– EasyJet adds Larnaca, new routes despite downturn
Troubled national carrier Cyprus Airways <CSE: CAIR> is starting a price war in a bid to fend off potential competition from low-cost carrier easyJet <EZJ:LN> that will be flying to Larnaca next March.
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CAIR is slashing its round-trip fares from the UK to GBP 179 including all taxes, far below the EUR 289/GBP 280 offered for the same fare headed out of Larnaca, as it prepares for the start of four flights a week by easyJet from Gatwick to Larnaca.
The CAIR all-inclusive offer is valid from January 1 to June 20, with a three-week break during the peak Easter holidays from April 3 to 30.
A similar offer is in place for departures from Birmingham and Manchester, while the Apollo business class is expected to be priced at GBP 379.
The budget airline is advertising fares starting from GBP 39 per leg, but being a low cost carrier many other services will have to be paid for additionally.
A quick look at the easyJet website shows the lowest single fare of GBP 39 per leg to Larnaca available in April and June, while May sees the cost of a single ticket rising to GBP 54, in March to GBP 88 and in July within a range of GBP 63-103.
Both airlines will probably battle it out to see who will dominate the loyal ethnic market, as well as the UK holidaymakers who account for half of all the 2.3 mln tourist arrivals to Cyprus.
High airport handling fees and taxes leave little room for the two to maneuver and cutting fares any further will drag them into losses, while British Airways will probably continue to rely on its regular clientele and expats, as well as some overflow from the ethnic market.
Even government-owned Eurocypria will need to attract business from other destinations, selling package holidays as well as seat-only, but competing with all the other operators and charter airlines.
easyJet has already been flying daily from Gatwick to Paphos ever since it took over GB Airways’ operations a year ago, but has failed to tap into the ethnic market of Cypriots in Britain or their relatives visiting from the island.
The airline’s new service to Larnaca will start from March 31 with departures on Tuesday, Wednesday, Friday and Sunday, defying the economic downturn and adding new services in the new year from Gatwick to Dubrovnik four times a week, daily to Naples and three times a week to Santorini.
But airline industry experts are not too enthusiastic about easyJet’s plans for Larnaca, saying that added capacity to an already saturated market may not be the solution to Cyprus’ falling tourism numbers.
GOV’T SUBSIDIES?
Unless, of course, the Cyprus government has struck a secret deal with easyJet to reduce airport taxes and fees in order to attract the airline to the island, in which case, other airlines would lose out and cut back on capacity, hurting the tourism industry even further.
The International Air Carriers’ Association, IACA, said last month that unless Cyprus cuts its airport taxes and other fees collected by operator Hermes Airports, it will lose business by as much as 25%. Cyprus is no longer competitive, IACA said.
One airline official in Nicosia told the Financial Mirror that Singapore has slashed its airport handling fees by 50% in an attempt to maintain its present status as international air travel hub.
Last week, airports operator BAA announced that Gatwick passenger numbers had dropped by 13.5% over November of 2007, but easyJet is optimistic and sees a potential for growth at the second-largest airport in the UK where it commands two thirds of the business and operates to 71 destinations.
“EasyJet has grown dramatically at Gatwick over the last few years and this will further strengthen our position at Gatwick, which is our biggest single airport base,” said easyJet’s general manager for the UK, David Osborne.
Other airlines have also announced expansion in services in the midst of the current financial crisis. CityJet will launch new flights from London City to Amsterdam from January 5, while VLM will start a daily service from London City to Rotterdam and Eindhoven from January 12.
STELIOS DISAGREES
EasyJet founder and single largest shareholder, Stelios Haji-Ioannou, has been at odds with the airline’s board over plans to go ahead with deliveries of new aircraft orders, which he said should not proceed at times of financial crisis and cost cutting, despite the travellers’ preference for low-cost holidays and travel.
According to Noel Josephides of independent Sunvil Travel, this is also the reason why easyJet needs to expand its services to new destinations, simply because of the airline’s added capacity and the hope that those seats will be filled.
“The no-frills carriers have new aircraft coming along, but this means they have to keep on growing.”
“Regional operator Flyglobespan, as well as Jet2, Monarch and ThomsonFly are already flying to Cyprus and they are carrying as much as they possibly can. On the other hand, Thomas Cook and TUI are offering all-inclusive packages to Cyprus, with accommodation to their own hotels and handling by their own in-house agents,” added Josephides.
“EasyJet passenger numbers may be going up, but their profitability is falling considerably and their seat load factor is also falling.”
“The tourist numbers from the UK to Cyprus have been falling for years and the CTO’s efforts have not translated in an increase, as everybody else is cutting back on capacity,” Josephides said.
“We have to consider how attractive the Eurozone destinations will continue to be. Will people travel to Cyprus?” asked Josephides, a former chairman of the UK’s Association of Independent Tour Operators.
ETHNIC MARKET
The ethnic market peaks in summer months as Cypriots visit relatives on the island, a period when Cyprus Airways becomes the airline of choice, followed by British Airways and government-owned Eurocypria that also do well with the expats in Paphos. Cyprus-specialist travel agents in London said that last August CAIR’s fares were cheaper than easyJet’s to Paphos.
Ironically, more Britons will use easyJet and head for holidays in Turkey, Egypt and Morocco during 2009 because the weak pound has made Europe too expensive, according to currency exchange firms and travel industry leaders.
The numbers are expected to rise following sterling's slump against the euro, which has pushed up the cost of a break in such traditional destinations as Tenerife or the Algarve by as much as 25%.
Demand for travel to Egypt rose 38% in 2008, while Turkey was up 32%, a pattern expected to continue in 2009.
EURO vs. STERLING
While the pound has weakened against most currencies, the high cost of travel, accommodation and everyday expenses in the likes of Spain, Cyprus and France mean that Turkey and northern Africa still offer better value for money, where you can still find dinner for two for 20 pounds.
The Co-operative Travel company said that, while GBP prices for 2009 package holidays have risen by an average of 18% over the past year, a typical holiday to the leading Turkish destination of Dalman had gone up 27% compared to a rise of just 3% for an equivalent holiday in Majorca.
A spokesman for Flyglobespan was quoted in the British press as saying: "We have added an extra weekly flight to Turkey from Edinburgh for next year and we are looking at the possibility of doing something similar from Glasgow.
"Elsewhere our experience is that people will still fly to the Costas and the usual Mediterranean favourites but perhaps curtail their spending patterns while on holiday."
Money exchangers have also reported rising demand for the currencies of other non-euro zone countries such as Tunisia, Croatia and Bulgaria.
Mark O'Sullivan, dealing director at Currencies Direct, said: "We have also seen a rise in demand the other way, with a lot of European visitors heading to Britain to do their shopping.
"Those expats who have been selling their homes in Spain in the middle of the property crash have found themselves better off when they convert the cash from the sale back into pounds sterling," he said.
"Likewise French and Spanish buyers are finding the weakness of the pound, coupled with our falling property prices, has made buying a property in Britain up to 50% cheaper than two years ago."
