Budget Airlines - The New Way to Travel?

Last year saw a progression in airline travel that appears to be continuing in 2004. With competition of the major UK airlines continuously increasing and new airlines such as the Cambridge-based domestic carrier, Hop, entering into the market, the airline industry is now firmly engaged into a price war that is leaving the old players in the market behind the rest.

Over the past few years, there has been an increasing trend for people in the UK to travel nationwide and overseas by the air, whether it is for the more popular overseas holidays or for the increasing demand for business travel. Whatever the reasons, the fact is that more people travel by air today than ever before. The high demand for air travel has meant that air flights need to be cheaper, faster and more frequent in order to satisfy the needs of the UK public. Budget airline companies such as easyJet and Ryanair have taken full advantage of this new requirement for air travel with their no (or few) frills service, and have purposely targeted their businesses for the continuing trend that the airlines are facing. With this increasing trend towards high-volume, low cost flights how are the more established airline companies like British Airways (BA) coping?

Last year saw a dramatic decrease in the number of passengers travelling with British Airways, with an overall drop in passengers by 5%, compared to a 72% rise in passengers travelling with easyJet and a 42% rise with Ryanair. This particular trend is being mimicked on a much larger scale within the UK with TBI, the Luton Airport operator, announcing last September that the total number of passengers over the previous 6 months had jumped to 9.95 million (a rise of over 1.2 million passengers from 2002). The number of those passengers travelling with low-cost airlines accounted for 68% of the total volume (and increase of 9%) while higher-priced charter traffic dropped 5% to only 25% of the total volume.

The trend of last year has continued to grow stronger in 2004, with easyJet and Ryanair overtaking British Airways in the UK and Europe with the number of passengers carried. The once dominant force in the UK airline industry has responded by its attempts at downsizing it operations in order to effectively compete in the airline price war. Last year however, British Airways saw its profits halved to £105 million, and narrowly avoided its expected profits of only £45 million by way of its cost-cutting exercises.

With British Airways showing a grim view of how airline travel trends are affecting the once stable 'quality-driven' UK airline companies. Is there any sign that the popularity of the quality chartered flights will increase? Only time will tell. What is obvious is that the move to low-frills budget flights will continue for some time to come.