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GO's New Route To Affect Aer Lingus

Fri Jul 06, 2001 1:14 pm

Go expected to fuel airfare war in Ireland
July 5, 2001 Posted: 2:03 PM EDT (1803 GMT)


DUBLIN, Ireland (Reuters) -- British no-frills airline Go's entry into the Ireland-Scotland market is unlikely to damage low cost rival Ryanair but could hurt Irish state carrier Aer Lingus , analysts said on Thursday.

Go's announcement on Wednesday it will fly between Edinburgh, Glasgow and Dublin from September is expected to trigger a limited price war, but few expect Ryanair to be beaten on its own turf.

"Based on what we have seen on the very competitive London to Glasgow route, we would expect Ryanair to react on two fronts to the new entrant," said analyst Shane Matthews at Dublin's NCB Stockbrokers.

"First the group will slash average fares and secondly it will increase frequency on the route."

Analysts say Go faces a higher load factor -- the number of seats it must fill to break even -- than Ryanair, and point out that while the Irish carrier owns its fleet of Boeing 737s Go takes the costlier option of leasing its planes.

"It's quite a strange move, why come and take on the strongest, most successful low fares airline in Europe in its own back yard?" said James Forbes, analyst and Dublin's Goodbody stockbrokers.

"If Go comes in and initiates a price war there can only be one winner."

Go, sold by British Airways last month in a management-led buyout, will fly between Dublin and Edinburgh four times each weekday and three times a day between Glasgow International and Dublin.

Ryanair, which has a strategy of flying to cheaper secondary airports, offers three flights a day to Glasgow Prestwick.

"Ryanair has a significant cost advantage over Go in that the passenger service charges at Glasgow are estimated to be 12 pounds ($16.89) sterling per person, in contrast with... less than one pound sterling at Prestwick," said Matthews.

Aer Lingus, beset in recent months by falling bookings and labor unrest, flies to Edinburgh and Glasgow International.

"In general, low fares airlines' primary competition is still the flag carriers," said Stephen Furlong of Dublin's Davy Stockbrokers.

"They try to grab market share and stimulate new business. The loser in a probably be Aer Lingus rather than Ryanair."

A search of the three airline's Web sites at 1100GMT on Thursday found Ryanair quoting 29.85 Irish pounds ($31.91) for a Dublin to Glasgow return leaving on September 19 -- the day Go begins operating -- and returning a week later, Go offering 45 Irish pounds and Aer Lingus 89.98 Irish pounds.

Copyright 2001 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Do you guys think that would it better for Aer Lingus to launch no-frilled airline? May be Aer Lingus could survive in this battle.
 
airblue
Posts: 1785
Joined: Sat May 19, 2001 9:16 pm

RE: GO's New Route To Affect Aer Lingus

Fri Jul 06, 2001 8:20 pm

They are in a very dangerous situation.... probably you are right, it's better they will became a no frilled airlines.But BA can help them at the end.

I don't undersand why GO focused on British-Irish market when all Europe (Middle-south) is free and need cheaper fares.Just think about Spain, France, Italy and German domestic market....