New low-cost carriers target individual tourists

The boom in low-cost airlines in Europe has reached Spain with the launch and rapid expansion of Vueling and Clickair. The two carriers aim to grow fast and take on dominant foreign budget airlines such as Ryanair, Easyjet and Air Berlin. They are pinning their hopes not only on the growing outbound Spanish market but also on individual European tourists interested in visiting attractive spanish cities.

The modest Vueling stand was one of the busiest at the recent Fitur show in Madrid. The Barcelona-based airline, which launched flights in 2004, has grown fast over the last two years and increased passenger numbers by 75% to 3.5 million in 2006. At Fitur, it announced the start of five daily flights between Madrid and Barcelona, and hopes to carry half a million passengers on the route this year. Vueling currently operates a fleet of 16 A320s to 11 destinations within Spain and selected European cities. The privately-owned airline, which floated on the Barcelona stock exchange last year, has so far launched flights to Italy (Milan, Rome and Venice), Paris, Brussels and Amsterdam but has kept out of the highly competitive British and German markets.

New competition arrived last October in the shape of Clickair, a start-up financed by a powerful group of investors including Iberia (20%), the parent company of regional carrier Air Nostrum, Iberostar and financial investors. The strategy of Clickair is essentially to defend Iberia’s market position in the budget segment via a code-share agreement. The Barcelona-based airline currently operates 12 A320s on domestic and selected international routes. It has just announced flights to North Africa, Russia, Eastern Europe and more destinations in Italy from October, which will give it 28 international and eight domestic destinations. Clickair has ambitious plans to expand to a fleet of 30 jets by the end of 2008 and carry 10 million passengers, which would make it Spain’s number two and Europe’s fourth-largest budget airline.

In response to the new challenge, Spain’s established airlines are adapting their business models. National carrier Iberia is increasingly focusing on international routes, while Star Alliance member Spanair is focusing more on business travellers with a new business class and enhanced corporate services and facilities. Air Europa, part of the Globalia group, has long concentrated on international leisure routes and benefits from sales through the group’s travel agency chain. Air Nostrum remains a specialist regional carrier.

European budget airlines are also stepping up their presence in Spain. Ryanair is launching new flights this summer from Britain, Germany and various other markets to Palma, Barcelona and Alicante. Easyjet will launch flights from Madrid to Palma. Air Berlin will increase flights from Germany to its hub at Palma by 20% to 360 weekly services this summer. From there it flies onwards to 14 domestic destinations.

The Spanish low-cost market still has considerable potential, according to statistics for 2006. Over 70% of international arrivals in Spain are by air, but only one-third of passengers currently arrive on a budget airline. While budget airlines now account of 41% of passengers from Britain, the figure is only 24% for German tourists. Three airlines, Ryanair, Easyjet and Air Berlin, currently account for 60% of the low-cost flight market, with roughly equal shares.