanded.

Ryanair, Lufthansa, State Aid
Ryanair has beaten Luftansa to become the largest airline in Europe. Photo: Getty Images

easyJet is a clear second

easyJet comes in fourth place overall, behind the three traditional airline groups, but is very secure as the second-largest low-cost airline.

It has followed a similar path to Ryanair, starting in the UK in 1995 and expanding across Europe following deregulation of the market. It used more early acquisitions to fuel its growth. Today it operates flights from 28 bases (having closed three UK bases in 2020 with the slowdown).

Unlike Ryanair (which operates predominately the Boeing 737 variants), easyJet is an all-Airbus airline, operating the A320 family. Interestingly, it actually started with just the 737 and went on to operate 86 of them. This focus on a single type fleet is a major competitive advantage of most low-cost carriers. Southwest started it with the 737, and many airlines benefit from reduced costs and easier servicing and scheduling than the legacy carriers face with their more varied fleets.

Easyjet carbon neutral getty images
easyJet stands firm as the second-largest low-cost airline. Photo: Getty Images

Wizz Air shows the fastest expansion

Hungarian airline Wizz Air follows a different competitive model than Ryanair and easyJet, focussing on connections between Eastern and Western Europe. It was founded only in 2004 and has grown dramatically since then. Like easyJet, it operates an all-Airbus fleet.

The fast expansion continues today. In 2019, it grew an impressive 17.7% in passenger numbers (overtaking Norweigan that year). For comparison, Ryanair grew 9.5%, and easyJet grew by 5.9%.

And it has plans to open a subsidiary in Abu Dhabi, although this has been delayed during the pandemic.

Wizz Air Airbus A320
Wizzair’s purple livery has become more common very quickly. Photo: Getty Images

Norwegian

Norwegian remains the fifth largest low-cost airline, despite a difficult few years. It’s passenger volume decreased by 2.5% in 2019. As of 2020, it is in a troubled financial state, although a rescue plan was agreed upon in December.

Norwegian Air Shuttle was formed in 1993 and focussed for many years on domestic and regional connections from Norway and Scandinavia. It now operates several subsidiaries, including in the UK.  It has also offered long-haul flights to the US, South American, and Asia with a widebody Boeing 787 fleet. How much of this returns post-2020 remains to be seen, but it is, of course, an interesting area of low-cost airline expansion.

Norwegian selling two 787s to Neos Air
Norwegian operates its long-haul network using Boeing 787 aircraft. Photo: Getty Images

Is there room for any more?

While these largest airlines are well established and have a solid market share, many other airlines have come and gone. We have recently seen the collapse of WOW Air and Thomas Cook Airlines, amongst several others. Norwegian has avoided collapse but remains in a difficult financial situation.

Simple Flying looked in late 2019 at the idea that the market may have peaked, with support from several industry voices. There is only so far you can spread the 30% they take up. The challenge for low-cost airlines is that margins are so small. They are increasingly relying on ancillary revenues but have seen difficulties there too.

Coming out of the slowdown in 2020, we will likely see more changes to the market. All airlines have suffered, but some are in a stronger position than others. As we have seen many times, when an airline starts to struggle, others will be ready to move in. Whether this is a new airline or just further expansion of the big players remains to be seen.

Would you like to share any thoughts on Europe’s low-cost airlines? Which do you think follows the best strategy to grow further, and what scope is there heading out of 2020 for changes or new entrants? Let us know your thoughts in the comments. 

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